Financial Literacy Basics

What is the first step towards achieving financial literacy?

• Understanding and managing personal finances

• Learning to invest in stocks

• Avoiding all forms of debt

• Buying assets like a house or car

What does financial literacy help you manage effectively?

• Work assignments

• Time management

• Personal finances

• Social interactions

What is a major risk of not understanding financial literacy?

• Better job performance

• Higher financial stress

• Increased social status

• Improved health

What rule is suggested for managing monthly income?

• 70-20-10 rule

• 80-20 rule

• 50-30-20 rule

• 60-30-10 rule

What percentage of your income should go towards savings and debt repayment according to the 50-30-20 rule?

• 20%

• 60%

• 30%

• 50%

Why is it important to start saving early?

• To avoid taxes

• To spend more on luxuries

• To benefit from compound interest

• To immediately buy expensive items

What is a key benefit of investing in a mutual fund?

• Guaranteed profits

• Single company focus

• Diversification of investments

• Short-term returns

What is the advantage of compound interest?

• It increases money exponentially over time

• It adds the same amount each year

• It decreases money over time

• It is only beneficial for short-term savings

Why is diversification in investments important?

• To focus on one sector

• To reduce risk

• To increase complexity

• To limit choices

What should be a priority when using credit?

• Using it for vacation expenses

• Buying consumables like food

• Investing in long-term assets

• Spending on entertainment