2.5-2.8 Test Review

What is a smart strategy for building savings?

• Spend first, then save whatever is left at the end of the month

• Automatically transfer a portion of your income into a savings account

• Use credit cards to cover expenses and save your cash

• Borrow money from friends to build savings

• 20 months

• 8 months

• 10 months

• 5 months

Which of the following is an example of a short-term savings goal?

• Saving for a new laptop

• Saving for a house down payment

• Saving for retirement

• Saving for your child’s college tuition

According to the 50-30-20 budgeting rule, how should income be allocated?

• 50% to savings, 30% to needs, 20% to wants

• 50% to needs, 30% to wants, 20% to savings

• 30% to needs, 50% to savings, 20% to wants

• 50% to wants, 30% to needs, 20% to savings

When is the best time to begin saving for retirement?

• After buying your first house

• As soon as you start earning income

• Once you have no remaining debt

• When you turn 40

What is true about the average American's savings?

• Most Americans have enough saved for retirement

• Most Americans have enough in their emergency fund

• Many Americans lack sufficient emergency and retirement savings

• Americans typically save more than they spend

Experts recommend having an emergency fund that covers: a. 1-2 weeks of expenses b. 3-6 months of expenses c. 1-2 years of expenses

• 1-2 weeks of expenses

• 3-6 months of expenses

• 1-2 years of expenses

• Your total annual salary

If someone is "living paycheck to paycheck," what does that mean?

• They rely on loans to pay bills

• They have no savings and barely cover their monthly expenses

• They earn money every other month

• They are only paid in cash

If inflation is higher than the interest rate on your savings account, what happens?

• Your purchasing power decreases

• Your savings grow faster

• You will earn more interest

• Inflation has no impact on savings

What should you do if you notice unauthorized withdrawals from your bank account?

• Ignore it and wait for your monthly statement

• Contact your bank immediately

• Assume the bank will fix the mistake automatically

• Withdraw all your money and close the account