Unit 6: Money & Banking

A man’s savings account has a balance of $5,000, which he uses to plan for big purchases, as well as to cover monthly expenses when his paycheck amount is too low. His monthly expenses are $2,000. In May, his monthly paycheck amount was $1,800. Based on the text, how does maintaining a savings account support fiscal responsibility?

• It enables the man to avoid using credit cards.

• It allows the man to afford a more expensive lifestyle.

• It prevents the man from going into debt if he loses his job.

• It helps the man pay his bills when there is an income shortfall.

Ramy is seeking to purchase his first home. How could Ramy BEST revise his budget to enable him to meet his goal?

• by eliminating his savings

• by getting rid of his auto insurance

• by reducing his entertainment budget

• by avoiding medical care

How do fiscally responsible individuals create a personal budget?

• They calculate their net income and allot money for bills and savings before planning discretionary expenses.

• They calculate their net income and allot money for bills and discretionary expenses, but no money for savings.

• They calculate their net income and allot money for bills and savings, using credit cards for discretionary expenses.

• They calculate their net income and allot money for bills and discretionary expenses before putting money in savings.

Many financial planners believe that one of the important steps a fiscally responsible person can take is to “pay yourself first” (that is, to put money in some form of savings aside for retirement or emergencies). How could an individual include the concept of “pay yourself first” when creating and managing a personal monthly budget?

• by depositing money in a discretionary fund for personal expenses every month, after balancing the budget

• by putting money left at the end of the month, after paying bills and balancing the budget, in a savings account

• by setting money aside for savings every month upon receiving a paycheck, before paying bills and balancing the budget

• by spending money left over from monthly expenses and balancing the budget on entertainment and other wanted items

How would a fiscally responsible individual budget to ensure long-term economic security?

• by purchasing wants before needs

• by relying on credit cards to pay monthly bills

• by making monthly contributions to a retirement fund

• by shifting money from an emergency fund to a checking account

In 2019, a woman owed $560 in taxes to the federal government. She was not expecting this, and needed to completely readjust her budget to address this expense. What can the woman do to avoid a similar situation in the future?

• She can withhold more of her earnings each month to prepare for a tax bill.

• She should give more to charity, which would give her a larger tax deduction.

• She should invest more pre-taxable income in a health spending and savings account.

• She can find a job that pays less so that her taxable income will be lower, thus lowering her tax responsibility.

How does a bank’s account maintenance fee affect an individual’s savings?

• It reduces the amount in an individual’s account.

• It increases the amount of interest earned on an individual’s account.

• It requires an individual to deposit funds in his or her account every month.

• It allows an individual to shift funds from one account to another without penalty.

How can failing to balance a checking account affect an individual’s financial well-being?

• It can increase the bank’s investment in an individual’s account.

• It can reduce the interest rates earned for money in the account.

• It can result in overdraft fees that reduce the amount in an individual’s account.

• It can prevent an individual from having access to automated deposits and withdrawals.

Which of the following are the three largest categories of federal government spending?

• infrastructure, defense, science

• health, military, interest on debt

• education, defense, food/agriculture

• military, education, science

When do you start paying taxes?

• when you turn 18

• when you get a full-time job (part-time does not count)

• when you are notified by the IRS that you are required to pay federal income taxes

• when you make more than the minimum income requirement