Savings Review Flashcards
The highest-yielding savings accounts are paying historically low-interest rates, so Maria is only able to get a 1% annual interest rate for her savings account. Assuming interest rates do not change, use the Rule of 72 to approximate how many years it will take for her to DOUBLE her money in this account.
a. 1 year
b. 5 years
c. 10 years
d. 72 years
d. 72 years
You are comparing two savings accounts based on the interest you would earn and the fees they charge. Assuming you have a savings account with an average balance of $500, which combination of interest rates and fees is a better deal? (Hint: Using a one-year period, determine the balance that you would have at Bank A and Bank B).
a. Bank A offers you a savings account with a 10% annual interest rate and $5/month in fees
b. Bank B offers you a savings account with a 2% annual interest rate and no fees
c. The two bank’s deals are equivalent
d. Trick question – it’s a bad idea to open a savings account with just $500
a. Bank A offers you a savings account with a 10% annual interest rate and $5/month in fees
Which of these statements about savings is incorrect?
a. People often believe they are saving when they buy products at a listed discount, even if they didn’t need the product in the first place
b. People often believe they are saving when they buy products at a listed discount, even if they didn’t need the product in the first place
c. Without a vehicle to save (like a savings account), it’s much easier to spend and harder to keep track of finances
d. Billions of dollars are spent on marketing to persuade consumers to spend money instead of saving it
b. People often believe they are saving when they buy products at a listed discount, even if they didn’t need the product in the first place
Jeremy is a 17-year-old junior in high school and just started his first job. He wants to open a savings account. Which of these will he need to bring to the local bank branch in order to start an account?
a. A letter from his school
b. A letter from his parents
c. An adult cosigner because he is under 18
d. An adult cosigner because he is still a student
c. An adult cosigner because he is under 18
You open a new bank account at East Side Savings. You see FDIC stickers around the bank, and the teller specifically mentions that East-side Savings is “FDIC insured”. A few months later, you hear on the radio that East Side Savings is struggling to stay in business. Your savings balance is $500. What would happen to that money if East Side Savings failed?
a. You would receive all the money you have deposited at East Side Savings since FDIC insurance covers accounts up to $250,000.
b. You could lose $250 since FDIC insurance only covers 50% of the money you have deposited.
c. You would lose all of your money.
d. You would receive $250,000 since FDIC insurance provides each account at the bank with $250,000 regardless of how much they have deposited.
a. You would receive all the money you have deposited at East Side Savings since FDIC insurance covers accounts up to $250,000.
Which list includes the most important factors to consider when opening a savings account?
a. The fees, the interest rates, and the minimum deposit to open the account
b. The fees, the interest rates, and the bank’s brand recognition
c. The fees, which bank your friend uses, and the minimum deposit to open the account
d. The fees, which bank your friend uses, and the bank’s brand recognition
a. The fees, the interest rates, and the minimum deposit to open the account
Which of the following is an effective strategy for personal saving?
a. Wait until the end of the month and save whatever is left in your checking account
b. Save a certain percentage of each paycheck and deposit it directly in a savings account
c. Cover all of your wants and needs and save whatever is left over
d. Take out a payday loan so you can save before you receive your paycheck
b. Save a certain percentage of each paycheck and deposit it directly in a savings account
What would be a good time to spend money from your Emergency Fund?
a. Your friend tells you that you should buy as much Bitcoin as possible
b. Your favorite artist releases a new album and you just have to buy it
c. You lose your job but still have bills to pay
d. Your friends are going on an expensive trip and you would like to go with them
c. You lose your job but still have bills to pay
Joelle wants to have an emergency fund to cover 6 months of her expenses. Her monthly gross pay is $4,000 and her monthly expenses are $2,000. If she plans to save 10% of her gross pay each month, how long will it take her to build her emergency fund?
a. 3 months
b. 9 months
c. 24 months
d. 30 months
d. 30 months
Which of the following statements about banks is FALSE?
a. If it is FDIC-insured, your money is safe even if the bank fails
b. Many banks pay interest for the money you deposit with them
c. Historically, savings accounts earn higher returns than investments in the stock market
d. Money in a bank is usually easy to access via ATM, debit card, or check
c. Historically, savings accounts earn higher returns than investments in the stock market
You are developing a savings plan and using short–, medium– and long-term goals to motivate you. Which of the following might you pick as the most long-term goal?
a. Saving for retirement
b. Saving for a down payment on a home
c. Saving to buy a car
d. Saving to go on vacation
a. Saving for retirement
You want to take earnings from your part-time job to pay for a new laptop. Your monthly take-home pay is $500 and the laptop costs $1,200. What percentage of your pay do you need to save in order to buy the laptop in 12 months?
a. 5%
b.10%
c. 15%
d. 20%
d. 20%
Which of the following statements is TRUE?
a. The interest rate on your savings account will remain the same as long as you keep the account open.
b. You can choose the interest rate on your savings account, but only once per year.
c. The interest rate on your savings account will vary over time and be set by the bank.
d. The interest rate on your savings account will vary over time and be set by the government.
c. The interest rate on your savings account will vary over time and be set by the bank.
All of the following are good strategies to develop savings habits EXCEPT…
a. Start with a small goal and gradually get more ambitious
b. Take a percentage of your paycheck and deposit it directly into a savings account
c. Avoid spending money that you don’t have and running up credit card debt
d. Request to be paid in cash so you can save a certain percentage of your money in a shoebox in your room every month
d. Request to be paid in cash so you can save a certain percentage of your money in a shoebox in your room every month
Which of the following individuals is the wealthiest?
a. Maria owns a $15,000 car and owes $45,000 in student loan debt.
b. Keith owns a $500,000 home and has a $460,000 mortgage.
c. Elyse owns a $25,000 car that is entirely paid off but has $10,000 in credit card debt.
d. Karina owns a $50,000 car and has $5000 remaining on her car loan.
d. Karina owns a $50,000 car and has $5000 remaining on her car loan.
