How Money Smart Are You?

As a fun change of pace, I decided to take a little quiz to see how money smart I am. Spoiler alert – I did not get a 100%. Think you can do better? Scroll through and test your knowledge!

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1. Which activity can pose the greatest threat to your wallet?

  1. Getting a latte at Starbucks every day
  2. Borrowing money for a car you need to get to work
  3. Spending without a plan
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Correct answer: C

It’s very difficult to keep your finances healthy if you don’t know how much money your are spending or where it is going. Without a plan or a budget you run the risk of overspending on unnecessary things.

2. If you apply for a store credit card, how do they decide if they approve you or turn you down?

  1. They make sure you look good in their clothes
  2. They check out your credit score
  3. They ensure you have spent a set amount of money at their store
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Correct answer: B

3. What is considered a good FICO credit score?

  1. In the mid to high 500’s
  2. In the mid to high 600’s
  3. In the mid to high 700’s
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Correct answer: B

However, a great credit score would be in the mid to high 700’s and will qualify you for the best interest rates. The national average score is around 690.

4. What does a phisher want?

  1. Your personal and financial information
  2. A romantic date
  3. Your academic records
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Correct answer: A

Phishers are email scam artists that are out to steal your confidential personal information.

5. If someone steals your credit card and uses it, how much could you end up owing?

  1. $50
  2. $500
  3. The total bill
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Correct answer: A or B.

If your credit card gets stolen, your liability is only $50. However, if your debit card is stolen, you could owe $500.

6. What’s the main difference between a Roth IRA and a Traditional IRA?

  1. Roth IRAs include stocks and Traditional IRAs do not
  2. With Roth IRAs, you pay taxes before you put the money in the account. With Traditional IRAs, you pay taxes when you withdraw the money in retirement
  3. Both Roth IRAs and Traditional IRAs are taxed
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Correct answer: B

Roth IRAs are generally considered better investments because you are likely to be in a lower tax bracket when you put money into the account than much later when you are withdrawing it.

7. Imagine that the interest rate on your savings account is 1% per year and inflation is 2% per year. After one year, would the money in the account buy more than it does today, exactly the same, or less than today?

  1. More than it does today
  2. Exactly the same
  3. Less than today
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Correct answer: C

Because inflation rises at a faster rate than your savings account interest the difference in your overall buying power in the future is lower. If your interest rate is greater than the rate of inflation you will have more overall buying power in the future.

8. How much money should you keep in your emergency fund?

  1. 3% of your current salary
  2. The equivalent of 3 to 6 months worth of living expenses
  3. Nothing – just use your credit card in case of emergencies
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Correct answer: B

An emergency fund is extremely important. Having 3 to 6 months of expenses stowed away will give you plenty of time to deal with big financial issues like losing your job.

9. How can you tell if your identity has been stolen?

  1. You receive bills for things you never purchased
  2. You receive a lot of spam email
  3. You receive mail addressed to someone else
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Correct answer: A

10. If you’re trying to build good credit, what is the most important thing you can do?

  1. Throw away your credit cards and don’t take out any loans
  2. Maintain a balance on your credit cards and pay the minimum every month
  3. Pay your bills on time
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Correct answer: C

11. Your credit score can affect your ability to:

  1. Lease an apartment
  2. Get a good rate on auto insurance
  3. All of the above
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Correct answer: C

Your credit score is evidence how trustworthy you are for paying off any debts or recurring bills.

12. As interest rates rise, what will happen to bond prices?

  1. Rise
  2. Fall
  3. Stay the same
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Correct answer: B

Bond prices and interest rates move in opposite directions

13. True or false: A 15-year mortgage typically requires higher monthly payments than a 30-year mortgage but the total interest over the life of the loan will be less.

  1. True
  2. False
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Correct answer: A

A 15-year mortgage will always have a lower interest rate. A 30-year mortgage will have an additional 15 years of compounding interest which adds up very quickly.

14. According to the US Department of Labor, what percentage of your pre-retirement yearly income do you need to save to maintain your standard of living when you stop working?

  1. 70%
  2. 60%
  3. 50%
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Correct answer: A

15. True or false: Buying a single company’s stock usually provides a safer return than a stock mutual fund

  1. True
  2. False
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Correct answer: B

This is a classic example of diversification. This means you reduce your risk by investing in a variety of assets. Mutual funds allow you to spread the risk between different investments.

16. What are your odds of winning a six-number lottery?

  1. 1 in 200 million
  2. 1 in 5 million
  3. 1 in 10 million
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Correct answer: A

Believe it or not, you have a higher chance of being hit by lightning… twice (1 in 144 million)!

17. According to the US Department of Labor, how much are social security benefits?

  1. Equal to about 40% of what you earned before retirement
  2. Equal to about 50% of what you earned before retirement
  3. Equal to about 60% of what you earned before retirement
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Correct answer: A

18. How much money does the average American save each year by bringing their lunch?

  1. $500
  2. $1,000
  3. $1,500
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Correct answer: C

It’s healthier too!

19. People in which of the following careers typically qualify for student loan forgiveness?

  1. Teachers
  2. Firefighters
  3. Individuals that work for the government
  4. Individuals that work for non-profit organizations
  5. All of the above
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Correct answer: E

20. What can happen if you fill out your W-4 incorrectly?

  1. The IRS will come after you
  2. You can end up withholding too much or prepaying too little tax
  3. Nothing
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Correct answer: B

You have to find the correct withholding amount so you don’t owe money when you file your taxes (or get too much back either).


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I got 17 out of 20 correct. What was your score?!

*Original quiz from this site

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