According to a National Financial Capability Study, financial literacy rates among Americans have decreased from 42% to 34% since 2009 — yet 71% of Americans believe they know more about personal finance than the data suggests. This has real-world implications for how people manage money today and prepare for their financial futures. How financially savvy are you?
Complete this quiz to gauge your financial literacy IQ.
True/False
1. You only need a budget if you earn a regular income.
False. If you have expenses, you need a budget. Following a budget helps you avoid overspending and achieve financial goals. Earning an irregular income from a side hustle or commission-based job is no excuse to spend more than you make and skip saving for the future.
Create a baseline budget by taking your lowest monthly income from the past six months and subtracting your expenses from that amount. Stay flexible, as you may need to adjust income and expenses with each payday. Place excess funds into a savings or investment account.
2. Building an emergency savings fund should be one of your top financial goals.
True. An emergency savings fund equal to at least three months of living expenses could help you avoid going into debt to cover bills. This fund is like having an interest-free insurance policy to pay for such things as housing and food costs after a job loss or Fido's emergency vet bill. It's okay to start with a smaller goal of $500. The most important thing is to start funding your account today!
3. You can only contribute to a 401(k), 403(b), or other work-based retirement plan if you're a full-time employee.
False. If you're an entrepreneur or don't meet your employer's retirement plan participation requirements, you can still invest for the future.There are at least three types of retirement plans for self-employed individuals: Simplified Employee Pension (SEP), Solo 401(k), and Savings Incentive Match Plan for Employees (SIMPLE IRA Plan).
If your employer doesn't offer a retirement plan benefit or you don't qualify for their plan, consider opening an individual retirement account (IRA). Traditional IRAs and Roth IRAs are available to individuals who meet certain income thresholds and age requirements. Learn more about how HawaiiUSA can help you plan for retirement.
4. Creditors are the only ones who care about your credit health.
False. Landlords, insurance companies, utility service providers, and employers are also interested in how well you handle credit. Late payments, high account balances, or other harmful data in your credit history report could lead to rental application denials, large security deposit requirements, or missed employment opportunities. Credit health can affect multiple areas of your life.
5. You should check your credit at least once a year.
True. Regularly checking your credit history reports can ensure they remain error-free. Reporting mistakes could lower your credit score. Request free copies of your reports from all three credit reporting bureaus at AnnualCreditReport.com. Follow the dispute policies of each bureau to have inaccurate data removed from your file.
HawaiiUSA members with Digital Banking benefit from free credit monitoring and credit scores through My Credit Score.
6. Searching for discounts, coupons, or other money-saving offers is a waste of time.
False. Spending hours only to find three grocery coupons you'll actually use might not be the best use of your time, especially if they total less than $2.00. Fortunately, you don't need to spend large chunks of time to pocket significant cash. Coupon and cash back mobile apps like ibotta and RetailMeNot offer users a quick and simple way to find in-store and online coupons they can redeem at thousands of locations.
Some app users report saving between $20 and $100+ a month. A potential annual savings of $1,200 could help reduce debt, pay for holiday expenses, or cover costs of a special event.
