Financial Literacy: Budgeting, Checking, Savings, and Income

What is a budget?

• A detailed plan for spending money

• A loan to buy a house

• A type of savings account

• Money earned from a job

Which of the following is NOT a characteristic of a checking account?

• Typically earns high interest

• Used for daily transactions

• Comes with a debit card

• Allows for direct deposit of your paycheck

What is the primary purpose of a savings account?

• To write checks

• To save money for future use

• To pay bills online

• To invest in the stock market

Gross income refers to:

• The amount of money earned after taxes

• The total amount of money earned before taxes

• Monthly expenses

• Yearly savings

Which of the following is a benefit of having a budget?

• It increases your expenses

• It reduces financial stress

• It eliminates the need for savings

• It increases debt

What is compound interest?

• Interest paid on the initial amount of deposit only

• A fixed interest rate for the life of the loan

• Interest paid on both the initial amount and the accumulated interest

• A fee charged for withdrawing money from savings

What is the 50/30/20 rule in budgeting?

• Spend 50% on needs, 30% on wants, and save 20%

• Save 50%, invest 30%, and spend 20% on bills

• Spend 50% on bills, 30% on savings, and 20% on entertainment

• Save 50%, spend 30% on needs, and 20% on wants

Which of the following is true about a fixed expense?

• The amount changes every month

• It is an unexpected expense

• The amount remains the same every month

• It is a discretionary expense

What is the difference between net income and gross income?

• Net income is your income after taxes, while gross income is before taxes

• Gross income is your income after taxes, while net income is before taxes

• There is no difference; they mean the same thing

• Net income includes savings, while gross income includes expenses

Why is it important to reconcile your checking account?

• To ensure you are saving enough money

• To check for any unauthorized transactions

• To calculate your net income

• To find out how much interest you have earned