Beginning a retirement plan is right at any age. The younger you start, the better off you are. But it is often the small financial mistakes we make every day that inflict the most damage, often years down the road. If you are close to retirement, offer this to your children. If you are years away, these questions should hold even more importance.
In her incredibly interesting fiction "Special Topics in Calamity Physics", Marisha Pessl suggested the following observation about imminent futures: "A person's life is nothing more that a series of tip-offs of what's to come. If we had the brains to notice these clues, we might be able to change our future." The quote was credited to Dr. Fellini Loggia, but I'm not sure he exists - it is fiction.
The Fed's Personal Financial Literacy Quiz:
(Answers with explanations - from me- at bottom of page, part three comes later this week.)
11. Sara and Joshua just had a baby. They received money as baby gifts and want to put it away for the baby's education. Which of the following tends to have the highest growth over periods of time as long as 18 years?
a.) A checking account.
c.) A U.S. Govt. savings bond.
d.) A savings account.
12. Barbara has just applied for a credit card. She is an 18-year-old high school graduate with few valuable possessions and no credit history. If Barbara is granted a credit card, which of the following is the most likely way that the credit card company will reduce ITS risk?
a.) It will make Barbara's parents pledge their home to repay Karen's credit card debt.
b.) It will require Barbara to have both parents co-sign for the card.
c.) It will charge Barbara twice the finance charge rate it charges older cardholders.
d.) It will start Barbara out with a small line of credit to see how she handles the account.
13. Chelsea worked her way through college earning $15,000 per year. After graduation, her first job pays $30,000. The total dollar amount Chelsea will have to pay in Federal Income taxes in her new job will:
a.) Double, at least, from when she was in college.
b.) Go up a little from when she was in college.
c.) Stay the same as when she was in college.
d.) Be lower than when she was in college.
14. Which of the following best describes the primary sources of income for most people age 20-35?
a.) Dividends and interest.
b.) Salaries, wages, tips.
c.) Profits from business.
15. If you are behind on your debt payments and go to a responsible credit counseling service such as the Consumer Credit Counseling Services, what help can they give you?
a.) They can cancel and cut up all of your credit cards without your permission.
b.) They can get the federal government to apply your income taxes to pay off your debts.
c.) They can work with those who loaned you money to set up a payment schedule that you can meet.
d.) They can force those who loaned you money to forgive all your debts.
16. Rob and Mary are the same age. At age 25 Mary began saving $2,000 a year while Rob saved nothing. At age 50, Rob realized that he needed money for retirement and started saving $4,000 per year while Mary kept saving her $2,000. Now they are both 75 years old. Who has the most money in his or her retirement account?
a.) They would each have the same amount because they put away exactly the same
b.) Rob, because he saved more each year
c.) Mary, because she has put away more money
d.) Mary, because her money has grown for a longer time at compound interest.
17. Many young people receive health insurance benefits through their parents. Which of the following statements is true about health insurance coverage?
a.) You are covered by your parents' insurance until you marry, regardless of your age.
b.) If your parents become unemployed, your insurance coverage may stop, regardless of your age.
c.) Young people don't need health insurance because they are so healthy.
d.) You continue to be covered by your parents' insurance as long as you live at home, regardless of your age.
18. Don and Bill work together in the finance department of the same company and earn the same pay. Bill spends his free time taking work-related classes to improve his computer skills; while Don spends his free time socializing with friends and working out at a fitness center. After five years, what is likely to be true?
a.) Don will make more because he is more social.
b.) Don will make more because Bill is likely to be laid off.
c.) Bill will make more money because he is more valuable to his company.
d.) Don and Bill will continue to make the same money.
19. If your credit card is stolen and the thief runs up a total debt of $1,000, but you notify the issuer of the card as soon as you discover it is missing, what is the maximum amount that you can be forced to pay according to Federal law?
20. Which of the following statements is NOT correct about most ATM (Automated Teller Machine.) cards?
a.) You can generally get cash 24 hours-a-day.
b.) You can generally obtain information concerning your bank balance at an ATM machine.
c.) You can get cash anywhere in the world with no fee.
d.) You must have a bank account to have an ATM Card.
ANSWERS: 11) b; 12) d; 13) a; 14) b; 15) c; 16) d; 17) b; 18) c; 19) d; 20) c
Part One of the Fed's Personal Finance Quiz can be found here as well.