Economics · Unit 16
Personal Finance and Investing
Budgeting, interest, stocks, and managing risk
The evidence about personal investing is unusually clear and unusually widely ignored: costs and diversification matter more than skill in picking.
The unit covers budgeting, compound interest, saving against investing, stocks and bonds, and risk and diversification.
This unit breaks down into 23 short steps and 118 questions, starting at difficulty 1 and building to 5. Below you can see exactly what it covers, how the path is structured, and worked examples with explanations.
- Steps
- 23
- Questions
- 118
- Difficulty
- 1-5
What this unit covers
- Budgeting
- Stocks and Bonds
- Risk and Diversification
- Saving vs Investing
- Compound Interest
Where this fits
Follows Earning, Spending and Saving and Money, Banking and Credit.
Where people slip
Compound interest works on debt exactly as it works on savings. The same mechanism that makes long-term investing powerful makes high-interest debt very hard to escape.
How the unit is structured
Personal Finance and Investing runs as 23 short steps that unlock in order. 17 are practice rounds and 6 are challenge rounds that pull together everything before them. Questions start at difficulty 1 and climb to 5 as you progress.
Challenge rounds
Example questions
30 real questions from this unit, with the answer and the reason behind it, grouped by what they practise. There are 118 in the unit altogether.
Budgeting
- Fill the blankLevel 1
1. Money that comes in, like wages or an allowance, is called ____.
- incomecorrect
- an expense
- a debt
- a tax
Income is the money that flows into a budget.
- Multiple choiceLevel 1
2. If someone earns 10 dollars and spends 7 dollars, how much is left over?
- 3 dollarscorrect
- 7 dollars
- 17 dollars
- 0 dollars
Income minus spending is 10 minus 7, which leaves 3 dollars.
- Choose all that applyLevel 2
3. Which of these are helpful reasons to make a budget? Select all that apply.
- To plan for the things you needcorrect
- To avoid running out of moneycorrect
- To help reach a savings goalcorrect
- To make sure you never earn any money
A budget helps you plan for needs, avoid running out of money, and reach savings goals.
- Odd one outLevel 2
4. Which of these is NOT normally part of a simple budget?
- A favorite cartoon charactercorrect
- Income
- Expenses
- Savings
Income, expenses, and savings are all parts of a budget, but a cartoon character is not.
- Sort into groupsLevel 2
5. Sort each item as money coming IN or money going OUT of a simple budget.
Answer: Allowance = Money In; Wages from a job = Money In; Buying lunch = Money Out; Bus ticket = Money Out
Allowance and wages bring money in, while buying lunch or a bus ticket sends money out.
- True or falseLevel 2
6. In budgeting, needs are things you must have, while wants are things that are nice to have.
Answer: True
True. Separating needs from wants helps decide where limited money should go first.
Compound Interest
- Multiple choiceLevel 1
7. What is interest on your savings?
- Extra money a bank pays you for keeping savings therecorrect
- A fee for opening a door
- A kind of holiday
- The name of a coin
Interest is the extra money a bank pays you for keeping your savings there.
- Fill the blankLevel 2
8. When you earn interest on your savings AND on the interest you already earned, that is called ____ interest.
- compoundcorrect
- simple
- flat
- zero
Compound interest pays interest on your interest, so savings can grow faster over time.
- Guess the numberLevel 2
9. You save 100 dollars and it earns 10 percent interest in one year. About how many dollars do you have after that year?
Answer: 110 dollars
Adding 10 percent of 100 dollars gives 110 dollars.
- True or falseLevel 2
10. The longer money is left to compound, the more it can grow.
Answer: True
True. More time gives compound interest more chances to build on itself.
- Type the answerLevel 2
11. Interest earned on top of interest you already earned is called ____ interest.
Answer: compound
Compound interest builds on itself over time.
- Put in orderLevel 3
12. Order these amounts from smallest to largest for 100 dollars growing at 10 percent compound interest.
Answer: Start: 100 dollars -> After 1 year: 110 dollars -> After 2 years: 121 dollars -> After 3 years: about 133 dollars
Compound growth makes the balance climb each year: 100, then 110, then 121, then about 133 dollars.
Risk and Diversification
- Choose all that applyLevel 2
13. Which of these actions can help lower money risk? Select all that apply.
- Spreading money across many different thingscorrect
- Mixing different kinds of investmentscorrect
- Choosing not to bet everything on one ideacorrect
- Putting every dollar into one single stock
Spreading money across many things, mixing different investments, and not betting everything all help lower risk.
- Fill the blankLevel 2
14. Spreading your money across many different things instead of just one is called ____.
- diversificationcorrect
- saving
- spending
- borrowing
Diversification spreads money out so one bad result hurts less.
- Multiple choiceLevel 2
15. In money, what does the word 'risk' mean?
- The chance you could lose money or things go differently than hopedcorrect
- A promise that you will always win
- A type of bank
- The interest a bank pays you
Risk is the chance that you could lose money or that things go differently than hoped.
- Odd one outLevel 2
16. Which of these does NOT help lower risk?
- Putting every dollar into one single stockcorrect
- Spreading money across many things
- Mixing different kinds of investments
- Not betting everything on one idea
Spreading and mixing lower risk, but putting every dollar into one stock raises it.
- True or falseLevel 2
17. Putting all your money into one single thing is usually riskier than spreading it out.
Answer: True
True. If that one thing fails, you could lose it all, so spreading out is safer.
- Match the pairsLevel 5
18. Match each risk term to its meaning.
Answer: Systematic risk = Market-wide, cannot be diversified away; Unsystematic risk = Company-specific, can be diversified away; Beta = How much a stock moves with the market
Systematic risk is market-wide, unsystematic risk is company-specific, and beta measures market sensitivity.
Saving vs Investing
- Choose all that applyLevel 2
19. Which of these are common ways people save money? Select all that apply.
- A piggy bankcorrect
- A savings accountcorrect
- A jar at homecorrect
- Spending it the moment you get it
A piggy bank, a savings account, and a jar at home are all places to keep saved money.
- Fill the blankLevel 2
20. Putting money into something hoping it grows in value over time is called ____.
- investingcorrect
- spending
- borrowing
- giving
Investing means using money to try to grow it, usually with some risk.
- Multiple choiceLevel 2
21. Which choice is usually the LOWER risk for your money?
- Keeping money in a savings accountcorrect
- Betting it all on one risky idea
- Lending it to a stranger
- Buying a single lottery ticket
Keeping money in a savings account is low risk, while betting it all on one idea is high risk.
- Odd one outLevel 2
22. Which of these is NOT a way to save money?
- Spending every coin the instant you get itcorrect
- Using a piggy bank
- Using a savings account
- Keeping money in a jar
A piggy bank, a savings account, and a jar all hold savings, but spending every coin does not.
- True or falseLevel 2
23. Investing can grow money more than a basic savings account, but it carries more risk.
Answer: True
True. Investing offers a chance at higher returns in exchange for taking on more risk.
- Match the pairsLevel 3
24. Match each money idea to its meaning.
Answer: Saving = Keeping money safe for near-term needs; Investing = Using money to seek growth over time; Emergency fund = Cash set aside for surprises
Saving keeps money safe for soon, investing seeks growth over time, and an emergency fund is cash for surprises.
Stocks and Bonds
- Fill the blankLevel 1
25. Owning a share of a company means you own a small ____ of that company.
- partcorrect
- copy
- tax
- coin
A share represents a small part, or slice, of the whole company.
- Multiple choiceLevel 1
26. What is a stock, also called a share?
- A small piece of ownership in a companycorrect
- A kind of bread
- A coupon for free food
- A government tax
A stock is a small piece of ownership in a company.
- Match the pairsLevel 2
27. Match each money term to what it means.
Answer: Stock = A piece of ownership in a company; Bond = A loan that is paid back with interest; Interest = Extra money paid for using money
A stock is ownership, a bond is a loan, and interest is extra money paid over time.
- Choose all that applyLevel 3
28. Which of these are generally true about stocks? Select all that apply.
- Their price can rise or fallcorrect
- They represent ownership in a companycorrect
- Some pay dividendscorrect
- They are guaranteed to never lose value
Stock prices can rise or fall, stocks represent ownership, and some pay dividends.
- Odd one outLevel 3
29. Which term does NOT describe a bond?
- Ownership sharecorrect
- Loan
- Interest payment
- Maturity date
A bond involves a loan, interest payments, and a maturity date, but not an ownership share.
- Put in orderLevel 5
30. In a company liquidation, order these claim holders from paid FIRST to paid LAST.
Answer: Secured lenders -> Bondholders -> Preferred shareholders -> Common shareholders
Secured lenders come first, then bondholders, then preferred shareholders, and common shareholders last.
Where these questions come from. Each unit starts as a plan of the concepts it should cover and the difficulty it should span. Questions are written against that plan with AI assistance, then checked by a validator that rejects anything without a single defensible answer, an explanation, or plausible wrong options. How we write questions sets out the whole process, and corrections are fixed in the bank and reach the site and the app the same day.
How you practise
This unit mixes 10 different question formats, so you are recalling and applying rather than recognising the same layout every time.
- Choose all that apply
- Fill the blank
- Guess the number
- Match the pairs
- Multiple choice
- Odd one out
- Put in order
- Sort into groups
- True or false
- Type the answer
Practise Personal Finance and Investing
118 questions across 23 steps. Start with step one and crawl at your own pace.
Play this unitRead about Personal Finance and Investing
Explainers from our blog on what this unit covers. Each one ends with real questions from the bank.
- How Does Insurance Work? Pooling Risk So That Nobody Is RuinedInsurance turns a large uncertain loss into a small certain payment by pooling many people's risks. How premiums are set, why pools fail, and where it began.September 14, 2026 · 5 min read
- How Does the Stock Market Work? Shares, Prices and What Moves ThemA share is a slice of a company, and the stock market is where slices change hands. Why companies sell them, how a price is set, and what an index measures.September 14, 2026 · 5 min read
- Compound Interest Formula: How Money Grows Over TimeThe compound interest formula shows how interest can earn interest over time. Learn each part of the formula, compounding periods, and simple examples.August 14, 2026 · 5 min read
- What Is Venture Capital? Betting on Ten Companies to Find the OneVenture capital is money invested in young companies for shares, on the expectation that most will fail and one will pay for the rest. How the funds work.September 15, 2026 · 5 min read
More units in Economics
- What is Economics?Scarcity, choices, and the cost of choosing
- Needs, Wants and ResourcesWhat we need, what we want, and limited resources
- Money and TradeFrom barter to money and prices
- Goods and ServicesProducers, consumers, and where things come from
- Earning, Spending and SavingPersonal money basics and budgeting
- Supply and DemandHow buyers and sellers set the price
- Markets, Prices and CompetitionHow markets and competition work
- Businesses and ProductionFirms, costs, profit, and entrepreneurship