Financial Literacy Month

We are back! I hope you had a Happy Easter with family and friends. And even though April is coming to an end, it is still Financial Literacy Month. Gregory Karp of the Chicago Tribune has put together a money quiz to help contribute to your understanding of money topics. Here is a chance to test your knowledge and hopefully learn a thing or two that will ultimately help you with your finances.

• Do your credit scores rise when you get a higher paying job?

Simply put, no. Your income in not shown on your credit report, so that isn’t a factor when determining your credit score. Using credit, and using it well, is what really matters.

• Is a household budget meant to restrict your spending?

Restrict is the wrong word. Budgeting allows you to tell your money what to do instead of wondering where it disappeared to. If you keep track of your spending and budget wisely you can set aside money to spend on fun things. Indulging once in a while will keep you on track so you don’t feel so restricted.

• Should I pay off highest interest-rate debt first?

Mathematically, using extra money to pay off high-rate debt, such as credit cards, makes sense. But if you have many different debts, you might get a psychological boost by wiping out smaller debts first.

• What is the only official site for getting your credit report?

You can request a free credit report annually from the three main credit bureaus: Equifax, Experian, and TransUnion. For the most part, they have the same information, so you could request one every four months to keep track of your score throughout the year.

• If a thief steals your credit card and charges $1,000, you’re responsible for how much?

Federal law says you’re responsible for $50, but most major credit-card issuers absolve you of all liability if it’s a clear case of a stolen card or number.

• What is likely to provide the highest returns over time: stocks, bonds or CDs?

Most financial advisers suggest a mix of stocks and relatively safer bonds, with the mix getting more bond-heavy as you approach the time you’ll need the money. Stocks have provided the highest returns over long periods, especially if you’re talking about decades.

• Which is more expensive for a family of four: food or financing a new car?

Food costs more, unless you’re talking about an especially pricey car. The American family of four spends about $8,700 on food in a year, or $725 per month, according to the most recent government Consumer Expenditure Survey. That’s far more than most monthly car payments. People will research for months to get a good deal on a car, but many won’t look at a sales flier or clip a few coupons.

• How large should your emergency fund be?

Three to six months of bare-bones living expenses, most money experts advise. But with the current state of the economy, six months should be the minimum.

Do you want to know more about debt and how you can make smart financial decisions now that will help you secure a more prosperous financial future? Sign up for our newsletter for monthly money tips.

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