EFD Exam (Latest 2025/2026 Update)
Questions and Answers | Grade A | 100%
Correct (Verified Answers)
Section 1: Financial Foundations
1. What is the primary purpose of a personal
budget?
a) To restrict your spending completely.
b) To track income and expenses to achieve financial
goals.
c) To calculate your annual taxes.
d) To apply for a loan.
2. What does "pay yourself first" mean?
a) Pay all your bills before doing anything else.
b) Set aside money for savings and investments
before paying other expenses.
c) Give yourself a spending allowance.
d) It means you are your own most important
employee.
3. Net Worth is calculated as:
a) Annual Income minus Annual Expenses.
, b) Total Assets minus Total Liabilities.
c) Total Liabilities minus Total Assets.
d) Gross Income minus Taxes.
4. Which of the following is considered an asset?
a) Your car loan
b) Your credit card balance
c) The money in your savings account
d) Your monthly rent payment
5. A high-deductible health plan (HDHP) is often
paired with which type of tax-advantaged
account?
a) 401(k)
b) Health Savings Account (HSA)
c) Flexible Spending Account (FSA)
d) Traditional IRA
6. What is the main advantage of a Roth IRA over a
Traditional IRA?
a) Higher annual contribution limits.
b) Tax-free growth and qualified withdrawals in
retirement.
c) Tax-deductible contributions.
d) No income limits for contributions.
,7. What is a W-4 form used for?
a) Filing your annual tax return.
b) Reporting investment income.
c) Telling your employer how much tax to withhold
from your paycheck.
d) Applying for a mortgage.
8. The "time value of money" concept states that:
a) Money loses value over time due to inflation.
b) Time is more valuable than money.
c) You need to work a certain amount of time to earn
money.
d) Money earned today is worth less than money
earned in the future.
9. What is a credit score primarily used for?
a) To determine your employment eligibility.
b) To assess your insurance premiums.
c) To evaluate your creditworthiness for lenders.
d) To calculate your tax bracket.
10. Which of these is the safest investment?
a) Stocks
b) Corporate Bonds
, c) U.S. Treasury Bonds
d) Cryptocurrency
Section 2: Budgeting and Cash Flow
11. An "emergency fund" should primarily be
held in:
a) A volatile stock portfolio.
b) A long-term certificate of deposit (CD).
c) A liquid, accessible savings account.
d) Real estate.
12. What is the recommended size for a fully-
funded emergency fund?
a) 1-2 months of living expenses.
b) 3-6 months of living expenses.
c) 1 year of gross income.
d) 10% of your annual salary.
13. The "50/30/20 rule" is a budgeting guideline.
What does the "20" represent?
a) 20% for wants and entertainment.
b) 20% for savings and debt repayment.
c) 20% for housing costs.
d) 20% for taxes.
Questions and Answers | Grade A | 100%
Correct (Verified Answers)
Section 1: Financial Foundations
1. What is the primary purpose of a personal
budget?
a) To restrict your spending completely.
b) To track income and expenses to achieve financial
goals.
c) To calculate your annual taxes.
d) To apply for a loan.
2. What does "pay yourself first" mean?
a) Pay all your bills before doing anything else.
b) Set aside money for savings and investments
before paying other expenses.
c) Give yourself a spending allowance.
d) It means you are your own most important
employee.
3. Net Worth is calculated as:
a) Annual Income minus Annual Expenses.
, b) Total Assets minus Total Liabilities.
c) Total Liabilities minus Total Assets.
d) Gross Income minus Taxes.
4. Which of the following is considered an asset?
a) Your car loan
b) Your credit card balance
c) The money in your savings account
d) Your monthly rent payment
5. A high-deductible health plan (HDHP) is often
paired with which type of tax-advantaged
account?
a) 401(k)
b) Health Savings Account (HSA)
c) Flexible Spending Account (FSA)
d) Traditional IRA
6. What is the main advantage of a Roth IRA over a
Traditional IRA?
a) Higher annual contribution limits.
b) Tax-free growth and qualified withdrawals in
retirement.
c) Tax-deductible contributions.
d) No income limits for contributions.
,7. What is a W-4 form used for?
a) Filing your annual tax return.
b) Reporting investment income.
c) Telling your employer how much tax to withhold
from your paycheck.
d) Applying for a mortgage.
8. The "time value of money" concept states that:
a) Money loses value over time due to inflation.
b) Time is more valuable than money.
c) You need to work a certain amount of time to earn
money.
d) Money earned today is worth less than money
earned in the future.
9. What is a credit score primarily used for?
a) To determine your employment eligibility.
b) To assess your insurance premiums.
c) To evaluate your creditworthiness for lenders.
d) To calculate your tax bracket.
10. Which of these is the safest investment?
a) Stocks
b) Corporate Bonds
, c) U.S. Treasury Bonds
d) Cryptocurrency
Section 2: Budgeting and Cash Flow
11. An "emergency fund" should primarily be
held in:
a) A volatile stock portfolio.
b) A long-term certificate of deposit (CD).
c) A liquid, accessible savings account.
d) Real estate.
12. What is the recommended size for a fully-
funded emergency fund?
a) 1-2 months of living expenses.
b) 3-6 months of living expenses.
c) 1 year of gross income.
d) 10% of your annual salary.
13. The "50/30/20 rule" is a budgeting guideline.
What does the "20" represent?
a) 20% for wants and entertainment.
b) 20% for savings and debt repayment.
c) 20% for housing costs.
d) 20% for taxes.
