Phase 3 Student Competition Quiz

What is the primary difference between 'Good Debt' and 'Bad Debt'?

• Good Debt = not manageable debt

  Bad Debt = manageable debt

• Good Debt = short-term debt

  Bad Debt = long-term debt

• Good Debt = high interest rates

  Bad Debt = low interest rates

• Good Debt = increases wealth

  Bad Debt = decreases wealth

How much money should be in your 'Emergency Fund'?

• $2500 - $5,000

• 6-12 months worth of living expenses

• 3-6 months worth of living expenses

• Minimum $5,000

1. What is the role of an 'Emergency Fund' in preventing 'Bad Debt'?

• It provides a financial cushion for unexpected expenses, reducing the need to rely on loans

• It increases the need for debt

• It decreases savings

• It avoids financial planning

1. Why is it important to avoid loans for 'Wants' or 'Luxury Items'?

• Because these must be paid for from your budget with cash so that you avoid unnecessary debt

• Because they are tax-deductible

• Because they decrease your debt

• Because they increase your savings

Scenario Question (Double Points!)

You have a $5,000 balance on a high-interest credit card and receive a $3,000 bonus.

How should you use the bonus?

• • Invest it into long term diversified funds

• • Pay off as much of the credit card balance as possible

• • Spend it on a vacation

• Add the money to your 'Savings' bucket

Scenario Question (Double Points!)

Jake has an emergency fund of $1,500 and faces an unexpected car repair costing $1,200. Should he use his emergency fund or put it on a credit card?

• Pay the expense using a credit card loan

• Use the emergency fund to avoid bad debt

• Borrow money from his family or friends

• Delay the repair until he gets his bonus

Scenario Question (Double Points!)

Tom realises he doesn't have an emergency fund, but he wants to invest money into long-term diversified funds to build his wealth. What should he do?

• Invest in the stock market and use his 'Wants' bucket to cover any future emergencies

• Invest in the stock market and take out a loan to cover future emergency expenses

• Build an emergency fund in a high-interest savings account before investing

• Build an emergency fund and then never invest into diversified funds as its too risky