Personal Finance Crash Course For College Freshmen
Texas CPAs Quiz Students About Their Money Know-How

DALLAS — As college freshmen head off to school armed with dorm room essentials like comforters and microwaves and prepare themselves to ace English 101, Texas CPAs offer the following quiz to test the money smarts of colleges’ newest campus residents.

True or False – Read each statement and determine whether it is true or false.

___ 1. You want to purchase a $30 shirt at the mall. Your part-time job pays $6 an hour. You will only need to work five hours to earn the $30 needed for the shirt.

___ 2. There’s no need to match the checks you’ve written and debit card purchases you’ve made to your bank statement, because you can check your account balance over the phone or online anytime you need to know it.

___ 3. After pulling an all-nighter studying for an exam, you need a cappuccino to keep you awake for the test. The bank’s Web site shows that you have $25 left in your account. You head to the coffee shop to purchase your cappuccino, assuming the debit card will be declined if there are insufficient funds.

___ 4. The close quarters of most college dormitories means college students are at a high risk for identity theft.

___ 5. As long as you still have money at the end of the week, you don’t really need to keep track of where you’re spending your money.

___ 6. Maggie has $1,000 worth of credit card debt and tries to pay the minimum balance each month. Sometimes she pays a few days late or forgets to pay at all. But she knows that won’t affect her credit score because she’s just a college student.

___ 7. Marcus receives a $200 monthly allowance from his parents to help cover his school expenses. He also works part-time and earns about $300 a month. Marcus must spend $150 on rent and $100 on car insurance. If he budgets $85 for eating out, $45 for clothes, and $50 for everything else, it will take him eight months to accumulate savings of $500.

___ 8. A thief steals your credit card and racks up $2,000 worth of charges. You notify your credit card company as soon as you realize the card is missing, but you must pay off the $2,000 bill charged by the thieves.

___ 9. Sales taxes are not deducted from your paycheck by the federal government.

___ 10. Using a cross-cut shredder to destroy credit card applications and sensitive personal information like Social Security numbers is an effective way to prevent identity theft.

Answers:

1. False. While it is true that working six hours at $5 per hour will earn a gross pay of $30, your take-home pay will be less than that. Federal income tax, Social Security, and Medicare contributions are withheld from your check, meaning you’ll need to work a few extra hours to buy that new shirt.

2. False. Comparing your check register to the bank statement can be time-consuming. However, it’s the only way to know that your records match the bank’s records. Banks do make errors from time to time, and you generally only have 60 days to notify the bank about their mistake.

3. False. While it is true that most debit cards won’t work if you don’t have enough money in your checking account to cover a specific charge, that won’t always save you from having your bank charge you a fee (often $35 or more) for having insufficient funds. For example, you forgot that you wrote a $22 check at the mall the day before the big exam. That check hasn’t cleared yet, but you’ll only have $3 left in your account once it does – not enough to cover that cappuccino and making it a very expensive energy booster.

4. True. College students are prime targets for identity theft. Dorm rooms and apartments are often shared, giving many people easy access to personal information. Keep track of credit card receipts and statements, as well as checkbooks, personal identification numbers (PINs) and other banking information. Also, safeguard your Social Security number. Choose alternate numbers for campus identification and grade posting.

5. False. Even if you still have money left over at the end of the week, it’s a good idea to keep track of where your money is going. The trick is to know how much money you have, what you need to buy and when you need to buy it. Are you spending $50 a week on pizza? You might be able to afford it now, but what happens when your car breaks down? Create a monthly spending plan with broad categories (rent, tuition, eating out, movies, etc.) that will be easy for you to monitor.

6. False. Maggie is hurting her credit score each time she pays her bill late or doesn’t pay it all. While it’s true that she might not purchase a home until she’s older, credit scores come into play for apartment rentals, loan interest rates and even on job searches. These days, many employers check credit scores of potential new employees during the hiring process. To maintain a good credit rating, pay your bills on time and don’t overextend yourself credit-wise.

7. True. If Marcus sticks with his spending plan, he should be able to save about $70 each month. In eight months, he’ll have about $560 set aside in savings.

8. False. As long as you report the stolen credit card to your card issuer, your maximum liability under federal law for unauthorized use of your credit card is $50 per card. The thieves may have illegally charged $2,000 on your card, but your credit card issuer can’t hold you accountable for any unauthorized charges beyond the $50 limit.

9. True. Sales taxes are added to the purchase of certain goods and services, not withheld from your paycheck.

10. True. For extra protection, consider purchasing a cross-cut shredder to destroy all credit card applications and other sensitive personal information.

Scores and Resources

Add up the number of questions you answered correctly. If your score wasn’t where you hoped it would be, these questions can help you get on the road to financial success.

Get more online tips on other personal finance issues at www.ValueYourMoney.org. While online, students may register for a free monthly electronic newsletter with articles on saving for retirement, identity theft protection, budgeting, tax planning, and more.

This quiz is for educational and/or entertainment purposes only. For a thorough financial evaluation, please consult your CPA.

ABOUT TSCPA

TSCPA (http://www.tscpa.org) is a nonprofit, voluntary, professional organization representing Texas CPAs. The society has 20 local chapters statewide and has 27,000 members, one of the largest in-state memberships of any state CPA society in the United States. TSCPA is committed to serving the public interest with programs that advance the highest standards of ethics and practice within the CPA profession.