Basic Financial Literacy Quiz 1 TaxCity, LLC www.taxcityadvisors.com Question Title * 1. What is the primary purpose of a savings account? To save money for future use To make daily transactions To invest in stocks To pay off debts Question Title * 2. Which of the following is considered a good practice for budgeting? Spending more than you earn Tracking your income and expenses Ignoring monthly bills Using credit cards for all purchases Question Title * 3. What does 'APR' stand for in financial terms? Annual Percentage Rate Annual Payment Rate Annual Profit Ratio Annual Penalty Rate Question Title * 4. Which of the following is a benefit of having an emergency fund? It allows you to cover unexpected expenses It increases your debt It lowers your credit score It is used for daily spending Question Title * 5. What is the main advantage of compound interest? It grows your savings faster over time It decreases your savings It has no effect on your savings It only applies to loans Question Title * 6. Which of the following is a common type of investment? Stocks Credit card debt Monthly rent Utility bills Question Title * 7. What is a credit score used for? To evaluate the creditworthiness of an individual To calculate monthly rent To determine utility bills To track daily expenses Question Title * 8. Which of the following is a tax-advantaged retirement account? 401(k) Checking account Credit card Personal loan Question Title * 9. What is the purpose of a budget? To plan and control your income and expenses To increase your debt To ignore financial goals To spend all your income Question Title * 10. What does diversification in investing mean? Spreading investments across different assets to reduce risk Putting all money in one stock Avoiding investments Using only cash for transactions Done