FREE Everfi Financial Literacy Questions and Answers

Question 1

What is the primary purpose of creating a budget?

Accepted Answer

To track spending and save money

Answer

A budget is a financial plan that allocates future income towards expenses, savings, and debt repayment. Its primary function is to help individuals or organizations monitor where their money is going, identify areas for potential savings, and work towards financial goals. By tracking income and expenditures, a budget provides a clear picture of financial health and enables informed decisions to manage money effectively and save for the future.

Question 2

What does the term “compound interest” refer to?

Accepted Answer

Interest earned on both the principal and previously earned interest

Answer

Compound interest is a powerful financial concept where interest is calculated not only on the initial principal amount but also on the accumulated interest from previous periods. This 'interest on interest' effect allows investments or savings to grow at an accelerating rate over time. It contrasts with simple interest, which is only calculated on the original principal.

Question 3

Which of the following is an example of a fixed expense?

Accepted Answer

Monthly rent payment

Answer

A fixed expense is a cost that does not change from month to month, regardless of the level of activity or usage. Monthly rent payments are a classic example because the amount due remains constant each period. In contrast, groceries, entertainment, and utility bills are typically variable expenses, fluctuating based on consumption or choices.

Question 4

What is the key benefit of having a high credit score?

Accepted Answer

Easier approval for loans and better interest rates

Answer

A high credit score indicates to lenders that an individual is a responsible borrower with a history of timely payments. This financial trustworthiness makes lenders more willing to approve loan applications and offer more favorable terms, such as lower interest rates. Lower interest rates translate to less money paid over the life of a loan, saving the borrower significant funds.

Question 5

What is the “pay-yourself-first” principle in personal finance?

Accepted Answer

Saving a portion of income before covering other expenses

Answer

The 'pay-yourself-first' principle is a fundamental personal finance strategy that prioritizes saving and investing. Instead of waiting until all other expenses are paid, individuals automatically set aside a predetermined portion of their income for savings or investments as soon as they receive their paycheck. This ensures that financial goals are consistently funded and helps build wealth over time, making saving a non-negotiable expense.

Everfi - Everfi Training Certification Practice Test

Everfi - Everfi Training Certification Practice Test

FREE Everfi Financial Literacy Questions and Answers