Chapter 3 Personal Finance Quiz

Once you have a $500 emergency fund, you should . . .

• Start putting it toward debt

• Invest it in the stock market to grow your money

• Save it until you have an emergency

• Use the money to pay for health insurance

The first step you should take when you want to make a large purchase is . . .

• Ask your parents to loan you the money with low interest

• Get a new credit card

• Decide how much you'll need to save and the time frame you want to save it in

• Sell something and use the proceeds

The best way to build wealth is to start investing early. You should start investing money . . .

• Once you have a fully funded emergency fund

• Once you're out of college, living debt-free, and have 3–6 months of living expenses saved

• When the stock market is performing really well

• As soon as you have extra cash

Which two habits are the most important for building wealth and becoming a millionaire?

• Working a high-paying job and relying on a trust fund

• Always paying off your credit card on time and putting extra money into a retirement account

• Investing into the right stocks and using a private CPA

• Consistently investing money and giving it time to grow

The interest rate on a savings account determines . . .

• How much money you need to have to open the account

• How much you will pay the bank to manage the account

• The amount of time your money will be in the account

• How quickly your money will grow over time

You should budget in this order: giving, savings, spending.

• True

• False

________ is a millionaire's best friend.

• Accrued interest

• Compound growth

• High returns

• Profit sharing

The purpose of an emergency fund is to . . .

• Be able to cover an unexpected expense with cash and protect you from having to pile up debt when something goes wrong.

• Teach you how to invest in growth stock mutual funds.

• Have some extra money in a checking account in case you need to transfer some to your spending categories.

• Teach you discipline—saving is purely a good exercise in self-control.

Compound interest is earned at a fixed rate, while ________ is an average based on an investment's past performance.

• The principal

• Interest rate

• The Fifth Foundation

• Compound growth

Once you're out of school, have started your career, and have zero debt, your emergency fund should have ________.

• 3–6 months of income

• 3–6 months of living expenses

• $3,000

• $5,000