Financial Literacy For Teens
A test on the book Financial Literacy for Teens.
Questions and Answers
- 1.
When paying taxes in the U.S., the more money you make, ____________________.
- A.
The less taxes you pay
- B.
The more taxes you pay
- C.
Doesn't make a difference because everyone pays the same amount in taxes
- D.
The more you hate paying taxes
Correct Answer
B. The more taxes you payExplanation
As per the given statement, when paying taxes in the U.S., the more money you make, the more taxes you pay. This implies that the tax amount is directly proportional to the income level. Therefore, individuals with higher incomes are required to pay a larger amount of taxes compared to those with lower incomes.Rate this question:
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- 2.
A health insurance program for the elderly and disabled that is funded by some of your taxes and run by the federal government is known as?
- A.
FICA.
- B.
State tax.
- C.
Unemployment tax.
- D.
Medicare.
Correct Answer
D. Medicare.Explanation
Medicare is a health insurance program for the elderly and disabled that is funded by some of your taxes and run by the federal government. It provides coverage for hospital stays, doctor visits, prescription drugs, and other medical services. FICA is a payroll tax that funds Social Security and Medicare, but it is not the specific program described in the question. State tax and unemployment tax are unrelated to the specific health insurance program mentioned.Rate this question:
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- 3.
One common thing of most financially successful people is that they?
- A.
Quit school before they were 18.
- B.
Always keep $500 in their pocket.
- C.
Started a business early in life.
- D.
Worked part-time when they were teenagers.
Correct Answer
D. Worked part-time when they were teenagers.Explanation
Financially successful people often develop a strong work ethic and valuable skills from an early age. Working part-time as teenagers allows them to gain experience, learn the value of money, and develop important skills such as time management, responsibility, and customer service. It also provides an opportunity to network and make connections that can be beneficial in their future careers. Additionally, working part-time can instill a sense of discipline and determination, which are crucial for achieving financial success later in life.Rate this question:
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- 4.
People who do not understand the difference between ______________ usually struggle with financial problems.
- A.
Taxes and insurance
- B.
Needs and wants
- C.
Buying and renting
- D.
Food and shelter
Correct Answer
B. Needs and wantsExplanation
People who do not understand the difference between needs and wants usually struggle with financial problems. This is because they may prioritize their wants over their needs, spending money on unnecessary things instead of essential expenses like food, shelter, and bills. Understanding the distinction between needs (basic necessities for survival) and wants (desires or non-essential items) is crucial for making wise financial decisions and managing one's budget effectively. Failing to do so can lead to financial instability and difficulties in meeting essential needs.Rate this question:
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- 5.
One major problem with using credit cards is that people...
- A.
Lose them a lot.
- B.
Buy things they can't afford.
- C.
Have to pay to use them.
- D.
Forget to use them.
Correct Answer
B. Buy things they can't afford.Explanation
Using credit cards can lead to people buying things they can't afford. Credit cards provide a convenient way to make purchases, but they also allow individuals to spend money that they may not have readily available. This can lead to accumulating debt and financial difficulties. People may be tempted to make impulsive purchases or overspend beyond their means, resulting in buying items they cannot afford.Rate this question:
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- 6.
If you use a credit card, you should...
- A.
Pay the full balance of the credit card every month
- B.
Pay the minimum payment each month
- C.
Never pay the bill
- D.
Be able to buy anything you want
Correct Answer
A. Pay the full balance of the credit card every monthExplanation
Using a credit card responsibly means paying off the full balance every month. This is important because it helps to avoid accumulating debt and paying high interest charges. By paying the full balance, you are effectively using the credit card as a convenient payment tool rather than relying on it as a form of borrowing. Additionally, paying the full balance helps to maintain a good credit score, which is crucial for future financial endeavors such as obtaining loans or mortgages.Rate this question:
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- 7.
A ___________ is a plan for how you will spend your money.
- A.
Paycheck
- B.
Cash journal
- C.
Credit card
- D.
Budget
Correct Answer
D. BudgetExplanation
A budget is a plan for how you will spend your money. It helps you allocate your income and expenses, allowing you to track and manage your finances effectively. By creating a budget, you can prioritize your spending, set financial goals, and ensure that you are living within your means. It helps you make informed decisions about where your money should go, whether it is for necessities, savings, or discretionary expenses. Overall, a budget serves as a financial roadmap, guiding you towards financial stability and success.Rate this question:
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- 8.
Health insurance is...
- A.
Only for those who get sick.
- B.
An unnecessary expense because you may not need it.
- C.
A must buy for your budget.
- D.
More important for women than for men.
Correct Answer
C. A must buy for your budget.Explanation
Health insurance is considered a must-buy for your budget because it provides financial protection against unexpected medical expenses. Without health insurance, individuals may face significant financial burdens if they require medical treatment or hospitalization. It ensures that individuals have access to necessary healthcare services without worrying about the high costs. Additionally, health insurance can also provide preventive care and coverage for regular check-ups, promoting overall well-being and early detection of potential health issues. Therefore, it is essential to include health insurance as a necessary expense in one's budget to ensure financial security and access to quality healthcare.Rate this question:
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- 9.
Renter's insurance is very important to have because they will replace all of your belongings in case of a...
- A.
Fire, robbery, or if your little brother damanges something
- B.
Flood, robbery, or a car accident
- C.
Robbery, fire, or if you brake something
- D.
Fire, flood, or robbery
Correct Answer
D. Fire, flood, or robberyExplanation
Renter's insurance is important to have because it provides coverage for your belongings in case of fire, flood, or robbery. These events can cause significant damage or loss to your personal property, and having insurance ensures that you will be able to replace or repair your belongings without incurring a large financial burden.Rate this question:
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- 10.
Which item below would certainly depreciate if you owned it?
- A.
A house
- B.
A car
- C.
Gold
- D.
All of the above
Correct Answer
B. A carExplanation
A car would certainly depreciate if you owned it. This is because cars are considered as depreciating assets, meaning their value decreases over time. As soon as a car is driven off the lot, it begins to lose value due to factors such as wear and tear, mileage, and the introduction of newer models. Unlike houses or gold, which can retain or even increase in value over time, cars generally lose value and depreciate as they age.Rate this question:
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- 11.
Chain mails involving money are?
- A.
Usually legal and ethical.
- B.
Legal if you are 21.
- C.
Completely illegal.
- D.
Partly legal and ethical.
Correct Answer
C. Completely illegal.Explanation
Chain mails involving money are completely illegal. Chain mails that require participants to send money or recruit others to send money are considered pyramid schemes, which are illegal in many countries. These schemes rely on continuously recruiting new participants to sustain the system, and the majority of participants end up losing money. Therefore, engaging in such chain mails is against the law and unethical.Rate this question:
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- 12.
What are the two main reasons to save money?
- A.
For emergencies and to buy everything you want
- B.
For emergencies and major purchases
- C.
To pay off your credit cards and for major purchases
- D.
So you can invest it and donate it
Correct Answer
B. For emergencies and major purchasesExplanation
Saving money for emergencies and major purchases is important for financial stability and security. Emergencies can arise unexpectedly, such as medical expenses or unexpected job loss, and having savings can provide a safety net during these challenging times. Additionally, saving for major purchases allows individuals to avoid taking on excessive debt and instead use their own funds to make large investments or purchases, such as buying a house or car. By prioritizing saving for emergencies and major purchases, individuals can achieve financial goals and have peace of mind in the face of unexpected events.Rate this question:
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- 13.
How can you make money while you sleep?
- A.
Put your money under your pillow for the tooth fairy
- B.
Dream about money
- C.
Invest your money
- D.
Donate your money
Correct Answer
C. Invest your moneyExplanation
Investing your money is a way to make money while you sleep. By investing in stocks, bonds, real estate, or other assets, you can earn passive income through dividends, interest, or capital appreciation. This means that even when you are not actively working, your investments can generate income for you. Investing allows your money to grow and work for you over time, providing financial security and the potential for wealth accumulation.Rate this question:
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- 14.
You won't be able to move out if you have...
- A.
Student loans
- B.
No roommates
- C.
Protective parents
- D.
Bad credit
- E.
No credit
Correct Answer
D. Bad creditExplanation
If you have bad credit, it means that you have a poor credit history or low credit score. This can make it difficult for you to secure loans or credit cards, and it may also affect your ability to rent an apartment or get approved for a mortgage. Having bad credit can limit your financial options and make it challenging to move out because you may struggle to meet the financial requirements or pass the credit checks necessary for renting or purchasing a new place.Rate this question:
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- 15.
What are the four main things you have to pay for every month when having a car?
- A.
Car payment, gas, maintenance/repairs, and tires
- B.
Car payment, insurance, gas, and maintenance/repairs
- C.
Gas, insurance, credit cards, and oil changes
- D.
Insurance, maintenance/repairs, car payment, and car washes
Correct Answer
B. Car payment, insurance, gas, and maintenance/repairsExplanation
The correct answer is car payment, insurance, gas, and maintenance/repairs. When having a car, you have to make monthly payments towards the car loan or lease, which is the car payment. Insurance is necessary to protect yourself and your vehicle in case of accidents or damages. Gas is required to fuel the car and keep it running. Maintenance and repairs are essential to keep the car in good condition and ensure its longevity. These four expenses are recurring every month for car owners.Rate this question:
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- 16.
You should choose a career based on...
- A.
How much money you want to make.
- B.
What you like to do and have a passion for.
- C.
What will make your parents happy.
- D.
What your friends tell you to do.
Correct Answer
B. What you like to do and have a passion for.Explanation
One should choose a career based on what they like to do and have a passion for, as this will lead to greater job satisfaction and fulfillment. When individuals are engaged in work that aligns with their interests and passions, they are more likely to excel and be motivated to succeed. Money and external factors like parental approval or peer influence should not be the sole determinants of career choice, as they may not bring long-term happiness and satisfaction. It is important to prioritize personal fulfillment and enjoyment when making career decisions.Rate this question:
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- 17.
You will likely earn over how much money before you retire?
- A.
One hundred thousand dollars
- B.
One million dollars
- C.
Five billion dollars
- D.
Fifty thousand dollars
Correct Answer
B. One million dollarsExplanation
The correct answer is One million dollars. This amount is suggested as the likely earnings before retirement. It implies that accumulating a substantial sum of money is expected in order to secure a comfortable retirement.Rate this question:
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- 18.
Which of the following is a true statement about credit cards?
- A.
You should never get a credit card.
- B.
If you get a credit card, you will go into debt.
- C.
You should get a credit card and use it responsibly in order to build good credit.
- D.
The credit card companies don't charge you anything to borrow money from them.
Correct Answer
C. You should get a credit card and use it responsibly in order to build good credit.Explanation
The correct answer is "You should get a credit card and use it responsibly in order to build good credit." This statement suggests that having a credit card can be beneficial if used responsibly. It implies that using a credit card can help individuals establish a positive credit history, which can be important for future financial endeavors such as getting a loan or mortgage. It emphasizes the importance of responsible usage to avoid falling into debt.Rate this question:
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- 19.
Which of the following is NOT an example of an investment?
- A.
Stocks
- B.
Mutual Fund
- C.
Real Estate
- D.
Automobiles
Correct Answer
D. AutomobilesExplanation
Automobiles are not considered as an investment because they are depreciating assets. Unlike stocks, mutual funds, and real estate, which have the potential to generate income and appreciate in value over time, automobiles typically lose value as they age and are used. Therefore, investing in automobiles is not a common practice for wealth accumulation or generating returns.Rate this question:
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- 20.
What is the most important reason to invest?
- A.
To get rich quick.
- B.
So you can buy a new car.
- C.
So you will have money to live off of when you retire.
- D.
To help other businesses.
Correct Answer
C. So you will have money to live off of when you retire.Explanation
Investing is important primarily because it allows individuals to secure their financial future. By investing, individuals can accumulate wealth over time and ensure that they have enough money to sustain themselves during retirement. Investing provides a means to grow one's savings and generate income, which can be crucial in meeting financial needs when regular income stops during retirement. It is a long-term strategy that helps individuals build a financial cushion and achieve financial security for their retirement years.Rate this question:
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- 21.
Why should you donate your money?
- A.
Because there is always someone less fortunate than you that needs it.
- B.
Because you don't need all of your money.
- C.
To get a tax break.
- D.
So your parents will be proud of you.
Correct Answer
A. Because there is always someone less fortunate than you that needs it.Explanation
The correct answer is because there is always someone less fortunate than you that needs it. This answer emphasizes the importance of empathy and helping others in need. It suggests that donating money can make a positive impact on someone's life who is less fortunate and in need of financial support.Rate this question:
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- 22.
If you don't have health insurance and you must have an emergency surgery...
- A.
They will tell you to leave the hospital.
- B.
You will have to pay for all the medical bills yourself.
- C.
The government will pay for all of your medical bills.
- D.
The hospital will do the surgery for free.
Correct Answer
B. You will have to pay for all the medical bills yourself.Explanation
If you don't have health insurance and you must have an emergency surgery, you will have to pay for all the medical bills yourself. This is because without health insurance, you are responsible for covering the costs of any medical procedures or treatments you receive. The hospital may still provide the necessary surgery, but you will be required to pay for it out of pocket. The government does not typically cover medical bills for individuals without health insurance, and the hospital is unlikely to perform the surgery for free.Rate this question:
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- 23.
Its extremely important to do what before buying a car?
- A.
Pay off all your credit cards
- B.
Do car buying research/homework
- C.
Get a driver's license
- D.
Ask your parents for permission
Correct Answer
B. Do car buying research/homeworkExplanation
Before buying a car, it is extremely important to do car buying research/homework. This is because conducting research helps in gathering information about different car models, their features, prices, and reviews. It allows the buyer to make an informed decision based on their preferences and budget. Car buying research also helps in comparing prices from different dealerships, negotiating better deals, and avoiding potential scams or purchasing a vehicle with hidden issues. Therefore, doing car buying research/homework is crucial to ensure a successful and satisfactory car purchase.Rate this question:
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- 24.
When you rent an apartment or house you have to sign a lease. Which of the following is NOT true with a lease?
- A.
It is a legal document.
- B.
You are agreeing to pay rent every month on time for the length of the lease.
- C.
If you have a roommate move in later, they don't need to sign the lease.
- D.
You are agreeing to take care of the place you are renting.
Correct Answer
C. If you have a roommate move in later, they don't need to sign the lease.Explanation
When you rent an apartment or house, you have to sign a lease, which is a legal document. By signing the lease, you are agreeing to pay rent every month on time for the length of the lease and to take care of the place you are renting. However, if you have a roommate move in later, they also need to sign the lease as they will be sharing the responsibility of paying rent and taking care of the property. Therefore, the statement "If you have a roommate move in later, they don't need to sign the lease" is not true.Rate this question:
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- 25.
Which of the following is NOT an example of a scam?
- A.
Identity theft
- B.
Phishing e-mails
- C.
Chain-mail involving money
- D.
People selling their things on Ebay
Correct Answer
D. People selling their things on EbayExplanation
People selling their things on Ebay is not an example of a scam because it is a legitimate platform for buying and selling goods. Scams typically involve fraudulent activities aimed at deceiving or tricking individuals for personal gain. Identity theft, phishing emails, and chain-mail involving money are all examples of scams as they involve illegal or deceptive practices with the intention of defrauding or stealing from others.Rate this question:
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- 26.
If you make $40,000 per year, Uncle Sam is going to take how much from you for taxes?
- A.
$1,000 (2.5%)
- B.
$20,000 (50%)
- C.
$10,000 (25%)
- D.
$200 (.5%)
Correct Answer
C. $10,000 (25%)Explanation
If you make $40,000 per year, Uncle Sam is going to take $10,000 from you for taxes, which is 25% of your total income.Rate this question:
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Apr 09, 2024Quiz Edited by
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