Test Your Savings Knowledge
Taking the following savings quiz will reveal how much you understand about the realities of saving in America.
Q. How much loose change is available for Americans to save?
A. The U.S. Treasury says that Americans hold about $15 billion in loose change.
Q. What is the typical amount of emergency savings that Americans need?
A. According to one recent survey, the typical amount Americans spent last year on unexpected expenditures was $2000. Surprisingly, lower-income households in the survey cited the same amount.
Q. What are the two most important types of emergency expenditures?
A. According to the same survey, two-thirds of unexpected expenditures were related to medical care or motor vehicles.
Q. How long does it take to completely pay off a $1000 credit card balance if monthly payments are 2% of this balance and there is a 24% penalty interest rate?
A. One will never pay off balance. All payments pay off only interest owed.
Q . About how much more do families with a savings plan save than those without such a plan?
A. According to one study, if family incomes are the same, those families with a plan save about twice as much as those who do not have one.
Q. What is the only free money for savings that is available to many Americans?
A. An employer’s match to a contributory workplace retirement plan such as a 401(k). Some employers, up to a certain level, will match each employee dollar contributed, thus guaranteeing at least a 100% yield on this savings.
Q. If they have no other income, how much must someone who retires at 65 have saved in order to be assured of an annual income of $50,000?
A. For a male at age 65, he should have $620,000 saved to ensure an average income of $50,000 a year for life, for a female at age 65, she should have $665,000.
Q. What percentage of elderly individuals depend entirely on Social Security payments for income?
A. In 2006, 25% of individuals age 65 and older relied 100% on Social Security payments for their income.
Q. What is the most effective way to save $100,000?
A. Tell your employer or bank to transfer, each month, as much of your paycheck as possible automatically to a savings or investment account. This is a far more reliable way to acquire $100,000 than to buy lottery tickets or wait for an insurance settlement.
Q. If one saves $200 a month with a 5% annual yield, after 30 years how much savings will have accumulated?
A. Over $170,000 will have accumulated, and most of this amount will represent interest earned and compounded.
Q. What represents the most effective way lower-income families have built assets over the past several decades?
A. Through buying a home and paying off the mortgage in full. Over four-fifths of the assets of lower-income homeowners represent home equity.