Ch 3 Test - Saving Money

________ is a millionaire’s best friend.

• Accrued interest

• Compound growth

• High returns

• Profit sharing

One of the main reasons we build wealth is so that we can . . .

• Give to those in need

• Spend it all on ourselves

• Impress the people around us

• Prove that we are successful

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.

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

• True

• False

While saving money isn't easy at first, it will make your life a lot ________ in the future if you make it a habit now.

• Easier

• Harder

• Poorer

• Longer

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 main reasons for saving your hard-earned money are . . .

• Emergencies, large purchases, and wealth building

• Paying for your dream home, buying your dream car, and going on your dream vacation

• Buying gifts, donating to charities, and building up a college fund for your kids

• Investing, indulging, and influencing

What is the goal of an emergency fund?

• To pay for large purchases

• To save for your children's college expenses

• To have cash on hand for unexpected events

• To pay for health insurance

Why do stores rarely advertise the full price of big purchases like smartphones?

• They are trying to keep their prices competitive.

• Hiding the full price allows stores to change their pricing as the market fluctuates.

• By showing you only the monthly payment, they make the product seem affordable.

• They are trying to cheat you.

Which principle says that a certain amount of money today is worth more than the same amount in the future?

• Inflation

• Rate of return

• The time value of money

• Principal interest