Personal Financial Literacy Lesson 1-5

What is the best definition of net worth?

• The amount of money a person earns in a year

• The total value of a person's assets minus their liabilities

• The amount of money a person has in their bank account

• The total amount of debt a person has

Which of the following is an example of a wealth-building asset?

• A new smartphone

• A collectible item that increases in value over time

• A car that loses value as it is driven

• A pair of designer shoes

Why doesn’t simply owning expensive things make a person wealthy?

• Because wealth is only measured by how much cash a person has

• Because expensive items always decrease in value

• Because if those items are purchased with debt, they don’t contribute to net worth

• Because only assets like houses count toward wealth

What is the key difference between appreciating and depreciating assets?

• Appreciating assets increase in value over time, while depreciating assets lose value

• Depreciating assets are always expensive, while appreciating assets are cheap

• Appreciating assets can never be sold, while depreciating assets can

• Depreciating assets do not cost money, while appreciating assets do

Who do people typically owe money to when they have liabilities?

• Their friends and family only

• Banks, utility providers, and credit card companies

• Only the government

• Anyone who has more money than them

Which of the following is an example of a liability?

• A savings account

• A student loan

• A rare coin collection

• A rental property

Which of the following statements is TRUE about wealth?

• Wealth is determined solely by how much a person earns each year

• Wealth is based on assets minus liabilities, not just income or possessions

• Owning expensive items automatically makes someone wealthy

• Debt does not affect a person’s wealth

What happens when liabilities exceed assets?

• A person has a positive net worth

• A person has a negative net worth

• A person is automatically considered wealthy

• The person no longer has any liabilities

Why is it important to build wealth by increasing assets and decreasing liabilities?

• It helps a person achieve financial stability and security

• It guarantees someone will become a millionaire

• It ensures a person will never have to work again

• It prevents someone from ever having to pay taxes

Why is intellectual property, such as patents and copyrights, considered an asset?

• It has no real value but is still considered an asset

• It can generate income and increase in value over time

• Only businesses can own intellectual property

• It is a liability that decreases wealth