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Intro and Savings Test

True/False
Indicate whether the statement is true or false.
 

 1. 
The first thing you should save for is your retirement fund.
 

 2. 
Your income level greatly affects your saving habits.
 

 3. 
Americans typically maintain a very high savings rate.
 

 4. 
You should save money for three basic reasons: emergency fund, purchases and wealth building.
 

 5. 
When it comes to saving money, the amount you save is determined by how much you have left at the end of the month once all of your spending is done.
 

 6. 
When you're older and out of school, you'll need to grow your emergency fund into a full three to six months' worth of expenses.
 

 7. 
You should keep your emergency fund in the same account as your spending money.
 

 8. 
Compound interest would pay you more on a savings account over time than simple interest.
 

 9. 
Dave’s 80/20 rule says that personal finance is 80% knowledge and 20% behavior.
 

 10. 
If we use a race analogy to describe building wealth, it would be most like a sprint.
 

 11. 
If you have $100 in a savings account that pays 1% simple interest, in one year you will have more than $100 in your account.
 

Multiple Choice
Identify the choice that best completes the statement or answers the question.
 

 12. 
Which of the following steps is the First Foundation?
a.
Get out of debt
b.
Build wealth and give
c.
Save a $500 emergency fund
d.
Pay cash for your car
 

 13. 
Instead of borrowing money for large purchases, you should set money aside over time and pay with cash.
a.
Emergency fund
b.
Sinking fund
c.
Credit card fund
d.
Mortgage fund
 

 14. 
The saving habits of Ben and Arthur best illustrate which principle of saving?
a.
The length of time money is invested matters.
b.
The amount of the initial investment is the key.
c.
Rate of return matters.
d.
Both A and C
 

 15. 
This principle suggests that a certain amount of money today has different buying power than the same amount of money in the future. This is due to both the opportunity to earn interest on the money and because inflation will drive prices up, thereby changing the "value" of the money.
a.
Opportunity cost
b.
Time value of money
c.
Interest rate
d.
Inflation
 

 16. 
For which of the following should you save?
a.
Purchases
b.
Wealth building
c.
Emergency fund
d.
All of the above
 

 17. 
Using the sinking fund approach, how much do you have to save each month to buy a $4,800 car one year from now?
a.
$400.00
b.
$300.00
c.
$275.00
d.
$500.00
 

 18. 
At your age, a fully funded emergency fund should be:
a.
$500.00
b.
$5,000.00
c.
$100.00
d.
$1,000.00
 

 19. 
Which of these is not a key to saving money?
a.
Focus
b.
Making saving a habit and a priority
c.
Your income
d.
Discipline
 

 20. 
Which of the following is a reason that people don't save money?
a.
They lack discipline
b.
They do not live on a budget
c.
They lack focus
d.
All of the above
 

 21. 
Which of the following is not one of the three basic reasons for saving money?
a.
Emergency fund
b.
Large purchases
c.
Have money available to lend to friends
d.
Build wealth
 

 22. 
Which of the following is not a reason your emergency fund should be kept in a separate savings account away from your spending money?
a.
So that you do not get your spending and saving money confused.
b.
So that it is clear what money is only to be used for emergencies.
c.
So that it is not too easy to access.
d.
So that your emergency fund savings can earn a lot of interest.
 

 23. 
Why is having a fully funded emergency fund so important when it comes to your financial well-being?
a.
As long as you have a good-paying job, you really don't need an emergency fund.
b.
The purpose of an emergency fund is to set money aside for unexpected financial emergencies and to provide a sense of financial security.
c.
The purpose of an emergency fund is to have money set aside for large purchases, like vacations.
d.
None of the above
 

 24. 
Why should interest earned not be a factor with your emergency fund?
a.
Inflation can eat up the interest earned.
b.
Interest-bearing accounts at banks earn a high rate of interest, therefore, interest is not a concern.
c.
The emergency fund is not intended to grow wealth.
d.
None of the above
 

Matching
Identify the choice that best completes the statement or answers the question. Answers may be used once, more than once or not at all.
 
 
a.
amoral
k.
interest rate
b.
certificate of deposit
l.
personal finance
c.
checking account
m.
principal
d.
compound interest
n.
savings account
e.
deflation
o.
simple interest
f.
emergency fund
p.
sinking fund
g.
First Foundation
q.
time
h.
Fourth Foundation
r.
time value of money
i.
inflation
s.
wealth building
j.
interest
 

 25. 

 Money set aside and left alone for a "rainy day."
 

 26. 

 Saving money over time for a large purchase
 

 27. 

 Percentage paid to a lender for the use of borrowed money, or the percentage earned on invested principal
 

 28. 

 Money today has different buying power than the same amount of money in the future
 

 29. 

 Interest paid on interest previously earned
 

 30. 

 The persistent rise in the cost of goods and services.
 

 31. 

 Save a $500.00 emergency fund.
 

 32. 

 Money held in this type of account can be withdrawn using checks, automated cash machines and electronic debits, among other methods.
 

 33. 

 An account that is penalized if you withdraw money before the specified time period.
 

 34. 

 Neither good nor bad.
 

 35. 

 All of the decisions and activities of an individual or a family regarding their money, including spending, saving, budgeting, etc.
 

 36. 

 Simple interest is calculated as I=PRT. What does I stand for?
 

 37. 

 Simple interest is calculated as I=PRT. What does P stand for?
 

 38. 

 Simple interest is calculated as I=PRT. What does R stand for?
 

 39. 

 Simple interest is calculated as I=PRT. What does T stand for?
 

 40. 

 The original amount deposited into a savings account.
 



 
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