How well do you understand the basics of money and personal finance? Take this quiz, prepared by CredAbility in cooperation with the Jumpstart Coalition financial education organization. Keep a calculator handy.
1. What percentage of your income should be spent on your monthly mortgage payment?
A. Whatever the bank says you qualify for
B. No more than 25 percent of your gross pay or 35 percent of your take-home pay
C. No more than half of your paycheck
D. Whatever you are comfortable with
2. How high must your FICO credit score be to quality for the best interest rate?
3. True or false: You can invest in only one 529 college savings plan per child.
4. Are contributions to a traditional 401(k) plan deducted from your salary before or after taxes?
5. Rob and Mary are the same age. At age 25 Mary began putting $2,000 a year into a savings account 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
6. How much should you have in an emergency account?
B. Three months of living expenses
C. Six months of living expenses
D. An emergency account? Isn’t that what credit cards are for?
7. True or false: A 15-year mortgage typically requires higher monthly payments than a 30-year mortgage, but you will pay less interest.
8. True or false: If a person age 62 or older obtains a reverse mortgage, he or she is still responsible for paying property taxes and insurance.
9. You purchase a $20,000 car with 10 percent down and take out a loan with a 10 percent interest rate for 60 months. About how much will your monthly payment be?
10. How long can negative information stay on your credit report?
A. Negative information is not included on your report
B. Three years
C. Seven years
9. B (Consider this: Put 20 percent down, and you will reduce your payments to $340 per month. Finance for 48 months instead of 60, and your payments will be about $74 more per month, but you will save abort $1,000 in interest charges over the life of the loan.)