There’s plenty of misinformation out there when it comes to money. Mixed messages and financial myths that just won’t die can make you wonder what’s really true.
So we’re testing you today with our pop quiz! Check your knowledge on some of the most important money matters — and learn a thing or two to improve your financial health this year.

1. How much money should you have saved in an emergency fund?

a. I’ll just use my credit card during an emergency.
b. 1 month’s worth of expenses
c. 6 months’ worth of expenses
d. 12 months’ worth of expenses
For most people, you’ll want to save enough to cover six months’ worth of your expenses. If you’re self-employed or face unpredictable income, consider boosting your buffer even further.
Of course, saving up that much money can feel daunting — especially if you’re starting from zero. Here’s our guide to building an emergency fund.

2. True or false: Carrying a balance on your credit card boosts your credit score.

You’re not alone if you got this one wrong: LendEDU found that 44% of millennials mistakenly believe carrying a balance improves their score.
You don’t actually need to be in debt to have a great score. In fact, maintaining a lower credit utilization ratio typically translates to a better credit score. That means paying off your balance in full each month — or at least keeping the percentage of what you borrow compared with your total available credit limit as low as possible.

3. Which of the following is a way to reduce your debt?

a. Negotiate a lower interest rate with your credit card company
b. Take advantage of a 0% balance transfer offer
c. Use a strategy like the debt avalanche or debt snowball method
d. All of the above
The best way to beat debt is to use every tool you have at your disposal. Negotiation, balance transfers and consolidation can all help knock down your interest rate. That means more of your money goes to the principal balance instead of high interest costs. Plus, a debt reduction strategy like the debt avalanche or debt snowball method can help spell out the exact steps you need to take to wipe out debt quickly.

4. True or false: When buying a home, your down payment must be at least 20% of the purchase price.

It’s true that at least 20% is the ideal amount to have for a down payment. With that sum of money on the table, you’re extra attractive to mortgage lenders and sellers. Plus, you’ll bypass the need for private mortgage insurance (PMI), an extra fee you’re required to pay alongside your monthly mortgage payment.
But 20% is hardly the minimum requirement. Many lenders offer mortgages if you have 10% or even 5% available upfront. And some programs — like Federal Housing Administration (FHA) or Veterans Administration (VA) loans — may go even lower if you qualify.

5. When’s the best time to start saving for retirement?

a. After you’ve paid off all your debts
b. After you’ve saved enough to buy a home
c. After you’ve contributed to your kids’ education costs
d. Right now!
When it comes to saving for retirement, the single biggest asset you have is time. Thanks to compound interest, saving early means earning more for every dollar you contribute.
And you can save for your future while tackling those other financial goals, like conquering credit card or student loan debt, or paying for college. (Remember: There are plenty of financing options available for college, but you can’t get a loan to cover retirement.)
Not sure how to plan and save for retirement? Here’s how you can get started.

6. What’s the difference between a traditional IRA and a Roth IRA?

a. The way that contributions are taxed
b. The way that withdrawals are taxed
c. The age at which you have to start withdrawing money
d. All of the above
There are several key differences related to how you contribute to and use the money in Roth and traditional IRAs. But both of these retirement accounts can be great ways to save for the future.
So how do you choose? A big factor will likely be whether you want to pay taxes now or later. With a traditional IRA, you’re contributing pre-tax dollars but will be taxed when you make withdrawals in retirement. With a Roth IRA, you’re contributing post-tax dollars, but you won’t be taxed on the money you withdraw in retirement.
Check an online calculator like this one to help you get a snapshot that compares the two based on what you’re saving for retirement. Talking to a financial advisor can also help you weigh the pros and cons of both.

7. What types of investments should you choose for your portfolio?

a. Stocks
b. Bonds
c. Cash
d. Real estate
e. It depends.
Before you begin investing, it’s essential to create a plan: How long do you plan to leave your money in the market? What goal do you have for your portfolio? How much risk are you willing to take on?
Any portfolio you design should directly reflect your individual needs, timeline and risk tolerance. If you’re leery of building one from scratch, many brokerage firms offer prepackaged portfolios or target date funds from which you can choose.