Personal Financial Literacy Test

Which of the following best describes the purpose of FICA deductions on a paycheck?

• To fund local infrastructure projects

• To pay for federal income tax

• To contribute to Social Security and Medicare

• To finance unemployment benefits

Gross income refers to:

• Your take-home pay after deductions

• Money earned from investments only

• Total earnings before any deductions

• Taxable income only

Which form does your employer provide that shows your annual income and taxes withheld?

• W-2

• W-4

• 1099

• 1040EZ

What is the primary purpose of using the 50/30/20 rule in budgeting?

• To track investment portfolios

• To pay off credit card debt

• To plan spending across needs, wants, and savings

• To create a retirement plan

Which of the following is considered a fixed expense?

• Monthly rent payment

• Grocery spending

• Utility bills

• Gasoline

Which of the following is a benefit of using a credit union over a traditional bank?

• Higher credit limits

• Lower interest rates and customer ownership

• Better access to international branches

• Government control

What does FDIC insurance cover?

• Stock market investments

• Cryptocurrency wallets

• Deposits in banks up to $250,000

• Money market funds

What is an example of revolving credit?

• Credit card

• Mortgage loan

• Student loan

• Auto loan

Which of the following is a retirement account that offers tax-free withdrawals in retirement?

• 401(k)

• Traditional IRA

• Roth IRA

• Pension

What is compound interest?

• Interest added once per year

• Interest earned on both the principal and previously earned interest

• Interest earned only on the initial deposit

• Interest taxed by the government