ScienceEconomicsFoundations in Personal Finance Chapter 2
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Foundations in Personal Finance Chapter 2

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3 March 2024
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37 test answers

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The Five Foundations
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The five steps to financial success
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What is the First Foundation?
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Save a $500 emergency fund
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Compound Interest
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Interest paid on interest previously earned; credited daily, monthly, quarterly or semiannually
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Emergency Fund
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Five hundred dollars in readily available cash to be used only in the event of an emergency; the goal of the First Foundation
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Interest Rate
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Percentage paid to a lender for the use of borrowed money (in debt); percentage earned on invested principal (in investing)
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Sinking Fund
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Saving money over time for a large purchase
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Instead of borrowing money for large purchases, you should set money aside in a _________ over time and pay with cash.
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Sinking Fund
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What does it mean to have a negative savings rate?
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Spending more money than you make and acquiring debt
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The saving habits of Ben and Arthur best illustrate which principle of saving?
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The length of time money is invested matters.
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The budget is your written plan and tells ______ _____ where to go.
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Every dollar
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True or False: Anyone can become a millionaire in this country.
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True
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True or False: Debt is only when you owe money on credit cards.
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False
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The first foundations tell you to save $500 for _______.
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Emergencies
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True or False: Debt never solves the problem; it delays one problem while creating another.
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True
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True or False: You should put your $500 emergency fund in your everyday checking account.
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False
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True or False: Savings: If it became important enough, you could save it!
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True
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Saving money is about emotion and ___________.
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Contentment
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Money is _______.
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Amoral
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True or False: Emergencies are going to happen.
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True
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True or False: Saving is a learned skill.
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True
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Saving takes the maturity to say, "_____" to purchases.
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No
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Murphy's law states that "If it can go _____, it will"
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Wrong
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True or False: "90 Day Same as Cash" deals are a great bargain.
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False
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True or False: You can't pay cash for a car.
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False
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True or False: Wealth building requires discipline.
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True
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Building wealth is a_________.
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Marathon
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True or False: Only a few people in America can become millionaires.
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False
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Automate your wealth building by using ________.
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Pre-authorized checking withdrawals
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To save you need to be focused and practice ________.
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Discipline
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What is the first thing you should do with your money?
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Give
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True or False: You should save first, give second, and spend third.
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False
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Compound interest creates a(n) _______ explosion.
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Mathematical
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True or False: Both Ben and Arthur made the same amount of money investing, regardless of when they started.
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False
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On average, how long does it take to become a millionaire in America?
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17 years
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Most millionaires inherited their money from their parents.
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False
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Rate of return is also called an _______ _______.
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Interest Rate
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True or False: Compound interest is when your interest rate doubles.
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False