How much do you know about some basic finance terms and concepts? Test your knowledge with this Money Tip Tuesday financial quiz.
Links:
- Learn more about APR
- Listen to our Calculating Your Net Worth Money Tip Tuesday episode
- Freddie Mac information about credit scores
- Podcast episodes on credit:
- Listen to our Starting Your Emergency Fund Money Tip Tuesday episode
- Follow our podcast Facebook, Instagram and Twitter
Transcript:
Welcome to Money Tip Tuesday from the Making Money Personal podcast.
How much do you know about some basic finance terms and concepts? Test your knowledge with this Money Tip Tuesday financial quiz.
Think you’re up for the challenge? Give it a shot and see how well you do!
Good luck and let’s begin!
Question 1: What does APR stand for?
APR stands for Annual Percentage Rate.
Investopedia defines APR as “the yearly interest generated by a sum that's charged to borrowers or paid to investors.” If you borrow money from a lender, you’ll be charged interest on your payments. The APR tells you the percentage rate that you can expect to pay over a one-year period. In many types of loans, the rate and the APR are the same, but other times they can differ due to additional fees or charges associated with the loan.
Next time you’re rate shopping, take note of not only the interest rate you’ll pay, but that APR as well.
Question 2: Net worth is calculated by subtracting your debts from your what?
Net worth is calculated by subtracting all your debts (or liabilities) from your assets.
Assets are things you own that have value. Things like investments, cash and savings accounts, collectibles and jewelry are considered assets. On the flip side, your debts are everything that you owe money on. Things like your mortgage, auto loan, and credit card balances are all considered debts. When you calculate your net worth, you subtract the total number of your debts from the total number of your assets.
If you’re interested in learning more about how to calculate your net worth, we have a Money Tip Tuesday episode that walks you through the steps on how to do it.
Question 3: If you want a healthy credit score, you should keep your debt to credit ratio below what percentage? A) 80% B) 30% C) 50%
Answer: B) 30%
Your debt to credit ratio is used to describe how close you come to reaching your credit limit. A 100% debt to credit ratio means you’ve borrowed 100% of your credit line and essentially maxed out your card. This does not look good for your credit.
If you want to maintain a healthy credit score, you should aim to keep your debt to credit ratio at 30% or below. For example, if you have a $10,000 credit limit, you should be keeping your charges at or below the $3,000 amount.
Question 4: What are the 5 main factors that add up to make your credit score?
According to Freddi Mac, the main factors are: Payment History, Amounts you Owe, Length of Credit History, Credit Inquiries, and Types of Credit You Use.
These are all factors used to determine your credit score. Each carries a different weight so some are more important than others.
If you’re trying to find ways to boost your credit score you can look at these factors. Pay attention to each one and how they can affect your personal credit history.
For more information about credit, you can listen to our prior episodes, What the Heck is Credit, and Strategies to Build Credit.
Question 5: How many months' worth should you have saved in an account for a healthy emergency fund? A) 1-2 B) 10-12 C) 3-6
Answer: C) 3-6 months
Your emergency fund is an account of money that you have set aside for emergency purchases. You should aim to have 3-6 months’ worth of expenses set aside in this account in case something happens. For example, if your living expenses are around $5,000 a month, a healthy emergency fund would have $15,000 – $30,000 saved in it.
Having an emergency fund is an important financial goal to meet because it provides a lot of flexibility and assurance if life brings about unexpected challenges.
If you don’t have an emergency fund yet, it’s a good idea to start one. If you can’t save the full 3-6 months right away, don’t worry. Just start saving something and make that 3-6 months your next financial goal to meet.
This wraps up our quick financial quiz.
How did you do? Let us know on social media!
If there are any other tips or topics you would like us to cover, let us know at tcupodcast@trianglecu.org. Like and follow our Making Money Personal FB, IG and Twitter pages and look for our sponsor, Triangle Credit Union on social media to share your thoughts.
Thanks for listening to today’s Money Tip Tuesday and be sure to check out our other tips and episodes on the Making Money Personal podcast.
Have a great day!
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