Special Report: Test your money-management smarts

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Test your money-management smarts
By Holden Lewis • Bankrate.com

Take this quiz to see whether your money management decisions are naughty or nice.

1. A car dealer is offering you a low interest rate or a rebate. "Pick one," he grunts. Which one do you choose?

2. Do you and your loved one assume that tying the knot means tying your bank accounts together?

3. Do you figure you can keep your new car looking fine and running so sweetly you'll get back most of your outlay when you sell it?

4. A credit union is offering lower fees and better loan rates. Do you switch from your bank because you really only need the bank for loans and ATM use?

5. You've lost your job but a new one seems just over the horizon. Do you think it's a reasonable decision to wait for the new job to avoid paying through the nose to keep your old company's health insurance policy alive?

6. You're at another auto dealer. This time, the choice is to lease or buy. Which way do you go?

7. Do you stay with your old passbook savings account because other ways of saving come with far too much risk to make their better interest rates worthwhile?

ANSWERS

1. Don't jump at either one. Assess your situation. The rebate is tinsel for someone with less than stellar credit who probably can't get the lowest interest rate going. The rock-bottom rate, however, leaves more in your pocket if you've got solid credit.

2. Trick question. Whether you do better with a joint account or stay with your own accounts and start a joint one for essentials depends on your personalities more than simple dollars and cents calculations. Talk with your partner.

3. No, you can't. Drive it off the lot and the price starts going down and 30 percent to 40 percent of the value is gone in two years, whether you treat it like a baby or race Jeff Gordon with it.

4. If you use your ATM a lot and rely on your bank's network of free machines, beware. You're unlikely to cut back on ATM use and the credit union might not have that network, so ATM surcharge fees could eat you up. The ATM fees could cost more than the savings you get from lower interest rates on loans.

5. Yes, you can save big bucks (family premiums of more than $600 a month are common). But the risk is massive because your new employer may not come through with insurance for three months or more. Or that new job may not work out. Then those premiums look like pocket change compared to your medical bills.

6. Leasing is tinsel for you if you don't have the down payment and want to keep the payments low and don't mind a fixed term. But if you have the money, buying allows you to sell when you want and get cash back whenever you want to unload the vehicle.

7. Those old passbook and statement accounts are still solid as a rock. But interest rates of about 1.7 percent don't earn you much interest. CDs and money market accounts come with interest rates two or three times that and with some basic management you can earn good money on a large chunk of your savings with a very small risk.

-- Posted: Dec. 10, 1999

See Also

•	Main story: Big-money decisions -- tinsel or tarnish?

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