Chapter 3 Test

1. 45% of Americans have less than $1,000 saved for a(n) ________.

• Emergency

• Car

• Retirement fund

• New smartphone

You'll have less freedom with your money if you . . .

• Invest in the stock market

• Are paying for things in your past

• Put money in a bank account

• Make less than $35,000

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 first step you should take when you want to make a large purchase is . . .

• Ask your parents to loan you the money with low interest

• Get a new credit card

• Decide how much you'll need to save and the time frame you want to save it in

• Sell something and use the proceeds

The best way to build wealth is to start investing early. You should start investing money . . .

• Once you have a fully funded emergency fund

• Once you're out of college, living debt-free, and have 3–6 months of living expenses saved

• When the stock market is performing really well

• As soon as you have extra cash

Why do some accounts, like savings accounts at your local bank, earn interest?

• Because you deposit money, adding to your principal each month

• Because the bank pays you to use your money

• Because those accounts always have great interest rates

• Because of inflation

7. It's not IF an emergency will happen, but ________.

• A. How

• B. Where

• C. Why

• D. When

If you really want to save money, you've got to . . .

• Fly economy class

• Live on less than you make

• Invest in a Roth IRA

• Have a financial advisor

The only place you should keep your emergency fund money is…

• A savings account or money market account.

• A safe in your bedroom

• A Roth IRA

• An envelope in a safe place

If people saved the equivalent of a car payment each month for a year or two (instead of spending it on payments and interest), they could have enough money to buy a car with cash for much cheaper!

• True

• False