Matching: Select the best answer from the vocabulary word bank. There may be extra words that are not used.

a. $500 / $1,000

b. Money market mutual fund

c. Amoral

d. First

e. Positive

f. Rate of return

g. Sinking fund

h. Negative

i. Wealth building

j. Murphys Law

k. 12

l. 36

m. Last

n. Insurance

o. Baby Steps

_____ 11. The type of account that holds your fully funded emergency fund

_____ 12. The amount you put into an emergency fund for Baby Step 1

_____ 13. The savings rate most Americans have (those who spend more than they make)

_____ 14. A proven plan to financial success that involves seven chronological actions

_____ 15. The third reason to save money; involves investing money long term

_____ 16. The number of months a fully funded emergency fund contains

_____ 17. The priority in which you pay yourself

_____ 18. A fund that stores saved money so that you can purchase items in full

_____ 19. The percentage by which your money grows as it is invested

_____ 20. Whatever can go wrong will go wrong

Multiple choice: Read each item carefully, then select the best answer.

21. The saving habits of Ben and Arthur illustrate which principle(s) of saving?

a. Rate of return matters.

b. The amount of the initial investment is important.

c. The length of time that money is invested matters.

d. All of the above.

22. What is the most sensible way to buy a $4,000 car?

a. Pay a down payment of $500 and use 90-days-same-as-cash to pay the balance.

b. Use the sinking fund approach and save $400 a month for ten months.

c. Shop around for the best interest rate before taking out a $4,000 loan.

d. Ask your parents to co-sign a loan at your local credit union.

23. Which is the correct order of priorities for your money?

a. Invest in retirement, save for emergencies, pay off the house

b. Pay off the house, save for emergencies, invest in retirement

c. Save for emergencies, invest in retirement, pay off the house

d. It is not important which order you follow as long as you do these three things.

24. Which is not a key to saving money?

a. Your income

b. Making savings a habit and a priority

c. Discipline

d. Focus

25. Which of the following is not one of the three reasons to save?

a. Emergency fund

b. Purchases

c. Pay off debt

d. Wealth building

26. How much money should a couple who makes $54,000 a year have in their beginner emergency fund if they have a $3,000 credit card bill and a mortgage?

a. 36 months of expenses

b. 10% of their credit card balance

c. $1,000

d. No emergency fund until the credit card is paid off

27. Even though a regular savings account is suitable when you are saving your beginner emergency fund, why is a money market mutual fund a better place to keep your completed emergency fund?

a. A saving account is too easy to access.

b. Typically, a money market mutual fund averages a higher interest rate than a savings account.

c. A money market mutual fund is accessible and generally has check-writing privileges if needed.

d. All of the above.

28. To build discipline and get into the habit of saving, you should:

a. Use pre-authorized checking.

b. Avoid extra expenses such as gourmet coffee.

c. Pack a lunch and save the cost of eating out.

d. All of the above.

29. The Baby Steps can best be described as:

a. A systematic process for getting out of a financial mess and into building wealth.

b. A series of seven sequential steps that help you plan, save, and manage money.

c. A series of steps that will work in good times and in bad times.

d. All of the above.

30. For most families, a fully funded emergency fund will be about:

a. $1,000

b. $3,0005,000

c. $5,0007,000

d. $8,000 or more

31. If you invest $1,000 at 12% interest, how much money will be in the account after two years, compounded annually?

a. $1,120

b. $1,240

c. $1,254.40

d. $1,300.40

32. Savings is about:

a. Discipline and making more money

b. Pride and greed

c. Emotion and contentment

d. Contentment and spending more money

33. For which of the following should you save?

a. Wealth building

b. Emergency fund

c. Purchases

d. All of the above

34. Which of the following is true about the concept of saving?

a. Saving must become a priority after all bills are paid.

b. You will save when you make more money.

c. You must pay yourself first.

d. All of the above.

35. A sinking fund approach means:

a. Saving and paying cash

b. Buying with credit, but paying it off in full before the interest is due

c. Buying with credit, getting a low interest rate, and sinking further into debt

d. 90-days-same-as-cash

36. Which statement is true about a one-time investment for 40 years?

a. The interest rate doesnt matter as long as you leave it alone for 40 years.

b. A one-time investment returns a higher yield than continued investments.

c. The annual interest rate matters when making a one-time investment.

d. All of the above.

37. Which statement is true?

a. People spend more money when they pay with cash.

b. When you pay with cash, you have a higher chance of negotiating a better deal.

c. When you pay with cash, it is hard to negotiate a deal because you didnt use their credit.

d. Using a credit card is wiser than carrying cash around.

38. What is the next step after you have a fully funded emergency fund?

a. Pay off the rest of your student loan.

b. Finish paying off the last credit card.

c. Invest 15% of your income into Roth IRAs and pre-tax retirement plans.

d. Work on both a and b at the same time.

39. Using the sinking fund approach, how much do you have to save to buy a $5,000 car one year from now?

a. $275 a month into savings

b. $300 a month into savings

c. $400 a month into savings

d. $416.66 a month into savings

40. How much money should you have in your beginner emergency fund by the time you hit Baby Step 2 (pay off all debt)?

a. 15% of your household income

b. 36 months of expenses

c. $500 or $1,000, depending on your current income

d. You should not have an emergency fund until all debt is paid