Being literate and aware of most aspects of life is essential to make well-informed and statistically correct decisions. And one such aspect is dealing with finances. Believe it or not, but most people tend to assume that money management is only restricted to setting a budget and saving money. However, they don’t realize the world beyond that.

Our academic curriculum has not yet included it as a topic for children to study, as it is not considered of utmost importance from an examination perspective. However, this type of education should start at an age where students learn about money and realize its value in the actual world. Thus, to make this learning fun and easy, we have provided you with an interactive quiz session on “Financial Literacy” to assess your existing knowledge and gain perspective on some basic concepts of finances.

Financial Literacy Quiz for Students

In a world where money dictates and controls a major portion of our lives, gaining insights and knowledge associated with it becomes necessary. Various dimensions of money like financial management, savings and interest, debt management, credit and credit scores, financial goals and planning, risk management and insurance, taxes, etc., are necessary to be studied, at least briefly. The following questions cover such topics and make one well aware of them.

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What is Financial Literacy?

The term “Financial Literacy” comes from the word Finance, which typically means “Management of Money,” and Literacy, in this context, means “Basic Education.” Thus, having basic education about money management is often referred to as financial literacy.

The term “money” refers to the medium of exchange by which people buy goods and services. Its value varies from place to place, depending on the financial and economic status of that country. Every country has its own set of currency, which is used by its people.

For example, “$” is used as the currency symbol by the U.S.A., “£” by Great Britain, “€” by European countries, and “₨” is used in most countries of the Indian subcontinent. To navigate the world of finances, the following terminologies and concepts are essential to be familiar with.

Consider having a look at each of them for better understanding.

Income:The amount of money earned or received by a person in the form of wages, salary, or pocket money in a fixed duration of time, and has complete authority to manage it is called income.
Expenses: The money deducted from your pre-existing income to sustain your lifestyle or run your business. These may include items like rent, groceries, utilities, and more.
Assets: Properties or items that you own which are valuable. For example, house, car, savings, jewels, etc.
Liability: These are financial obligations that one owes to another person or a company. Often termed as “Debt.” These can further be classified into two categories: current liability and long-term liability. The liabilities that are expected to be paid within a short period are called current liabilities. The time limit is set to be comparatively longer, usually beyond one year, and is classified as a long-term liability.
Budgeting and Money Management: To ensure efficient money utilization, one should be well aware of their expenses and income. Prioritizing expenses and cutting down on unnecessary ones can significantly help save money at the end of the month.
Saving Money: This course of action requires you to set aside a certain chunk of your income and not utilize it in other activities. This can be broken down into short-term goals and long-term goals. Short-term goals are those where money is being saved up for a vacation, game, or any other such item. Whereas, long-term savings can be referred to as items that save to be done for a long period. Examples may include a house, car, or retirement.
Investment: When a person puts their money with the intent of getting a return or some profit is termed as an “investment.” Investment can be done in various forms and ways such as buying stocks, bonds, mutual funds, real estate, etc.
Risk and Return Factor in Investment: It is highly essential to learn about the risk and return factor before making any form of investment. For example, mutual funds often come with a risk of achieving a high return compared to others but also carry a high chance of loss.
Economic and Global Financial System: Economic changes ultimately affect your finances in various ways. Thus, understanding economic mechanics helps individuals to make informed financial decisions.

Importance of Financial Literacy

Why is it important to learn about finances with a well-set mindset one may wonder? Well, to make you understand its importance let’s consider an example. Two kids named Alex and Alan were friends. Both of them used to receive a certain amount of money in the form of pocket money/allowance from their families.

Alex had a habit of spending all of his money on gadgets, expensive dinners, and other luxury items. Whereas, Alan had a different view towards money. He, contrary to Alex, saved and invested his money wisely and made decisions that make him financially secure for the future. As time went by, Alan’s sum of money started to mount.

Then came a golden opportunity of investing in the real estate market which was time-limited and Alan took advantage. On the other hand, Alex learned the lesson of financial literacy the hard way. Therefore, it’s essential to make wise decisions when it comes to money.

And to have that mental caliber one shall have to understand the concepts of financial literacy. Moreover, it provides essential information towards “Debt Management.” One can easily prevent loans available at a higher interest rate. It provides individuals with the ability to set and achieve their financial goals, whether it be buying houses, completing bank EMIs in one go, funding education, etc.

In the end, it is important to realize that being fully aware of the market and finances is an ongoing process which requires one to stay committed and vigilant towards learning about new trends and updates in the financial world.