Financial literacy is the ability to use your financial skills to make smart decisions with your money. The more financially literate you are, the more likely you will be able to do a good job managing finances across your lifetime.

In this Chambers Bank Financial IQ Quiz, you will get to test your current financial knowledge and find out how much you know about budgeting, saving, and spending. The answers will also help you increase your financial knowledge and practice good money habits.

All questions are multiple-choice. You will find answers and a scoring table at the end of the quiz. Good luck!

Chambers Bank Financial IQ Quiz

1. What does APR stand for?

1.   Annual Performance Report
2.   Annual Percentage Rate
3.   Average Percentage Rate
4.   Actual Price Reduction

2. How long can a Chapter 7 bankruptcy affect your credit score?

1.   3 years
2.   5 years, or until your credit score returns to 720
3.   7 years
4.   10 years

3. What is a Certificate of Deposit?

1.   A savings product that earns interest in exchange for holding a fixed amount of money in the account over a fixed period of time.
2.   An authorization document given by a bank or credit union when a customer opens a new checking or savings account.
3.   A savings product that pays a variable interest rate premium per month in exchange for holding a fixed amount of money in the account over a fixed period of time.
4.   An authorization document given by a bank or credit union verifying a customer’s deposit is insured by the Federal Deposit Insurance Corporation (FDIC) for up to $250,000.

4. What is the 50/30/20 budget rule?

1.   50% of your money is free to spend while 30% should go toward utility bills and 20% toward loans.
2.   Spend 50% of your gross pay on wants, 30% on necessities, and 20% on savings.
3.   Spend 50% of your net pay on necessities, 30% on wants, and 20% on savings.
4.   50% of your paycheck should go toward housing and transportation while 30% should go toward utility bills and 20% toward loans.

5. If your credit card is lost or stolen and unauthorized charges occur before you can report the card as missing, what is the maximum amount you can be held responsible for, according to federal law?

1.   $15
2.   $50
3.   $100
4.   All unauthorized charges if you don’t report the loss or theft within 60 days.

6. If you keep $2,000 in a savings account that accrues 3% per year, how much will you have in total after 1 year?

1.   $2,003
2.   Just above $2,010
3.   $2,010.50
4.   Exactly $2,060

7. How does inflation affect your buying power?

1.   It allows you to buy more goods and services with less money.
2.   Inflation does not affect buying power.
3.   It takes more money to buy goods and services.
4.   Inflation helps you get better deals on the goods and services you purchase.

8. According to Equifax®, a credit score of what number is considered very good?

1.   640
2.   700
3.   740
4.   800

9. What is the “Rule of 72?”

1.   A way to calculate how long it will take to double your money at a fixed rate of interest.
2.   A formula for determining your Social Security benefits at age 72.
3.   A way to calculate how long it will take to triple your money at a fixed rate of interest.
4.   A formula created in 1972 to help you estimate your annual retirement savings benefits.

10. If you want to make sure some of your retirement savings won’t be subject to income tax upon withdrawal, you should contribute to:

1.   A pension
2.   A 401(k) plan
3.   An individual IRA
4.   A Roth IRA

Answers to the Chambers Bank Financial IQ Quiz

1.1. Annual Percentage Rate

APR is the interest rate you get charged annually for borrowing money, plus fees. It is expressed as a percentage and is calculated differently depending on the financial product you use.

For credit cards: APR is the interest rate charged on the monthly balance, excluding the credit card’s annual fee. If you carry a balance each month, your credit card company will charge you at the end of each billing period based on the APR.

For loans: APR is the interest rate you get charged, plus associated fees, depending on loan type.

2. 4. 10 years

A Chapter 7 bankruptcy allows a person’s unsecured debts such as medical bills, credit cards, and personal loans to be discharged by a bankruptcy court. Also known as a liquidation bankruptcy, it’s the most common type of bankruptcy and it gives an individual a second chance at repairing their finances.

Chapter 7 bankruptcy has the most serious effect on a person’s credit score and the incident can legally remain on credit reports for up to ten years from the filing date. This doesn’t mean that someone who has filed a Chapter 7 bankruptcy won’t be able to borrow money during the time period, but obtaining new credit with favorable terms can be more difficult.

3. 1. A savings product that earns interest in exchange for holding a fixed amount of money in an account over a fixed period of time.

CDs come in a variety of terms, from as little as one month to ten years. Money deposited into a CD must remain in the account until maturity to avoid penalties and gain the full amount of interest earnings. CDs typically earn more than savings accounts and are considered low-risk investments.

4. 3. Spend 50% of your net pay on necessities, 30% on wants, and 20% on savings.

The 50/30/20 budget is one of the most common types of percentage-based budgets and is popular because it’s easy to calculate. With this technique, you divide your after-tax income into the following:

Necessities (50%). This includes expenses such as rent or a mortgage, groceries, car payments, utilities, credit card payments, health care, and insurance.

Wants (30%). Things like entertainment, travel, subscriptions, club memberships, electronics, hobbies, and discretionary spending items and services all fall into this category.

Savings (20%). This includes savings, investment, and retirement accounts plus other accrual-based offerings. 

For more information on budgeting, visit this Chambers Bank blog.

5. 2. $50

If a thief takes your credit card and uses it before you can report the card missing, you cannot be charged more than $50 according to federal law; this is your maximum liability. However, if you report the loss or theft before the card is used, the card issuer cannot hold you responsible for unauthorized charges. Additionally, if the loss or theft involves the card numbers but not the physical card, you are not responsible for unauthorized charges.

6. 4. Exactly $2,060

To determine the simple interest you will earn from a savings account, you multiply the account balance by the interest rate by the time period that the money is in the account. 

Here is the formula:

Interest=Principal (opening balance) x Interest Rate (decimal format) x Time Period (years)

So, for this multiple-choice question …

 $2,000 x 0.03 x 1 year=$2,060

7. 3. It takes more money to buy goods and services.

Inflation is the increase in the price of goods and services over a period of time. When this happens, consumers experience a reduction in purchasing power. In the U.S., inflation is sometimes described as “too many dollars chasing too few goods,” which means that spending is outpacing the production of goods and services.

8. 3. 740

Ranges can vary slightly depending on the credit scoring model, but credit scores at 740-799 are considered Very Good. The higher you score, the more likely you will get loans with better terms and interest rates. Lenders usually consider anyone with a score of 670 or above a low-risk borrower.

9. 1. A way to calculate how long it will take to double your money at a fixed rate of interest.

The “Rule of 72” can give you an idea of how fast your money will grow at a specific rate of return. This is the simple formula:

Years to Double=72 ÷ Rate of Return (or Interest Rate)

Here are some examples:

If you earn 1% interest, it will take 72 years to double your money (72 ÷ 1).

If you earn 2% interest, it will take 36 years to double your money (72 ÷ 2).

If you earn 3% interest, it will take 24 years to double your money (72 ÷ 3).

If you earn 5% interest, it will take 14.4 years to double your money (72 ÷ 5).

10. 4. A Roth IRA

A Roth IRA is a type of individual retirement account (IRA) that allows you to contribute money on an after-tax basis. There is no upfront tax break when you contribute, but the money in your Roth IRA grows tax-free and money can be withdrawn tax-free if certain requirements are met.

How Did You Score?

Add up the number of questions you answered correctly and then check out this scale to find out your Financial IQ.

9-10 Congratulations! You’re a financial superstar. Share your knowledge with others, often!

6-8 Great job! You know more than many Americans about finances.

3-5 Keep it up! You have some good financial knowledge already, but continue learning. Our Chambers Bank blogs can help you discover more about money and banking.

0-2 Keep trying! We all have to start somewhere. You just learned a lot from this quiz, and you can learn even more by reading our Chambers Bank blogs. 

We hope you had fun taking the Chambers Bank Financial IQ Quiz! If you have any questions about personal finance or want more information about our financial products, please fill out our online form or contact our Customer Care Center at 1-800-603-1226.