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57. Excessive debt is as much a problem of young consumers as it is of other age groups.
58. More than half of all debtors seeking help at the National Consumer Counseling Service
were between the ages of 18 and 32.
59. One danger of a credit card is that consumers often buy items they wouldn't normally buy
if they had to pay cash.
60. Accumulating money through savings allows you to participate in the growth of a
capitalist society.
61. Buying a duplex and living in one side, while renting the other side, generally turns out to
be more trouble than it is worth, since you have to satisfy not only your own needs, but also the
needs of the renters.
62. When young people decide to buy a house, the best approach is to buy a house in an
inexpensive part of town so they can get a larger house for less money.
63. House payments tend to rise at a faster rate than do rent payments on a similar sized
house.
64. The tax shelter offered by home ownership increases the overall cost of owning your
home.
65. Investors who desire a very stable and predictable income from their investments (such
as people who are nearing retirement) would be reluctant to invest heavily in the stock market.
66. During the first few years of a home mortgage, almost all the payments go for interest on
the loan. This high interest is a reason it is better for young people to rent rather than buy.
67. One of the keys to financial success is never to apply for a credit card.
68. The best strategy to follow in using credit cards is to pay only the minimum amount
required each month.
69. If you are in the 25 percent tax bracket and your home mortgage interest is $1,000 per
month, then your after-tax mortgage interest cost is $750 per month.
70. Shuichi graduated from college two years ago. He has already accumulated enough
money in his savings account and money market to meet basic contingencies, and now wants to
begin investing a portion of each paycheck to earn a high rate of return over the long run. His
best choice as a young recent graduate would be to put money into a bank savings account
regularly.
71. During the most recent drop in stock prices, Homer took the opportunity to buy a wide
variety of stocks even though many of his friends and relatives were selling. Homer's investment
strategy appears to be consistent with contrarian views.
72. Term life insurance is a combination insurance plan and savings plan.
73. Term life insurance offers pure insurance with no savings feature.
74. The younger you are when you buy term life insurance, the lower the premiums tend to
be.
75. Multiyear level-premium insurance is a form of term insurance with fixed premiums for the
life of the policy.
76. Most families only need to buy enough life insurance to replace about three years of
income.
77. Whole life insurance premiums provide the insured with both pure insurance and a savings
plan.
78. Unlike whole life policies, a universal life insurance policy typically invests part of the
premium in very aggressive, high-risk assets.
79. The death benefits of a variable life insurance policy vary depending upon the
performance of the investment.
80. An annuity is a contract to make regular payments to a person for life or for a fixed period.
81. Fixed annuities have become much more popular than variable annuities.
82. Variable annuities offer investment choices identical to mutual funds.
83. People who have health insurance seldom need disability insurance.
84. If you are relatively healthy, there is no real reason to buy health insurance.
85. Everything else constant, the higher the deductible on your car insurance policy, the higher
the premium for your car insurance.
86. Many employers offer health insurance coverage for their full-time employees.
87. Disability insurance provides a relatively low cost way of protecting against lost income
due to an accident or illness that prevents you from working for an extended period of time.
88. Due to the high cost of the insurance premiums, many people have found that it makes
financial sense to carry medical insurance only if their employer provides it.
89. The chances of becoming disabled at an early age are much higher than your chances of
dying from an accident.
90. Guaranteed replacement cost insurance coverage provides the insured with the
depreciated cost of assets.
91. Most homeowner's insurance policies do not cover certain types of expensive items unless
you purchase a rider for the additional coverage.
92. An umbrella policy is an inexpensive policy that provides financial protection only in the
event of clearly defined major catastrophes such as hurricanes or earthquakes—events which are
referred to in the insurance industry as "rainy days."
93. One strategy used to lower car insurance premiums is to choose a policy with a large
deductible.
94. Don is young and newly married. He and his wife plan to have children in the near future
and Don wants to get a significant amount of life insurance coverage at as low a cost as possible.
He would be well advised to purchase a term insurance policy.
95. Wendy wants to obtain life insurance at the lowest possible cost, but is leery of term
insurance because she has heard the premiums tend to go up every few years. One way for her
to avoid this concern would be to purchase multiyear level-premium insurance.
96. Carrie is trying to find a way to reduce her car insurance premium. She would be well
advised to decrease her insurance policy's deductible.
97. Pete wants life insurance to provide benefits for his family if he were to die. He also
wants part of his premium to go into a savings plan that he will need if he lives to retirement age.
His best strategy to achieve insurance and savings with one premium is term insurance.
98. As a recent college graduate just starting out on his own, Greg needs health, disability,
car, and auto insurance. He may be able to save money by obtaining an umbrella policy.
99. Social Security is the term used to describe the Old Age, Survivors, and Disability
Insurance Program.
100. One problem with the Social Security system is that the number of people retiring and
living longer is declining dramatically.
101. It is likely that young adults today will benefit from the recent trend in the Social Security
system to increase benefits and expand the cost-of-living adjustments.
102. The number of workers paying into Social Security per retired individual receiving benefits
is decreasing.
103. Regardless of potential changes, you can count on Social Security to provide you with a
comfortable retirement.
104. An IRA (individual retirement account) is a tax-deferred investment plan that encourages
workers to save for retirement.
105. A traditional IRA affords workers who qualify the opportunity to deduct from their reported
income the money they put into a qualified retirement account.
106. Both the Roth and traditional IRA allow individuals to put as much money as they want
into their retirement account.
107. A Roth IRA allows workers who qualify to get an up-front deduction for any money they
invest in the plan.
108. An advantage of both traditional and Roth IRAs is that both the income invested and the
earnings from these investments are never taxed.
109. The benefit of opening an IRA while you're young is the compounding of the money
invested tax-free over your working lifetime.
