CH. 2 Test Review Question Preview (ID: 26403)


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

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

What does it mean to have a negative savings rate?
a) Saving for something that is a want instead of a need
b) Having a fully funded emergency fund
c) Having no savings at all
d) Spending more money than you make and acquiring debt

The saving habits of Ben and Arthur best illustrate which participate 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

This principle suggest that a certain amount of money today as different buying power than the same amount of money in the future.
a) Opportunity cost
b) Time value of money
c) Interest fund
d) Inflation

For which of the following should you save?
a) Purchases
b) Wealth buliding
c) Emergency fund
d) All of the above

Using the sinking fund approach, how much do you save each month to buy a $4,800 car one year from now?
a) $400
b) $300
c) $275
d) $500

At your age, a fully funded emergency fund should be:
a) $500
b) $5,000
c) $100
d) $1,000

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

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

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

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 for access.
d) So that your emergency fund savings can earn a lot of interest.

Why is having 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) Emergency funds are to are to set money aside for unexpected financial emergencies.
c) The purpose of an emergency fund is to have money set aside for large purchases, like vacations.
d) None of the above

Saving is about:
a) Contentment and emotion
b) Contentment and earning more money
c) Making more money and discipline
d) Pride and greed

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

The first thing you should save for is your retirement fund.
a) True
b) False
c)
d)

Your income level greatly affects your saving habits.
a) True
b) False
c)
d)

Americans typically maintain a very high savings rate.
a) True
b) False
c)
d)

You should save money for three basic reasons: emergency fund, purchases and wealth building.
a) True
b) False
c)
d)

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.
a) True
b) False
c)
d)

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