FPF Chapter 3 Test

45% of Americans have less than $1,000 saved for a(n) .

• Emergency

• Retirement fund

• Car

Which of these would count as a legitimate reason to use your emergency fund?

• You forgot to budget for your mom's birthday gift

• The smartphone you've wanted just went on sale

• Your car battery died

You'll have less freedom with your money if you

• Put money in a bank account

• Are paying for things in your past

• Invest in the stock market

Once you have a $500 emergency fund, you should . . .

• Start putting it toward debt

• Use the money to pay for health insurance

• Save it until you have an emergency

The first step you should take when you want to make a large purchase is . . .

• Get a new credit card

• Decide how much you'll need to save and

  the time frame you want to save it in

• Sell something and use the proceeds

The best way to build wealth is to start investing early. You should start investing money . . .

• Once you're out of college, living debt-free, and have 3–6 months of living expenses saved

• When the stock market is performing really well

• As soon as you have extra cash

Why do some accounts, like savings accounts at your local bank, earn interest?

• Because of inflation

• Because the bank pays you to use your money

• Because you deposit money, adding to your principal each month

If you really want to save money, you've got to . . .

• Have a financial advisor

• Live on less than you make

• Fly economy class

The only place you should keep your emergency fund money is...

• A savings account or money market account.

• An envelope in a safe place.

• Under your bed in your room.

If people saved the equivalent of a car payment each month for a year or two (instead of spending it on payments and interest), they could have enough money to buy a car with cash for much cheaper!

• True

• False