Knowledge check

Knowledge check — Unit 1

Four questions on where the money goes. You need 75% to pass, and you can retake it as many times as you like.

1. Why do mental budgets tend to fail? People are naturally bad at math Small frequent purchases do not form strong memories, so spending is underestimated Banks hide transactions Budgets only work with high incomes

Show the explanation

It is a memory problem, not a discipline or math problem. Small repeated purchases are the ones that vanish from recall.

2. In the 50/30/20 starting framework, what does the 20 represent? Spending on entertainment Fixed bills Savings and debt payoff Taxes withheld

Show the explanation

The 20% is future money — savings and paying down debt. It leaves before you have a chance to spend it.

3. What makes a separate savings account effective? It earns dramatically more interest It is harder to spend from, which adds a deliberate step Banks require it It improves your credit score

Show the explanation

The interest is a small bonus. The real mechanism is friction — one extra step is often enough to stop an impulse.

4. Your available balance is $40 and your current balance is $95. What is most likely true? The bank made an error You have $95 free to spend Some charges have not posted or a deposit has not cleared Your account is frozen

Show the explanation

The gap between current and available balance is pending activity. Spending against the higher number is a common route to overdraft fees.