Certified Financially Literate (CFL) Practice Exam
Education
1. Money History and Characteristics of Money Evolution of money systems Characteristics of effective money Fiat Currency Definition and examples Advantages and disadvantages Cashless Society Trends in digital payments Implications for consumers and businesses Sources of Income Employment Investments Self-employment Rental income Interest income Profits from sales Windfall income (e.g., lottery, inheritance) Factors Influencing Income Education and skills Employment opportunities Economic conditions (inflation, deflation) Employment benefits Taxation and Payroll Deductions Types of taxes (federal, state, local) Progressive tax system Mandatory vs. optional deductions Understanding paychecks and pay stubs Income Tax Returns Filing requirements Common forms (e.g., W-2, 1040) Tax credits and deductions 2. Budgeting Financial Goals Setting short-term, medium-term, and long-term goals SMART goal framework Preparing and Managing a Budget Creating a spending plan Balancing income and expenses Adjusting budgets as needed Needs vs. Wants Identifying essential vs. non-essential expenses Impact on budgeting decisions Strategies for Financial Wellness Emergency savings Debt management Building wealth over time 3. Cost of Money Role of Interest Definition and types of interest (simple vs. compound) Impact on loans and savings Role of the Federal Reserve Functions and responsibilities Influence on monetary policy Compounding and Time Value of Money Understanding compound interest Calculating future and present values Annual Percentage Rate (APR) Definition and calculation Comparison of loan offers Inflation and Its Impact Definition and causes of inflation Effect on purchasing power 4. Banking Importance and Need for Savings Building an emergency fund Saving for future goals Types of Banks Commercial banks Credit unions Online banks Banks as Intermediaries Role in the economy Facilitating transactions and loans Safety of Deposits FDIC and SIPC insurance Protecting personal assets Banking Services and Products Checking and savings accounts Certificates of deposit (CDs) Money market accounts Checking and Reconciliation Writing and managing checks Reconciling bank statements How Banks Make Money Interest on loans Fees and charges Alternative Financial Services Credit unions Pawn shops Check cashing centers Finance companies 5. Credit Understanding Credit Definition and types of credit Benefits and risks Credit Products and Their Use Credit cards Loans (personal, auto, student) Mortgages Credit History and Credit Score Factors affecting credit scores Importance of maintaining good credit Credit Problems and Remedies Common credit issues Steps to improve credit Consumer Rights and Responsibilities Fair Credit Reporting Act Consumer protection laws 6. Insurance Purpose of Insurance Risk management