Personal Finance PRE-TEST

What is the main difference between a salary and an hourly wage?

• Salary workers are paid based on hours worked, while hourly workers get a fixed amount per year

• Hourly workers are paid for each hour worked, while salary workers earn a fixed amount annually

• Salary workers earn more than hourly workers

• Hourly workers get more benefits than salary workers

What type of tax is deducted from your paycheck to fund Social Security and Medicare?

• Income tax

• Property tax

• Payroll tax

• Sales tax

Which of the following is an example of passive income?

• Working part-time at a store

• Investing in rental properties

• Babysitting on weekends

• Driving for a rideshare service

What does the 50-30-20 rule recommend?

• 50% Savings, 30% Fun, 20% Bills

• 50% Needs, 30% Wants, 20% Savings

• 50% Wants, 30% Needs, 20% Debt Payments

• 50% Bills, 30% Investments, 20% Fun

Fixed expenses are costs that:

• Change every month

• Stay the same each month

• Are optional and can be cut from a budget

• Only apply to businesses

Which of the following is an example of a variable expense?

• Rent

• Car payment

• Groceries

• Internet bill

What is the purpose of an emergency fund?

• To pay for everyday expenses

• To cover unexpected expenses like medical bills or car repairs

• To invest in stocks

• To buy luxury items

Experts recommend saving how much in an emergency fund?

• At least $500

• 1 year’s worth of expenses

• 3-6 months’ worth of expenses

• 10% of your monthly income

What is the main benefit of compound interest?

• You earn interest on both your original savings and the accumulated interest

• It helps you avoid paying taxes

• It reduces the amount of debt you owe

• It guarantees high returns in a short time

What is the primary purpose of a checking account?

• To save money for long-term goals

• To hold money for everyday transactions

• To invest in the stock market

• To increase credit score