Money Skills Quiz

Which of the following is a benefit of budgeting?

• Helps in tracking expenses

• Increases impulsive spending

• Reduces financial awareness

• Encourages unnecessary purchases

Answer explanation

Budgeting helps in tracking expenses by providing a clear overview of income and expenditures, allowing individuals to manage their finances effectively and avoid overspending.

Having an emergency fund is important because:

• it provides financial security during unexpected events.

• it allows for more spending on luxury items.

• it eliminates the need for insurance.

• it guarantees high returns on investment.

Answer explanation

Having an emergency fund is crucial as it provides financial security during unexpected events, helping to cover expenses without relying on credit or loans.

Which of the following is a way to save money for a 6-month emergency fund plan?

• Meal prepping

• Buying a new car

• Increasing dining out

• Subscribing to more services

Answer explanation

Meal prepping helps save money by reducing food costs and minimizing waste, making it an effective strategy for building a 6-month emergency fund. The other options increase expenses, which is counterproductive.

What is the difference between online vs. traditional banks?

• Online banks offer services primarily through the internet, while traditional banks have physical branches.

• Traditional banks offer better interest rates than online banks.

• Online banks do not provide customer service.

• Traditional banks are more secure than online banks.

Answer explanation

The correct choice highlights that online banks operate mainly via the internet, while traditional banks have physical locations. This distinction is key in understanding their service delivery models.

How do you track transactions and avoid overdrafts?

• By regularly checking your account balance and setting up alerts

• By ignoring your account balance

• By spending more than you have

• By not using a bank account

Answer explanation

The correct choice emphasizes the importance of regularly checking your account balance and setting up alerts to monitor transactions, which helps prevent overdrafts. Ignoring your balance or overspending leads to financial issues.

What is the definition of credit and how does it work?

• Credit is a contractual agreement in which a borrower receives something of value now and agrees to repay the lender at a later date.

• Credit is a form of currency used in digital transactions.

• Credit is a type of investment strategy used in stock markets.

• Credit is a method of saving money for future use.

Answer explanation

The correct choice defines credit as a contractual agreement where a borrower gets value now and agrees to repay later, accurately capturing the essence of how credit functions.

Should you use your credit card to pay for a $1,000 vacation?

• Yes, if you can pay it off immediately.

• No, it's better to save up first.

• Yes, if it offers rewards or cashback.

• No, if it will lead to debt.

Answer explanation

Saving up for a vacation is a more responsible approach. Using a credit card can lead to debt if not paid off immediately, and it's better to avoid financial strain by planning and saving first.

What happens if you miss a credit card payment?

• You will be charged a late fee.

• Your credit score will improve.

• You will receive a reward.

• Your interest rate will decrease.

Answer explanation

Missing a credit card payment typically results in a late fee being charged. This is a common penalty for late payments, while the other options listed do not occur.

Which of the following is a potential scam?

• Email: “Congratulations! You’ve won $1,000. Click here to claim your prize.”

• Email: “Your package has been shipped. Track your order here.”

• Email: “Your subscription has been renewed successfully.”

• Email: “Thank you for your payment. Your invoice is attached.”

Answer explanation

The email claiming a $1,000 prize is a potential scam, as it uses a common tactic to lure recipients into clicking a link. The other emails are more typical and less likely to be fraudulent.

Which of the following is a short-term financial goal?

• Saving for a vacation next year

• Planning for retirement

• Buying a house in 10 years

• Investing in a child's education fund

Answer explanation

The correct choice, 'Saving for a vacation next year', is a short-term financial goal as it focuses on a specific, immediate timeframe. The other options involve long-term planning.