Unit 1 Test Personal Finance

Juan saved $1,000 from his summer job cleaning pools. Which of these account types would work best for him if he doesn't need access to the money for a number of years AND wants to earn the highest interest rate?

• Regular savings account

• Money Market account

• Checking account

• Certificate of Deposit

Which of the following is an effective strategy for personal saving?

• Wait until the end of the month and save whatever is left in your checking account

• Save a certain percentage of each paycheck and deposit it directly into a savings account

• Cover all of your wants and needs and save whatever is left over

• Take out a payday loan so you can save before you receive your paycheck

Joelle wants to have an emergency fund to cover 6 months of her expenses. Her monthly gross pay is $4,000 and her monthly expenses are $2,000. If she plans to save 10% of her gross pay each month, how long will it take her to build her emergency fund?

• 3 months

• 9 months

• 24 months

• 30 months

All of the following statements about bank accounts are true EXCEPT...

• If the bank is FDIC-insured, your money, up to the FDIC limit, is safe even if the bank fails

• Many banks pay interest on the money you deposit into your savings account

• Historically, savings accounts earn higher returns than investments in the stock market

• Money in a checking account is usually easy to access via ATM, debit card or check

Jay asks his friends for advice: "Should I start doing mobile banking now that I've got my new smartphone?" Which friend is correct in their statement on the benefits of mobile banking?

• Jenna says, “It’s so convenient, because you can deposit your check using your phone’s camera and the bank’s app.”

• Julee says, “One major pro of mobile banking is that they typically waive all of the normal fees like overdraft fees, ATM fees, insufficient funds fees.”

• Clint says, “One inconvenience is that once you set up mobile banking on your phone, you can’t use online banking on your computer any more.”

• Phil says, “A con of mobile banking is that typically banks charge you a $10-15 set-up fee in addition to a small monthly fee (~$3) for mobile banking privileges.”

All of the following are true about prepaid cards EXCEPT...

• Prepaid cards typically include a lot of fees

• Prepaid cards are a useful option for someone who is unbanked to make online purchases

• Prepaid cards are a great way to build credit

• Prepaid cards are usually accepted anywhere that debit and credit cards are accepted

You are developing a savings plan and using short-, medium-, and long-term goals to motivate you. Which represents possible goals from short-term to long-term? Save for...

• Retirement, a house down payment, college tuition

• A new cell phone, college tuition, a house down payment

• A new cell phone, dinner with friends this weekend, a new bike

• Retirement, college tuition, a vacation

Fill in the blanks with the correct responses. If you follow the 50-30-20 rule of budgeting, you'll be putting 50% of your monthly income toward _______________, 30% of your monthly income toward _______________, and 20% of your monthly income toward _______________.

• Needs, savings, wants

• Savings, needs, wants

• Wants, savings, needs

• Wants, needs, saving

• Needs, wants, savings

Mia is opening her first checking account, and she's trying to decide whether she should sign up for overdraft protection. Which friend's advice is most accurate?

• Jordan says, "With overdraft protection, you never have to worry about how much money is in your account."

• Donnie says, "Yes, you'll have to pay a fee for each overdraft, but you DON'T have to pay the bank back the money you overdrew the account by."

• Frank says, "Overdraft protection is handy if you have an emergency (like needing gas to get to work) and don't have the funds right now."

• Alexis says, "If you don't get overdraft protection, and you TRY to withdraw more than what's in your account, you pay a fee anyway."

Which represents the BEST time to start saving for your retirement?

• As soon as you have your first full-time job

• Right after you pay off your student loans

• Once you are debt-free, including paying off all credit cards, auto loans, and your mortgage

• At age 45, so you have exactly 20 years until retirement