Retirement Planning and Your Personal Finance Skills, Part Three

Personal Financial Literacy Quiz:

(Answers and explanations by me are at the bottom of the page)

21. Matt has a good job on the production line of a factory in his home town. During the past year or two, the state in which Matt lives has been raising taxes on its businesses to the point where they are much higher than in neighboring states. What effect is this likely to have on Matt's job?

a.) Higher business taxes will cause more businesses to move into Matt's state, raising wages.

b.) Higher business taxes can't have any effect on Matt's job.

c.) Matt's company may consider moving to a lower-tax state, threatening Matt's job.

d.) He is likely to get a large raise to offset the effect of higher taxes.

22. If you have caused an accident, which type of automobile insurance would cover damage to your own car?

a.) Comprehensive.

b.) Liability.

c.) Term.

d.) Collision.

23. Scott and Eric are young men. Each has a good credit history. They work at the same company and make approximately the same salary. Scott has borrowed $6,000 to take a foreign vacation. Eric has borrowed $6,000 to buy a car. Who is likely to pay the lowest finance charge?

a.) Eric will pay less because the car is collateral for the loan.

b.) They will both pay the same because the rate is set by law.

c.) Scott will pay less because people who travel overseas are better risks.

d.) They will both pay the same because they have almost identical financial backgrounds.

24. If you went to college and earned a four-year degree, how much more money could you expect to earn than if you only had a high school diploma?

a.) About 10 times as much.

b.) No more; I would make about the same either way.


c.) A little more; about 20% more.

d.) A lot more; about 70% more.

25. Many savings programs are protected by the Federal government against loss. Which of the following is not?

a.) A U.S. Savings Bond.

b.) A certificate of deposit at the bank.

c.) A bond issued by one of the 50 States.

d.) A U. S. Treasury Bond.

26. If each of the following persons had the same amount of take home pay, who would need the greatest amount of life insurance?

a.) An elderly retired man, with a wife who is also retired.

b.) A young married man without children.

c.) A young single woman with two young children.

d.) A young single woman without children.

27. Which of the following instruments is NOT typically associated with spending?

a.) Debit card.

b.) Certificate of deposit.

c.) Cash.

d.) Credit card.

28. Which of the following credit card users is likely to pay the GREATEST dollar amount in finance charges per year, if they all charge the same amount per year on their cards?

a.) Jessica, who pays at least the minimum amount each month and more, when she has the money.

b.) Vera, who generally pays off her credit card in full but, occasionally, will pay the minimum when she is short of cash

c.) Megan, who always pays off her credit card bill in full shortly after she receives it

d.) Erin, who only pays the minimum amount each month.

29. Which of the following statements is true?

a.) Banks and other lenders share the credit history of their borrowers with each other and are likely to know of any loan payments that you have missed.

b.) People have so many loans it is very unlikely that one bank will know your history with another bank

c.) Your bad loan payment record with one bank will not be considered if you apply to another bank for a loan.

d.) If you missed a payment more than 2 years ago, it cannot be considered in a loan decision.

30. Dan must borrow $12,000 to complete his college education. Which of the following would NOT be likely to reduce the finance charge rate?

a.) If he went to a state college rather than a private college.

b.) If his parents cosigned the loan.

c.) If his parents took out an additional mortgage on their house for the loan.

d.) If the loan was insured by the Federal Government.

31. If you had a savings account at a bank, which of the following would be correct concerning the interest that you would earn on this account?

a.) Earnings from savings account interest may not be taxed.

b.) Income tax may be charged on the interest if your income is high enough.


c.) Sales tax may be charged on the interest that you earn.

d.) You cannot earn interest until you pass your 18th birthday.

ANSWERS: 21) c; 22) d; 23)a; 24)d; 25)c 26) c; 27) b; 28) d; 29) a; 30) a; 31) b

Part One

Part Two

Retirement Planning and Employee Stress

Along the same topic of stress, there is a mention in the book about financial education for employees. Some business leaders suggest that once employees grasp some basic financial ideas, those ideas become tools to eliminate stress and increase productivity.

"Our calls in general for mortgage-related issues are up over three times compared to last year," says Richard Chaifetz, CEO of ComPsych. "(Employees) become preoccupied with financial issues at work. You see absenteeism, lack of performance and turnover as people look for jobs that may pay more." ComPsych, for those interested is focused the business aspect of the equation and offers products and services to that end.

The not-for-profit company Personal Finance Employees Education Foundation, inc. led by the renowned Dr. E. Thomas Garmin, works to achieve three goals: (1) The lack of financial literacy--spending plans, credit management, and savings--is the major reason why employees do not save for retirement; (2) Money worries hinder employee job performance; and (3) Providing employees easy access to basic financial literacy education programs improves their personal financial behaviors and job performance as well as the employer's bottom line.



These folks act as an intermediary advisors, taking donations for its efforts with a volunteer board and recommending programs designed to further the education process. Those donations can run from as little as $500 to $100,000.

According to Dr. Thomas R. Watson, a leading expert on workplace financial education, employers who provide a “sound investment in employees, a quality financial education program would benefit your business for years to come. Workers become more tolerant of budget cuts that prevent expected increases in pay. Fewer employees work second jobs or seek higher paying jobs at the expense of their employer. Employees who are more cost-conscious at home should be more cost-conscious at work.”



In the end, this reduces absenteeism and, for the employer, that means increased profits. When a business focuses on human capital, something that has a reduced importance to employers as the worker ages, it can increase an employee’s financial capital. Their efforts may in the end be somewhat of a Sisyphean challenge. The hardest part is not in the education of employees, it is in the creation of a permanent change in attitude about a future that lies solely in their hands.