Federal Deposit
Insurance Corporation

1. Perhaps the biggest mistake you can make with student loans is:

a) Paying your loan(s) off too soon.

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2. Before going to the dealership to shop for a new car, if you have to borrow money for the purchase you should:

a) Talk to several lenders and decide how much you can comfortably afford to spend on a car after factoring in monthly payments on a loan (such as for three years) and then stick to that maximum purchase price.

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3. The savings strategy called “paying yourself first” means:

a) You arrange to put a certain portion of your income into savings before you are tempted to spend it.

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4. Putting money into tax-advantaged retirement accounts as soon as you start earning income is a good idea because:

a) The sooner you start, the sooner you can benefit from the compound growth of interest and dividends.

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5. Generally speaking, the financial product for managing your everyday transactions that has the best federal consumer protections and the lowest chance of unexpected fees is:

a) A low-cost checking account for which you agree (“opt in”) to an overdraft program for debit card transactions that exceed your balance.

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Quiz Answers

1(b) If you need to borrow money for college, only do so after you explore and exhaust all available grants and scholarships. Borrow as little as possible, and only after comparing your loan payments to projected earnings for your intended career path. Otherwise, you could struggle with debt problems for years. (See If You Need to Borrow for Higher Education for more information.)

2(a) The more you borrow, and the longer the repayment period, the more you pay in interest. So shop around for the best financing deal for you, and don’t purchase a more expensive car than you can comfortably afford, even if you qualify for a larger loan. And even if a dealer is promoting special financing, it may be cheaper to use low-rate financing from your financial institution in exchange for a lower purchase price on the car. (See Auto Loans: How to Get a Good Deal.)

3(a) By consistently putting money into savings before you can spend it, you can gradually turn small sums of money into bigger amounts for important purchases in the future. (See Simple Ways to Rev Up Your Savings.) 

4(c)The results can be dramatic when you start saving early, even in small amounts, in tax-advantaged retirement accounts. Look into all your retirement savings options, which may come with matching contributions from your employer. (See Simple Ways to Rev Up Your Savings.)  

5(b) A low-cost checking account without overdraft protection is typically your best choice. Overdraft programs can be costly. Advertisements for prepaid cards may not list all the fees you could be charged. In addition, prepaid cards often do not offer ways to set up automatic transfers into a savings account or to access other services that a banking relationship can offer. (See For Everyday Banking: Choosing the Best Account for You.)