AFC Savings Strategies and Emergency Fund Planning

Question 1

What is the generally recommended minimum amount of living expenses that should be held in an emergency fund?

Accepted Answer

3-6 months

Answer

1-2 months

Answer

8-10 months

Answer

12-18 months

Question 2

Which type of account is BEST suited for holding an emergency fund?

Accepted Answer

High-yield savings account

Answer

Certificate of Deposit (CD)

Answer

401(k) account

Answer

Brokerage investment account

Question 3

A client has $3,500 in monthly living expenses. What is the MINIMUM emergency fund balance a financial counselor would typically recommend?

Accepted Answer

$10,500

Answer

$3,500

Answer

$7,000

Answer

$21,000

Question 4

Which of the following best describes the 'pay yourself first' savings strategy?

Accepted Answer

Automatically transferring a set amount to savings before paying other expenses

Answer

Saving money only after all monthly bills are paid

Answer

Paying off all debt completely before beginning to save

Answer

Using credit cards for expenses and keeping cash in savings

Question 5

For a self-employed individual with highly variable income, the recommended emergency fund is typically:

Accepted Answer

6-12 months of expenses

Answer

1-2 months of expenses

Answer

3-4 months of expenses

Answer

Equal to the prior year's gross income

Question 6

Which of the following would NOT be considered an appropriate use of an emergency fund?

Accepted Answer

A limited-time vacation sale that expires soon

Answer

Unexpected medical or dental bills

Answer

Car repair following an accident

Answer

Living expenses during a period of unemployment

Question 7

The FDIC insures deposits at member banks up to what amount per depositor, per institution, per ownership category?

Accepted Answer

$250,000

Answer

$100,000

Answer

$500,000

Answer

$1,000,000