DC Financial Literacy MIDTERM
Which of the following statements comparing credit and debit cards is TRUE?
With debit cards, you're spending your own money at point of sale, while with credit cards, you're promising to pay back the money eventually
What is the advantage of paying your credit card balance in full each month?
You avoid paying any interest and fees
Each of the following financial products will help you build a credit history EXCEPT
Debit Card
How often do customers typically receive a bank statement for their checking account?
monthly
What does it mean to "pay yourself first"?
Deposit money into your savings account before spending on anything else
What is the purpose of the FAFSA, or Free Application for Federal Student Aid? (Select two)
- It provides access to financial aid from the Federal government, such as grants, loans, and work-study - Colleges and universities use the information you submit on the FAFSA to determine how much financial aid to offer you
Select TWO statements that correctly describe a Direct Subsidized Loan and a Direct Unsubsidized Loan.
- The government pays the interest on a Direct Subsidized Loan while the student is in school and during the grace period - The borrower is responsible for paying all of the interest on a Direct Unsubsidized Loan
When it comes to protecting your account from fraudulent charges, ...
A credit card provides more protection
Which of the following is most likely to represent a fixed rate, secured debt?
A dealer-financed Auto Loan
If you used the 50-30-20 rule of budgeting, how much money would you be saving?
20%
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. How much of your pay do you need to save each month in order to buy the laptop in 12 months?
20%
Jennifer wants to have an emergency fund to cover 6 months of her expenses. Her monthly pay is $4,000 and her monthly expenses are $2,000. If she plans to save 10% of her pay each month, how long will it take her to build her emergency fund?
30 months
Which of the following statements is TRUE about the value of education?
A college graduate can expect to earn, on average, about a $1,000,000 more than a high school graduate over a career
Nigel 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?
An adult cosigner because he is under the age of 18
When a bank says their savings account earns 1% interest, that typically means you will earn 1% interest over what period of time?
Annually (a year)
Which TWO of the following statements are advantages of online banking? A) Once you set up online banking, your bank will waive overdraft, ATM, and monthly fees B) With online banking, you can view your daily transactions and balances, rather than waiting for your monthly statement C) Using online banking, you can request transfers, pay bills and automate your savings without visiting the bank branch D) You can shop online only if your bank account has online banking features
B & C
Ways you can make a tax payment are (check all that apply)?
Bank Account (Direct Pay) Debit or Credit Card Cash Check or Money Order
You are 18 years old, opening your first savings account, and are considering three options. All three have fees competitive with other banks. Which bank is the best option?
Bank B because it IS FDIC insured, interest rate is 0.01%, and a minimum deposit of $50
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 are a better deal? (Hint: Using a one year period, determine the balance that you would have at Bank A and Bank B)
Bank B offers you a savings account with 2% annual interest rate and no fees
Mark saved $1,000 from his summer job cleaning pools. Which of these savings vehicles would work best for him if he doesn't need access to the money for a number of years AND wanted to earn the highest interest rate?
Certificate of deposit
Which of the following transactions may be missing when you go online to review your checking account balance?
Check that you mailed to your cousin for his birthday today
As an employee which of the items below are your responsibility?
Complete a W-4
When loans are amortized, monthly payments are _______ , while the interest portion of the monthly payment ________ and the principal portion of the monthly payment _______ over time.
Constant, Decreases, Increases
Jodi gets a text alert from the bank that her account balance has dropped below $100 after a series of $30 ATM withdrawals. She has not used her ATM in over a week and wonders what she should do. What would you recommend?
Contact your bank immediately as it appears that your account may have been hacked
While doing online research about the colleges you're considering, you see an ad that says, "Enter a few vital pieces of information, pay $39.99 per month, and we guarantee you'll win a scholarship. You don't even have to write an essay! Sign up today with just your name, social security number, and an email address!" How should you proceed?
Don't sign up, because you shouldn't pay money to win scholarships, and you shouldn't enter your SSN into unknown websites
In order to qualify for financial aid, which form must you file?
FAFSA
Student loans are disbursed immediately to you, and you use the funds to pay things like tuition, fees, room and board, etc.
FALSE
Your parent/guardian can use your FSA ID to submit any information for your FAFSA application.
FALSE
Which of the following withholdings is income for the federal government to pay for things like the military and national parks?
Federal income taxes
Which of these options depicts the types of financial aid from MOST attractive to LEAST attractive?
Grants/Scholarships, Work-study, Federal loans, Private loans
What is the different between gross pay and net pay?
Gross pay is before taxes and deductions are subtracted; Net pay is your take-home pay
What are two examples of things your employer might contribute to?
Health Insurance & 401K
Which of the following statements about banks is FALSE?
Historically, savings accounts earn higher returns than investments in the stock market
Danielle's family earns about $60,000 per year. She has been accepted to State U and Greenlawn College and is comparing their financial aid packages. State U has a sticker price of $28,000 and net price of $12,000. Greenlawn College has sticker price of $60,000 and net price of $9,000.Which statement below is FALSE?
If making a decision strictly based on cost, Janelle's best option is State U
Why is it a benefit to pay for somethings like healthcare and retirement investing BEFORE taxes are calculated on your paycheck?
It decreases the amount of your income that taxes will be calculated on and you will pay less in taxes
You are at the checkout counter at the local supermarket and use your debit card to pay for your groceries. Where does the money for this purchase come from?
It is deducted directly from your checking account
Which of these statements about savings is INCORRECT?
It is extremely difficult to open a savings account, as you typically need at least $10,000 for your initial deposit
What does the term "withholding" mean in reference to your paycheck?
It is how much is being taken out of your paycheck in taxes
By Which date should you receive your W-2?
Jan 31
Jill lives on campus. Which of the following cost categories can she most likely remove from her budget?
Monthly on-campus parking permit
Which of the following is an example of delayed gratification as it pertains to saving?
Not buying a muffin or breakfast sandwich every morning during the workweek so you can buy a really nice breakfast for your family once every few weeks
The largest source of fees for banks when it comes to checking accounts is...
Overdraft fees
Who qualifies for a Direct Plus Loan? (choose two)
Parents of a college student Graduate students
When filing your FAFSA, you'll need each of the following documents EXCEPT...
Proof of Employment
All of the following are good strategies to develop savings habits EXCEPT...
Request to be paid in cash so you can save a certain percentage of your money in a shoebox in your room every month
Joe filled out a W-4 a few years ago when he first got hired at his job. He recently got married. He should...
Request to fill out a new W-4 from his employer
Which of the following is an effective strategy for personal saving?
Save a certain percentage of each paycheck and deposit it directly in a savings account
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?
Saving for retirement
What financial product am I? I am a type of credit card that requires cardholders to make a security deposit equal to the credit limit on their account. Due to this deposit requirement, I am often a good choice for young people looking to establish a credit history.
Secured credit card
Malcolm is working full-time and wants to make sure he's saving strategically for four specific goals: an emergency fund ($5000), a flight home to see his parents for the holidays ($450), a downpayment on a new car ($3000), and his retirement (2% of his monthly take-home pay). What's his best strategy?
Set up 3 separate savings accounts for the first 3 goals and a retirement investment for the 4th
One example of mandatory spending and one example of discretionary spending are
Social security and the military
Which of the formulas below equates to net price?
Sticker price minus grants and scholarships = net price
If you are having trouble making auto loan payments, and are really following a tight budget, which recommendation below represents the WORST advice?
Stop making payments on some of your debts so you can focus on getting the most expensive or largest debts under control
Which type of financial aid am I? I have limits on the amount that you can borrow based on your year in college. The federal government makes the interest payments on me while you are in college, and you make the interest payments on me after you graduate.
Subsidized Federal Loan
What happens if you are not accurate on your tax return (form 1040)?
The 1040 form determines whether you owe additional taxes or are entitled to receive a refund from the government
Which of these statements best explains why it's often a good idea to pay more than the monthly amount due on an amortized loan?
The extra payment will be applied to the principal amount you owe, which will pay down your debt more quickly
Which list includes the most important factors to consider when opening a savings account?
The fees, the interest rates, and the minimum deposit to open the account
Which of the following statements is TRUE?
The interest rate on your savings account will vary over time and be set by the bank.
Why is it more difficult to get out of debt when only paying the minimum payment?
The majority of your minimum payment is going toward interest and finance charges and only a small amount toward the principal
Which of the following is a way to access the money in your checking account?
Using your debit card to pay for groceries at the checkout Depositing a paycheck at an ATM
You deposit a check by using the bank app that you have on your smartphone. What is the standard amount of time that you will need to wait in order to get access to these funds?
Usually 1-7 business days later
Which tax form do you fill out when you start a job and need to provide information to your employer about how much tax to withhold from your paycheck?
W-4
What would be a good time to spend money from your Emergency Fund?
You lose your job but still have bills to pay
Which of the following statements is TRUE about filing the FAFSA?
You need to file the FAFSA for every year you will be in school no matter what
What is a good rule of thumb to consider when it comes to student loan debt?
You should generally limit your borrowing to what you expect to earn as a starting salary when you leave college
When signing up for a new checking account, you answer "Yes" to receive overdraft protection. On this day, you have $10 in your account and go out and use your debit card to buy lunch for $12, a movie ticket for $12 and dinner for $15. What is likely to be the outcome resulting from these transactions?
You will likely be charged an overdraft fee for one or more of the transactions and also will need to repay the bank for the amount overdrawn ($29)
You open a new bank account at Eastside Savings. You see FDIC stickers around the bank, and the teller specifically mentions that Eastside Savings is "FDIC insured". A few months later, you hear on the radio that Eastside Savings is struggling to stay in business. Your savings balance is $500. What would happen to that money if Eastside Savings failed?
You would receive all the money you have deposited at Eastside Savings since FDIC insurance covers accounts up to $250,000
What is the benefit of automating your savings account contributions?
Your money will be transferred automatically and guarantees you will be contributing to your savings
What factors determine the interest rate that will be charged for money borrowed when using credit?
credit score the type and term of the loan good employment history (ALL OF THE ABOVE)
How often should you look at your bank statement?
monthy