It is quiz time. Time to see whether you were paying attention to the Community Contact’s articles discussing financial literacy matters. To take the quiz you will need a pen or pencil, a promise that you will not cheat by peaking at the answers at the end of the article. Good luck to all.
Q1. Which one of the following is NOT a description of a credit union?
a) Members of a credit union are the owners of the financial institution
b) Credit unions offer low interest loans
c) Credit unions only offer sources of credit and low interest loans to its members
d) As compared to regular banks, they are very few credit unions that you walk into to perform regular transactions
Q2. What are the best two ways to avoid paying additional fees when making a withdrawal from your bank account via an automated banking machine?
a) Withdraw the amount of money that you will need for a fixed amount of time
b) Use your credit card instead of cash to pay for items
c) Withdraw your money from a machine that only belong to your bank
d) Ask to be exempted from the fees charged by the bank
Q3. The major advantage of using your debit card instead of your credit card when it comes to shopping on a frequent basis
a) You can spend an unlimited amount of money without being charged interest
b) You can be exempt from user fees
c) Debit cards cannot be easily cloned and used by others
d) You can track your spending easier for budget purposes
Q4. Ronald has just received a gift of $1000 from his grandparents. He has an outstanding credit card debt of $200 at 19.99% and has borrowed against his line of credit at the bank where he owes $850 at 17.99%. Before depositing the sum of money, his grandmother insists that the gift is a contribution to buy a used car for him to drive to work. What is the best option for Ronald to use his gift?
a) Honour his grandmother’s wish and buy the car
b) Place $1000 in a high yield savings account
c) Pay off his credit card debt
d) Repay the money he borrowed from the line of credit
Q5. Upon checking your email, you notice that you have received a recurring message from your bank indicating that you have $250 waiting to be transferred into your chequing account. To satisfy your curiosity, you decide to open one of the emails where you find a message asking you to visit a website where you need to provide your bank account information to ensure that the money is deposited into your account. What do you do next?
a) Close and delete the email
b) Visit the website and provide the required information to complete the transfer
c) Forward the email to friends and family who use the same bank
d) Report that you are receiving the emails to your bank and the police
Q6. Carol has started her career in marketing and earns $40,000 per year. Her plan is to start saving for her retirement; however, she would like to have money available in case of emergencies. Which of the following is the safest and convenient place for her savings?
a) Tax Free Savings Account (TFSA)
b) Mutual Funds
c) Registered Retirement Savings Account (RRSP)
d) At home in a glass jar
Q7. In the event that there is a financial crisis in Canada and all banks fall into bankruptcy, how much of a $250,000 savings account is insured?
Q8. The primary purpose of the Bank of Canada is:
a) To insure that all bank machines are well stocked with money
b) To be a last option for Canadians to obtain a loan when other banks do not extend credit and loans
c) To be the only issuer of paper money in Canada
d) To offer and insure all mortgages for Canadians
A1. c) Credit unions offer a wide range of financial services going beyond credit and low interest loans. Some of the services similar to banks include: savings and chequing accounts, online banking, mortgages and financial advice.
A2. a) and c) Although all four options are viable to avoid paying additional fees, withdrawing the money you need for a fixed period and only from your bank machine are the best choices. Instead of being charged each time at your bank machine, withdraw money that will last you a fair amount of time.
A3. d) Each time you elect to use your debit card, your bank records when, where and how much money was spent. By accessing your record online or via your monthly statement, you see where your money is going and if you can control your spending.
A4. d) Contrary to his grandmother’s wishes, Ronald should use the money to pay off his debts. Since he cannot pay both debts in full, he should elect to repay the line of credit first due to the fact that the sum is greater than his credit card charges, even though the interest rate is slightly lower.
A5. d) A bank will never send an email to inform you that money is waiting to be transferred into any account. You should inform your bank and the police that you are a target of bank fraud.
A6. a) A TFSA fits the needs of Carol because it allows her money to grow over time in a relatively safe investment where money can be withdrawn at any time without incurring a penalty. Selecting a RRSP restricts her from pulling out any cash unless she wishes to pay tax on income earned on the investment in the account.
A7. Regardless of how much money you have in your savings accounts, The Canada Deposit Insurance Corporation, a Canadian federal Crown corporation, insures Canadians’ deposits held at Canadian banks up to $100,000 in case of a bank failure.
A8. c) As a user of the Canadian banking system, you will never have direct contact with the Bank of Canada. Some of the bank’s main responsibilities are: issuing paper money in Canada, setting monetary policy and being the central bank for the federal government.