1. Credit Scores

Which action is most likely to improve your credit score over time?

Closing your oldest credit card to avoid annual fees Keeping credit card balances below 30% of your limits Applying for several new cards to increase your total credit Maxing out one card and paying it off once a year

Correct answer: B – Credit utilization (how much of your available credit you use) is a major part of your credit score. Consistently keeping balances below about 30% of your total limits signals responsible borrowing and can help improve your score over time. Closing your oldest card can reduce your average account age and available credit, which may hurt your score.

2. Budgeting Rule of Thumb

Which budget breakdown is closest to the popular “50/30/20” rule?

50% savings, 30% wants, 20% needs 50% needs, 30% wants, 20% savings/debt payments 50% housing, 30% food, 20% transportation 50% wants, 30% needs, 20% savings

Correct answer: B – The 50/30/20 rule suggests using about 50% of your take-home pay for needs (rent, utilities, groceries, minimum debt payments), 30% for wants (restaurants, entertainment, travel), and 20% for savings and extra debt payments.

3. Emergency Fund

How much should most people aim to keep in an emergency fund?

One month of living expenses 3–6 months of essential living expenses A full year of gross salary Exactly $1,000, regardless of income

Correct answer: B – A common guideline is 3–6 months of essential expenses (housing, utilities, food, transportation, insurance, minimum debt payments). The right amount depends on your job stability, family situation, and risk tolerance.

4. Investing Basics

Which statement about investing in the stock market is generally true for long-term investors?

Individual stock picking is safer than broad index funds Diversification helps reduce risk without eliminating it Past performance guarantees future returns Cash under a mattress usually beats inflation over decades

Correct answer: B – Diversification (spreading money across many investments, often via index funds or ETFs) reduces the impact of any one investment doing poorly. It lowers risk, but cannot eliminate it, and no strategy can guarantee returns.

5. Debt Management

You have several debts. Which strategy focuses on paying off the debt with the highest interest rate first?

Debt snowball Debt avalanche Debt consolidation loan Minimum-payment method

Correct answer: B – The debt avalanche method targets the highest interest rate debt first while making minimum payments on others. This minimizes total interest paid. The snowball method focuses on the smallest balance first to build motivation.

6. Insurance

What is the main purpose of health insurance?

To guarantee that you never pay anything for medical care To protect you from large, unexpected medical costs To increase your credit score each year To act as a retirement savings account

Correct answer: B – Health insurance is designed to protect you from financially devastating medical expenses. You typically still pay premiums, deductibles, and co-pays, but insurance limits the risk of very large bills.

7. Retirement Planning

Which advantage is common to many tax-advantaged retirement accounts (like 401(k)s or IRAs)?

Contributions are guaranteed to double every 5 years Investments grow tax-deferred or tax-free, depending on the account type Money can be withdrawn at any time with no penalties Contributions do not count as part of your net worth

Correct answer: B – Many retirement accounts allow your investments to grow tax-deferred (traditional 401(k)/IRA) or tax-free (Roth accounts, if rules are followed). This can significantly boost long-term growth compared with investing in a taxable account.

8. Taxes

In a progressive income tax system (like in the U.S.), how are tax brackets applied?

Your entire income is taxed at the rate of your highest bracket Each portion of your income is taxed at the rate for its bracket Only your investment income is taxed You choose which single bracket applies to all your income

Correct answer: B – In a progressive system, income is divided into brackets, and each slice is taxed at that bracket’s rate. Only the income that falls into the highest bracket you reach is taxed at that highest rate, not all of your income.

9. Credit Cards

Which habit will most help you avoid paying interest on a credit card?

Paying at least the minimum payment by the due date Making cash advances instead of purchases Paying the full statement balance by the due date each month Ignoring statements and waiting for the bank to contact you

Correct answer: C – When you pay your full statement balance by the due date, most cards will not charge interest on new purchases (thanks to the grace period). Paying only the minimum triggers interest charges on the remaining balance.

10. Time Value of Money

If you invest $1,000 today and earn an average 7% annual return, about how long will it take to double?

About 5 years About 8–11 years About 20 years It will never double at 7%

Correct answer: B – Using the “Rule of 72,” you divide 72 by the annual return (72 ÷ 7 ≈ 10.3). At a 7% average annual return, money roughly doubles in about 10 years.

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ZMoney Finance Quiz