Measuring and Reducing Investment Risks

Investment risk is the possibility of losing part or all of the money you put into an
investment. Risks vary depending on the type of investment, market conditions, and
investor decisions. The goal is not to eliminate risk, but to measure, manage, and reduce it.

1. Ways to Measure Investment Risk

1. Volatility – How much the value of an investment changes over time.

2. Credit Risk – The chance that a borrower will fail to pay back.

3. Liquidity Risk – The difficulty of turning an investment into cash.

4. Inflation Risk – The danger that returns will not keep up with inflation.

5. Market Risk – The possibility that economic downturns or crises will lower investment
values.

2. Ways to Minimize or Reduce Investment Risk

a. Diversification – Spread investments across different assets.

b. Asset Allocation – Balance between high-risk and low-risk investments.

c. Research and Education – Understand the investment before committing money.

d. Long-Term Perspective – Stay invested despite short-term downturns.

e. Emergency Fund – Keep 3–6 months of expenses in liquid assets.

f. Professional Advice – Consult financial advisors or mentors.

g. Insurance and Protection – Safeguard against unexpected losses.

3. Simple Case Problems with Solutions

Case 1: Diversification

Juan has ₱50,000 to invest. He puts all of it in a single company’s stock. The company’s
value drops by 40%, and Juan loses ₱20,000.
👉 What could he have done to reduce risk?
Answer: He should have diversified. For example, ₱20,000 in stocks, ₱15,000 in bonds,
₱10,000 in savings, and ₱5,000 in a mutual fund.

Case 2: Liquidity Risk

Maria invested ₱200,000 in a condominium unit, hoping to sell it quickly if she needs cash.
An emergency happens, but she cannot sell the property immediately.
👉 What mistake did she make?
Answer: She did not consider liquidity risk. To minimize this, Maria should have kept an
emergency fund.

Case 3: Inflation Risk

Ana keeps all her savings (₱100,000) in a bank account with 1% interest per year. Inflation
is 5% annually.
👉 What is happening to Ana’s money?
Answer: Her money is losing value in real terms. She should invest some of her money in
inflation-protected investments.

Case 4: Market Risk

Pedro invested in the stock market, but during a global recession, prices dropped by 25%.
He panicked and sold all his shares, losing money.
👉 What could Pedro have done?
Answer: He should have stayed invested for the long term, since markets usually recover.

4. Key Takeaways
1. All investments have risks—but risks can be measured and managed.

2. Diversification and asset allocation are the best shields against losses.

3. Knowledge and discipline are just as important as money.

4. Match investments to goals—short-term needs require safer investments; long-term

goals may allow higher-risk investments.

Part I – Multiple Choice (20 points)

Choose the best answer.

1. Which of the following best describes investment risk?

A. Guaranteed profit from investments
B. The chance of losing money from an investment
C. The amount of money saved in a bank
D. The interest rate of a loan
Answer: B — Remembering

2. Which risk refers to the difficulty of selling an investment quickly for cash?
A. Market risk
B. Credit risk
C. Liquidity risk
D. Inflation risk
Answer: C — Understanding
3. Inflation risk happens when:
A. Returns grow faster than prices
B. Investment returns fail to keep up with rising prices
C. Investors earn higher than inflation
D. Investors diversify their portfolio
Answer: B — Understanding

4. Bonds are mostly exposed to what kind of risk?

A. Credit risk
B. Market risk
C. Liquidity risk
D. Commodity risk
Answer: A — Applying

5. Which of the following is a method to reduce risk?

A. Investing in only one company
B. Diversification
C. Ignoring inflation
D. Panic selling during downturns
Answer: B — Applying

6. Juan lost ₱20,000 because he put all his money in one stock. What should he have
done?
A. Focused on bonds only
B. Diversified his investments
C. Avoided savings accounts
D. Bought more stocks
Answer: B — Analyzing

7. Maria cannot sell her condominium quickly in an emergency. Which risk is this?
A. Market risk
B. Credit risk
C. Liquidity risk
D. Inflation risk
Answer: C — Analyzing

8. Ana’s savings earned 1% while inflation was 5%. What happened?

A. She gained more in real value
B. Her money lost value in real terms
C. She earned above inflation
D. She avoided risk completely
Answer: B — Analyzing

9. Pedro sold his shares during a market downturn and lost money. What mistake did
he make?
 A. He invested in bonds
B. He stayed invested for the long term
C. He panicked and sold too early
D. He diversified too much
Answer: C — Analyzing

10. The practice of balancing high-risk and low-risk investments is called:

A. Hedging
B. Insurance
C. Asset allocation
D. Speculation
Answer: C — Applying

11. Which of the following is a way to manage market risk?

A. Long-term investing
B. Panic selling
C. Avoiding diversification
D. Borrowing more money to invest
Answer: A — Applying

12. An investor checks how much their investment price changes over time. What risk is
being measured?
A. Credit risk
B. Volatility
C. Liquidity risk
D. Inflation risk
Answer: B — Understanding

13. If a company cannot pay its bondholders, what type of risk is this?
A. Market risk
B. Credit risk
C. Inflation risk
D. Liquidity risk
Answer: B — Applying

14. Which of these is the safest protection against financial emergencies?

A. Insurance
B. Mutual funds
C. Emergency fund
D. Stock market
Answer: C — Analyzing

15. If inflation is higher than interest rates, savers experience:

A. Increased real wealth
B. Decreased purchasing power
 C. Higher returns
D. Risk-free savings
Answer: B — Understanding

16. Which of the following is an example of diversification?

A. Putting all savings in one stock
B. Investing in stocks, bonds, and savings
C. Saving only in a bank account
D. Buying only real estate
Answer: B — Applying

17. Which risk is usually higher in cryptocurrencies compared to bonds?

A. Market volatility
B. Credit risk
C. Liquidity risk
D. Inflation risk
Answer: A — Analyzing

18. Professional advice in investing mainly helps in:

A. Eliminating all risks
B. Minimizing risks by informed decisions
C. Avoiding losses permanently
D. Guaranteeing profits
Answer: B — Evaluating

19. Which is an example of asset allocation?

A. 50% in stocks, 30% in bonds, 20% in cash
B. 100% in one company’s stock
C. All money in real estate
D. None of the above
Answer: A — Creating

20. Which strategy combines safety and growth?

A. Saving only in banks
B. Combining savings, bonds, and stocks
C. Putting all money in cryptocurrency
D. Only investing in gold
Answer: B — Creating

Part II – True or False (15 points)

1. Investment risk means there is always a possibility of losing money.

Answer: TRUE — Remembering
2. Market risk can be avoided completely with diversification.
Answer: FALSE — Understanding

3. Liquidity risk is the difficulty of selling investments quickly.

Answer: TRUE — Remembering

4. Inflation risk occurs when investment returns fail to keep up with price increases.
Answer: TRUE — Understanding

5. Bonds are risk-free investments.

Answer: FALSE — Understanding

6. Diversification helps reduce risk by spreading money across different assets.

Answer: TRUE — Applying

7. An emergency fund helps protect against unexpected financial problems.

Answer: TRUE — Applying

8. Investing only in one company reduces overall risk.

Answer: FALSE — Analyzing

9. Professional advice can help minimize, but not eliminate, risks.

Answer: TRUE — Analyzing

10. Pedro’s mistake was selling too early during a downturn.

Answer: TRUE — Analyzing

11. Insurance can provide protection against unexpected financial loss.

Answer: TRUE — Applying

12. Inflation increases the real value of money in savings.

Answer: FALSE — Understanding

13. Asset allocation means balancing between high- and low-risk investments.
Answer: TRUE — Evaluating

14. Diversification and asset allocation are the best defenses against losses.
Answer: TRUE — Evaluating

15. Keeping all money in a savings account is the best way to grow wealth long-term.
Answer: FALSE — Creating
Money Management Philosophies

Money management philosophies are guiding principles or approaches people use to handle
their income, spending, saving, and investing. These philosophies often reflect a person’s
values, beliefs, financial goals, and even cultural or family influences. Understanding them is
important because financial behavior is not just about mathematics; it is also about
discipline, mindset, and decision-making.

1. The Frugality Philosophy (Living Below Your Means)

 Core Idea: Spend less than what you earn and save the difference.

 Characteristics:

o Prioritizes needs over wants.

o Avoids unnecessary luxuries.

o Emphasizes budgeting and careful spending.

 Advantages:

o Builds strong financial discipline.

o Ensures money is available for emergencies.

 Risks: Can lead to deprivation if taken to the extreme, limiting enjoyment of life.

 Example: A student who tracks expenses daily, avoids impulsive shopping, and
saves allowance for future needs.

2. The Pay-Yourself-First Philosophy

 Core Idea: Before paying bills or spending, allocate a portion of income to savings
or investments.

 Characteristics:

o Treats savings as a non-negotiable expense.

o Encourages long-term wealth building.

 Advantages:

o Ensures consistent savings and investments.

 o Helps build financial independence early.

 Risks: Requires strong discipline, especially for people with irregular income.

 Example: An employee automatically setting aside 20% of salary to a savings

account before spending on monthly bills.

3. The Balanced Lifestyle Philosophy

 Core Idea: Balance between enjoying money today and preparing for tomorrow.

 Characteristics:

o Encourages moderation—save enough, but also spend reasonably on

enjoyment.

o Promotes both short-term happiness and long-term security.

 Advantages:

o Reduces stress about money while avoiding guilt in spending.

o Encourages sustainable financial habits.

 Risks: Balance can be difficult to maintain—some people lean more toward

overspending or oversaving.

 Example: A family setting a budget for travel while still saving for retirement.

4. The Debt-Free Philosophy

 Core Idea: Avoid or eliminate debt as quickly as possible.

 Characteristics:

o Sees debt as a burden and risk to financial freedom.

o Focuses on paying off loans before pursuing luxuries.

 Advantages:

o Provides peace of mind and financial security.

o Reduces interest expenses.

  Risks: May miss out on opportunities where “good debt” (like business loans or
student loans) could be beneficial.

 Example: A young professional paying extra on student loans each month to

achieve debt-free status faster.

5. The Investing-for-Growth Philosophy

 Core Idea: Use money to generate more wealth through investments.

 Characteristics:

o Prioritizes putting money in stocks, bonds, mutual funds, or businesses.

o Focuses on building wealth over time.

 Advantages:

o Potential for high returns and financial independence.

o Beats inflation over the long run.

 Risks: Market volatility may lead to losses if investments are not managed wisely.

 Example: A college student investing in mutual funds monthly to build long-term

wealth.

6. The Minimalist Philosophy

 Core Idea: Financial freedom through simplicity—owning less and spending only
on essentials.

 Characteristics:

o Focuses on needs, not wants.

o Values experiences over material possessions.

 Advantages:

o Less stress from financial obligations.

o Encourages intentional spending.

 Risks: May conflict with modern lifestyle demands (e.g., technology, social
expectations).
  Example: A person choosing a small, affordable home instead of taking a large
mortgage.

7. The YOLO / Carpe Diem Philosophy (“You Only Live Once”)

 Core Idea: Spend and enjoy money while you can. Life is short.

 Characteristics:

o Prioritizes experiences and enjoyment over savings.

o Often linked to travel, dining, and lifestyle spending.

 Advantages:

o Maximizes present enjoyment.

o Builds memories and experiences.

 Risks: High chance of debt, lack of savings, and financial struggles later in life.

 Example: A fresh graduate spending most of the first salary on gadgets and travel
without saving.

8. The Faith- or Values-Based Philosophy

 Core Idea: Manage money according to religious or ethical principles.

 Characteristics:

o Emphasizes generosity (tithing, donations).

o Avoids unethical or interest-based investments (common in some faith

traditions).

 Advantages:

o Provides a sense of purpose and discipline.

o Encourages charitable giving and community support.

 Risks: May limit financial options if too restrictive.

 Example: An individual regularly donating 10% of income to charity before

spending.
Comparison of Philosophies

Philosophy Focus Strength Weakness

Frugality Spending less Builds discipline May reduce enjoyment

Ensures consistent Hard for irregular

Pay-Yourself-First Saving first
saving earners

Sustainable financial Balance can be hard to

Balanced Lifestyle Moderation
habits keep

May miss “good debt”

Debt-Free Avoiding debt Provides security
benefits

Investing-for-
Wealth building High returns Risk of market losses
Growth

Less stress, intentional May conflict with

Minimalist Simplicity
living lifestyle

YOLO / Carpe Risk of debt, no long-

Enjoyment today Builds experiences
Diem term plan

Faith-/Values- Ethical/Religious Purpose-driven, Can be financially

Based values generous restrictive

✅ Key Takeaway for Students:

There is no single “correct” philosophy. The best approach depends on your personality,
values, financial situation, and goals. However, many successful individuals combine
elements: living below their means, saving first, investing wisely, and still enjoying life.
Assessment on Money Management Philosophies

A. Multiple Choice (25 points)

Choose the best answer.

1. Which philosophy emphasizes “spending less than you earn and saving the rest”?
A. YOLO Philosophy
B. Frugality Philosophy
C. Minimalist Philosophy
D. Balanced Lifestyle Philosophy
Answer: B – Frugality Philosophy (Remembering)

2. The philosophy that prioritizes saving before spending is known as:

A. Debt-Free Philosophy
B. Pay-Yourself-First Philosophy
C. Balanced Lifestyle Philosophy
D. Values-Based Philosophy
Answer: B – Pay-Yourself-First (Remembering)

3. Which philosophy is most likely to lead to a life of simplicity and fewer material
possessions?
A. Minimalist Philosophy
B. YOLO Philosophy
C. Balanced Lifestyle Philosophy
D. Investing-for-Growth Philosophy
Answer: A – Minimalist Philosophy (Understanding)

4. A person who eliminates credit card debt as quickly as possible follows which
philosophy?
A. Debt-Free Philosophy
B. YOLO Philosophy
C. Frugality Philosophy
D. Balanced Lifestyle Philosophy
Answer: A – Debt-Free Philosophy (Understanding)

5. Which philosophy is risky because it often ignores saving and focuses on

enjoyment?
A. Balanced Lifestyle Philosophy
B. YOLO Philosophy
C. Frugality Philosophy
D. Values-Based Philosophy
Answer: B – YOLO Philosophy (Analyzing)
6. The philosophy that encourages both saving for the future and enjoying life in the
present is:
A. Balanced Lifestyle Philosophy
B. Minimalist Philosophy
C. YOLO Philosophy
D. Frugality Philosophy
Answer: A – Balanced Lifestyle Philosophy (Understanding)

7. A student invests allowance in mutual funds monthly. Which philosophy is applied?

A. Debt-Free
B. Investing-for-Growth
C. YOLO
D. Frugality
Answer: B – Investing-for-Growth (Applying)

8. Which philosophy may prevent financial opportunities by rejecting “good debt”?

A. Investing-for-Growth
B. Debt-Free
C. Balanced Lifestyle
D. Frugality
Answer: B – Debt-Free (Analyzing)

9. The philosophy often associated with the principle “Carpe Diem” is:
A. YOLO Philosophy
B. Minimalist Philosophy
C. Debt-Free Philosophy
D. Balanced Lifestyle Philosophy
Answer: A – YOLO Philosophy (Remembering)

10. Which philosophy is most connected to religious or ethical guidelines in managing

money?
A. Frugality
B. Balanced Lifestyle
C. Values-Based Philosophy
D. Minimalist Philosophy
Answer: C – Values-Based Philosophy (Understanding)

11. What is the main advantage of the Pay-Yourself-First philosophy?

A. It encourages luxury spending
B. It guarantees consistent saving
C. It reduces enjoyment in life
D. It eliminates all debt
Answer: B – Guarantees consistent saving (Understanding)
12. The philosophy of investing for growth primarily focuses on:
A. Short-term enjoyment
B. Building long-term wealth
C. Eliminating debt
D. Donating income to charity
Answer: B – Building long-term wealth (Remembering)

13. A risk of the YOLO philosophy is:

A. No enjoyment in life
B. Over-saving and deprivation
C. High chance of debt
D. Lack of ethical spending
Answer: C – High chance of debt (Analyzing)

14. Minimalism often values __________ more than possessions.

A. Luxury
B. Experiences
C. Savings
D. Debt-free living
Answer: B – Experiences (Understanding)

15. Which philosophy reduces stress by simplifying lifestyle and lowering expenses?
A. YOLO
B. Minimalist
C. Balanced Lifestyle
D. Values-Based
Answer: B – Minimalist Philosophy (Applying)

16. A young professional donates 10% of income to charity first. Which philosophy?
A. YOLO
B. Frugality
C. Values-Based
D. Debt-Free
Answer: C – Values-Based Philosophy (Applying)

17. The philosophy most vulnerable to inflation if money is not invested is:
A. YOLO
B. Debt-Free
C. Balanced Lifestyle
D. Pay-Yourself-First
Answer: D – Pay-Yourself-First (Analyzing)

18. Which philosophy stresses discipline and budgeting above everything else?
A. YOLO
B. Frugality
 C. Balanced Lifestyle
D. Investing-for-Growth
Answer: B – Frugality (Remembering)

19. A family who sets aside money for both travel and retirement is applying:
A. Balanced Lifestyle Philosophy
B. YOLO Philosophy
C. Frugality Philosophy
D. Minimalist Philosophy
Answer: A – Balanced Lifestyle (Applying)

20. Which philosophy could limit opportunities by rejecting student loans or business
loans?
A. Debt-Free
B. YOLO
C. Minimalist
D. Frugality
Answer: A – Debt-Free (Analyzing)

21. A student avoids impulsive shopping to save for emergencies. Which philosophy?
A. Frugality
B. YOLO
C. Balanced Lifestyle
D. Minimalist
Answer: A – Frugality (Applying)

22. Which philosophy can sometimes conflict with modern lifestyles that require
technology?
A. YOLO
B. Minimalist
C. Values-Based
D. Investing-for-Growth
Answer: B – Minimalist (Analyzing)

23. Which philosophy promotes setting aside money for investments first before
spending?
A. YOLO
B. Debt-Free
C. Pay-Yourself-First
D. Frugality
Answer: C – Pay-Yourself-First (Remembering)

24. The philosophy with potential for high returns but with market risk is:
A. Investing-for-Growth
B. Frugality
 C. YOLO
D. Debt-Free
Answer: A – Investing-for-Growth (Analyzing)

25. Which philosophy emphasizes generosity, donations, and avoiding unethical

financial practices?
A. YOLO
B. Frugality
C. Minimalist
D. Values-Based
Answer: D – Values-Based (Understanding)

B. True or False (15 points)

1. Frugality philosophy encourages spending luxuriously to enjoy life.

Answer: False (Remembering)

2. Pay-Yourself-First philosophy treats savings as a priority.

Answer: True (Remembering)

3. The YOLO philosophy encourages saving first before spending.

Answer: False (Understanding)

4. A risk of the Balanced Lifestyle philosophy is difficulty in maintaining balance.

Answer: True (Analyzing)

5. Debt-Free philosophy promotes avoiding and eliminating loans quickly.

Answer: True (Remembering)

6. Minimalist philosophy encourages intentional spending and less clutter.

Answer: True (Understanding)

7. Investing-for-Growth has no risks involved since it guarantees profit.

Answer: False (Analyzing)

8. YOLO philosophy is often linked with the idea “Carpe Diem.”

Answer: True (Remembering)

9. Values-Based philosophy is not influenced by religion or ethics.

Answer: False (Understanding)

10. A balanced lifestyle focuses only on long-term savings and not enjoyment.
Answer: False (Analyzing)

11. Frugality philosophy may lead to deprivation if overdone.

Answer: True (Analyzing)
 12. Debt-Free philosophy reduces interest expenses by eliminating loans.
Answer: True (Understanding)

13. Minimalism is about owning more material possessions for status.

Answer: False (Remembering)

14. YOLO philosophy can often result in financial struggles later in life.
Answer: True (Analyzing)

15. Values-Based philosophy may restrict financial options due to ethical rules.
Answer: True (Analyzing)

The Money Management Cycle

Money management is not just about handling cash—it is a continuous cycle that involves
earning, spending, saving, and investing. Each stage connects with the next, forming a
cycle that can either build financial stability or lead to financial difficulties, depending on
how it is managed.

1. Earning

Earning refers to the income or money we receive from various sources such as salaries,
allowances, business, or investments. It is the starting point of the cycle, since without
income, the other steps cannot happen.

Sound Practices in Earning

 Diversify income sources: Do not depend solely on one job. Explore part-time jobs,
freelancing, or small businesses.

 Invest in skills and education: Higher qualifications and skills often lead to higher
income opportunities.

 Use time productively: Avoid procrastination and focus on activities that add
value.

Example: A senior high school student receives an allowance from parents and also earns
money by tutoring younger students in math.
2. Spending

Spending is the use of money to meet needs and wants. While spending is necessary,
overspending can create debt and financial stress.

Sound Practices in Spending

 Create and follow a budget: Track expenses and allocate money for essentials,
wants, and savings.

 Prioritize needs over wants: Buy necessities first such as food, school supplies, or
transportation before leisure.

 Avoid impulse buying: Wait 24 hours before making non-essential purchases.

Example: Instead of buying the latest phone model, a student continues using their
functional device and uses extra money for school projects.

3. Saving

Saving means setting aside money for future needs, emergencies, or goals. It acts as a
financial safety net.

Sound Practices in Saving

 Follow the 50-30-20 rule: 50% for needs, 30% for wants, and 20% for savings.

 Build an emergency fund: Aim for at least 3–6 months’ worth of expenses saved.

 Automate savings: Transfer a portion of income directly to a savings account

before spending.

Example: A student saves ₱50 from their weekly allowance in a piggy bank, which
accumulates over months and is later deposited into a savings account.

4. Investing

Investing means using money to buy assets that can grow in value and generate returns
over time. It helps money “work for you” instead of just sitting idle.

Sound Practices in Investing

 Start small and early: Even small investments grow over time because of
compounding.
  Diversify investments: Spread money across different assets like stocks, bonds,
mutual funds, or business ventures to reduce risk.

 Understand before investing: Avoid scams or risky investments without research.

Example: A young worker starts investing in a cooperative savings program that earns
interest yearly, while also learning about mutual funds for future investments.

Illustration of the Money Management Cycle

EARNING → SPENDING → SAVING → INVESTING → (back to Earning)

 Earning provides money for needs.

 Spending fulfills daily requirements.

 Saving protects against uncertainties.

 Investing grows wealth and may increase future earnings.

The cycle then continues, ideally becoming stronger with better practices.

Conclusion

The Money Management Cycle teaches us that handling money wisely is not a one-time
action but an ongoing process. Sound practices in earning, spending, saving, and
investing allow individuals—especially students and young professionals—to achieve
financial security, independence, and long-term success.

1. What is the first step in the money management cycle?

A. Saving
B. Spending
C. Earning
D. Investing
Answer: C — Remembering

2. A student earns money from tutoring and uses it for daily transportation. Which
part of the cycle is this?
A. Spending
B. Saving
C. Investing
D. Earning
Answer: A — Understanding

3. Which of the following is an example of “active income”?

A. Stock dividends
B. Salary from a part-time job
C. Rental income
D. Mutual fund earnings
Answer: B — Remembering

4. Which is the best reason to create a budget?

A. To track only luxuries
B. To monitor spending and plan saving
C. To avoid all expenses
D. To increase allowance
Answer: B — Understanding

5. Which is the safest and most accessible form of saving for students?
A. Piggy bank
B. Stock market
C. Real estate
D. Cryptocurrency
Answer: A — Applying

6. If a student saves ₱20 weekly from allowance, what money management practice is
applied?
A. Impulse spending
B. Emergency fund building
C. Saving discipline
D. Diversification
Answer: C — Applying

7. Which investment provides both protection and wealth accumulation?

A. Insurance with investment (VUL)
B. Regular savings account
C. Time deposit
D. Cash allowance
Answer: A — Understanding

8. Which of the following reduces financial risk?

A. Spending on wants first
B. Borrowing more money
C. Diversifying investments
D. Delaying savings
Answer: C — Analyzing
9. If someone spends all earnings without saving, what will happen?
A. They will still build wealth
B. They may struggle in emergencies
C. They will always avoid risk
D. They will earn more
Answer: B — Analyzing

10. The 50-30-20 rule recommends what percent for savings?

A. 10%
B. 20%
C. 30%
D. 50%
Answer: B — Remembering

11. A student buys a new gadget using money saved for tuition. This reflects poor
practice in:
A. Earning
B. Spending
C. Saving discipline
D. Investing
Answer: C — Evaluating

12. Which is an example of a long-term investment?

A. Daily allowance
B. Mutual funds
C. Snacks
D. Transportation fare
Answer: B — Remembering

13. “Money should work for you” refers to which stage?

A. Spending
B. Saving
C. Investing
D. Earning
Answer: C — Understanding

14. Which action improves earning capacity?

A. Watching TV daily
B. Investing in education
C. Overspending
D. Impulse buying
Answer: B — Applying

15. Which is NOT a sound practice in spending?

A. Buying necessities first
B. Impulse shopping
C. Tracking expenses
D. Sticking to budget
Answer: B — Analyzing

16. A person sets aside 3–6 months’ worth of expenses in a fund. This is called:
A. Emergency fund
B. Retirement plan
C. Diversification
D. Budgeting
Answer: A — Remembering

17. Which investment carries the highest risk?

A. Time deposit
B. Bonds
C. Cryptocurrency
D. Mutual funds
Answer: C — Analyzing

18. A student earning allowance and selling snacks to classmates shows:

A. Impulse buying
B. Multiple income streams
C. Overspending
D. No financial planning
Answer: B — Applying

19. What should come first before leisure spending?

A. Wants
B. Needs
C. Investments
D. Loans
Answer: B — Understanding

20. Which of the following illustrates poor money management?

A. Saving weekly
B. Diversifying investments
C. Spending more than earning
D. Creating a budget
Answer: C — Analyzing

21. Why is saving before spending recommended?

A. To avoid budgeting
B. To prioritize wants
C. To ensure future security
D. To increase debt
Answer: C — Evaluating

22. Which is the best financial decision for a high school student?
A. Borrowing money for luxuries
B. Setting aside part of allowance as savings
C. Buying expensive gadgets on credit
D. Avoiding savings completely
Answer: B — Evaluating

23. The money management cycle is best described as:

A. A one-time action
B. A repeating process of earning, spending, saving, investing
C. Only about saving
D. Only about investing
Answer: B — Remembering

24. Which practice can increase future earning power?

A. Wasting time on unproductive activities
B. Improving skills and education
C. Spending without limits
D. Saving nothing
Answer: B — Applying

25. If a student invests early in mutual funds, which principle is applied?

A. Risk avoidance
B. Compounding growth1
C. Emergency saving
D. Impulse spending
Answer: B — Analyzing

15 True or False Questions

1. Money management is a cycle that ends once money is invested.

Answer: FALSE — Understanding

2. Earning is the foundation of the money management cycle.

Answer: TRUE — Remembering

3. Impulse spending is an example of sound spending practice.

Answer: FALSE — Understanding

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4. Building an emergency fund is part of saving practices.
Answer: TRUE — Remembering

5. Investing is risk-free and always guarantees profit.

Answer: FALSE — Analyzing

6. Overspending can prevent individuals from saving.

Answer: TRUE — Understanding

7. Diversification means putting all money in one type of investment.

Answer: FALSE — Applying

8. A student setting aside ₱50 weekly is practicing saving discipline.

Answer: TRUE — Applying

9. A budget is a tool to plan and control expenses.

Answer: TRUE — Understanding

10. Saving comes after spending luxuriously.

Answer: FALSE — Evaluating

11. The 50-30-20 rule is a simple guide to balance spending, wants, and savings.
Answer: TRUE — Remembering

12. Money management helps achieve financial stability.

Answer: TRUE — Understanding

13. Spending more than what you earn is a good financial habit.
Answer: FALSE — Analyzing

14. Compounding allows small investments to grow significantly over time.

Answer: TRUE — Applying

15. Financial literacy and discipline are keys to successful money management.
Answer: TRUE — Evaluating

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