This was one of the better personal finance quizzes that I have seen out there…Why?
- Comprehensive: It has 30 questions covering a range of topics
- Numeracy: It has several questions that require some basic problem solving and numeracy skills in comparing options or best course of action
- Application: Less focus on conceptual knowledge and more on whether you can use this knowledge to make good decisions
- Open Net: It encourages students to go out and find the answers if they don’t know them. This is the way the world works…
- Question type: for both investing and paying for college questions, it asks test takers to rank order various options going beyond the basic multiple choice
- Motivational: Once your students have completed the quiz, it shows how they stack up vs. the thousands of other test takers and identifies the concepts that require further study.
Look for the NGPF Question Bank later this summer which will provide teachers with hundreds of assessment questions. Oh, how did I score on the quiz (I know you were wondering)? A-. I have an email into the company disputing a few of the questions that I answered incorrectly…
Thanks to Brian Rothenberg of Evolution Finance for his speedy response to my questions about his quiz (Spoiler alert: I squeezed another point out of him, putting me in solid A territory:)
I reviewed the questions you flagged for us. On the first one, I see your point about the comparison. In the original wording the comparison is only implied. During our next update, we will change that question wording to the following:
Generally, if you borrow against collateral (like a house or car) compared to a loan not secured by collateral (like a credit card), the interest rate charged on the loan:
-Increases
-Decreases
-Remains the same
On the second question, we disagree about the financial flexibility being greater on a 15-year mortgage. What you said about a 15-year mortgage is true: if you can afford it, paying down your mortgage within 15 years provides you opportunities to make other investments for the second 15 years. However, a 30-year mortgage gives you more financial flexibility because you can choose to pay down your mortgage over 15 years by making extra payments and take advantage of the same investing opportunities. In addition, should you have a financial setback or need to use the extra payment amount for other expenses, your minimum required payment each month is smaller for a 30-year mortgage so you can scale back any overpayment to deal with other expenses. It also reduces the risk of losing the house if you cannot make the higher mortgage payment required on the 15-year loan. Therefore, a 30-year mortgage does not prevent taking advantage of the financial flexibility you describe and it provides other flexibility while you pay down the mortgage. There is an open question about whether people will stay committed to paying down a 30-year mortgage in 15 years if they are not locked into a 15-year payment plan. However, if we operate under the assumption that someone will, the 30-year mortgage will give them more flexibility if they need to use that money for other major expenses or might later struggle to afford the higher mortgage payment.
