MONEY MANAGEMENT QUIZ #1
Michigan Credit Union League - Your Money Matters
Attention class, please place your books under your desk and have your pencil ready. We will be taking a quiz this morning.
Are you nervous yet? The word quiz can make even an adult's palms sweat. Well, you needn't be concerned. The following quiz, published by Kiplinger's Personal Finance Magazine, isn't really a quiz at all. It's simply a great refresher opportunity for those of us who might have been slacking off in the back of the class lately. And, there's no penalty for flunking - at least not right away.
1. You use your credit card to pay for just about everything, including your groceries and your children's day care, but you pay the balance in full every month. Which kind of credit card would offer the best deal for you?
a. A card with no annual fee
b. A card with an annual fee but a rock-bottom interest rate
c. A no-fee card that gives you a rebate on purchases
d. A card that charges a fee but rewards you with frequent-flier miles
2. You own a stack of series EE U.S. savings bonds that date back a number of years. What's the best way to redeem them?
a. Hang on to any bonds guaranteed to earn 6%
b. Redeem bonds that have just credited interest
c. Both a and b
d. None of the above.
3. You want to start a college investment plan for your children, who are 4 and 6 years old. Which investment category should be the cornerstone of your plan?
a. Certificates of deposit
b. Series EE U.S. savings bonds
c. Stock mutual funds
d. Money-market funds
4. Your car-insurance premiums are going through the roof, and you're looking for ways to cut costs. What's the most economical deductible on your policy?
5. You can give $10,000 to any number of individuals each year without having to pay federal gift tax. How can you give an individual twice as much and still keep the gift tax-free?
a. Give the money to a child
b. Give the money to a parent
c. Have your spouse join in your gift
d. Make the gift from pretax dollars
6. You want to buy 100 shares of a $50 stock. What's the lowest commission you can expect to be charged by a broker?
a. $15 to $35
b. around $50
c. $80 to $100
1. C, a no-fee card that gives you a rebate on purchases. A card's annual fee - or lack of - matters more to you than its interest rate because you don't carry a running tab, and the rebate is icing on the cake. If you spend lots of time in the air, answer d may also be an option because even with a fee the card may more than pay for itself in fare freebies.
2. C, both a and b. Redeeming savings bonds isn't nearly as simple as buying them. You want to keep bonds issued from November 1986 through February 1993, which earn a guaranteed 6%, far above the current market rate of less than 5%. Of your remaining bonds, cash in those that have recently credited interest. Because interest is credited only every six months on most bonds, if you deem a bond just before its crediting date, you'll lose half a year's worth of interest.
3. C, stock mutual funds. You want a long-term asset that will grow with your children, who have plenty of time to ride out ups and downs in the stock market. Savings bonds are too conservative to form the core of your portfolio.
4. D, $500. Raising your deductible to the maximum - usually, somewhere around $500 - can save several hundred dollars per year on your car-insurance premiums. Record-damaged drivers may have to raise their deductible just to make the premiums affordable.
5. C, have your spouse join in your gift. Then, you can use his or her $10,000 allowance, as well as your own, and give up to $20,000 with no gift tax.
6. A, $15 to $35. If you go to a deep-discount broker, that's about what you can expect to pay on a transaction of this size. You can pay even less if you trade through an online service.
Now that wasn't so bad, was it? Look for quiz #2 coming soon.