Unit 3 Test (Part One)

Which of the following is true about the comparison between credit unions and banks?

• a. Credit unions are owned by customers and banks are owned by shareholders

• b. Credit unions are structured to maximize profits and banks are non-profit entities serving their members

• c. Credit unions tend to be large organizations and banks are often smaller/more local organizations

• d. Banks compete mostly on services relationships and credit unions try to offer a one-stop-shop for products

What does it mean if a person lives paycheck-to-paycheck?

• a. They use their entire paycheck to cover monthly expenses and have very little money saved

• b. Their income varies month-to-month and they save a large portion of their biggest paychecks

• c. They use direct deposit, so their paycheck is automatically split between their checking and savings accounts

• d. They have high-paying jobs, so don't have to worry about how much is in each paycheck

Using the 50/30/20 budgeting plan can help you save money because...

• a. It limits your spending to $50 per month

• b. It recommends that 20% of your budget goes to debt repayment or savings

• c. It recommends that 50% of your budget goes to debt repayment or savings

• d. For every $50 you save, a bank will give you $30 or a credit union will give you $20

Tre just got a part-time job, and his sister recommends he “pay himself first." What is she talking about?

• a. Tre should deposit his check as quickly as possible before taxes can be taken out

• b. Tre should set aside part of every paycheck for savings before he does any spending

• c. Tre should spend the money he needs before he lends any to friends or gives to charity

• d. Tre should start his own business rather than being someone else's employee

Misty is going to use the 50/30/20 rule in order to save $2000 for her family's next big vacation. Her monthly income is $2500. How many months will it take her to reach her savings goal?

• a. 2.4 months

• b. 4 months

• c. 5 months

• d. 6 months

How much do personal finance experts recommend having saved in an emergency fund?

• a. 1-3 month of expenses

• b. 3-6 months of expenses

• c. 6-9 months of your salary

• d. 1-2 years of expenses

Over the last twenty years, how have wages changed compared to the costs of housing, healthcare, and education?

• a. Wages have increased at a slower rate than those costs

• b. Wages have increased at the same rate as those costs

• c. Wages have increased at a faster rate than those costs

• d. Wages have decreased as those costs have increased

The majority of Americans...

• a. Have an adequate emergency fund and have enough saved for retirement

• b. Have an adequate emergency fund but do NOT have enough saved for retirement

• c. Do NOT have an adequate emergency fund but have enough saved for retirement

• d. Do NOT have an adequate emergency fund and do NOT have enough saved for retirement

Which pair of savings strategies will likely work best if your goal is saving $5000 before heading off to college?

• a. Get a couple of part-time jobs to increase income and then also increase your spending

• b. Control impulse spending and break your goal into smaller time frames

• c. Pay all of your bills in cash and then save all your pocket change

• d. Keep your money in a checking account and only spend using your debit card

A Roth IRA is best described as...

• a. A retirement investment account with specific tax advantages

• b. A specialized savings account that allows you to save for college

• c. A checking account from which you pay your healthcare bills

• d. A savings account at an online-only bank