Do you know your money basics?

Do you know your money basics? Take this 10-question quiz to test your basic knowledge about personal finance. Find out how you scored immediately after you submit your answers; plus, you can compare your score to the overall average and get tips and explanations about your answers. BY JULIA LAWLOR

1. You're a homeowner who's charged up to the limit on three credit cards. You see no end in sight to paying off your debt, especially since your credit cards carry double-digit interest rates. What should you do?
a) Apply for another credit card with a low introductory rate, transfer your debts to that card and make a budget that allows you to start paying off your total debt.
b) Consolidate your debt by taking out a home-equity loan.
c) Stop paying your bills and declare bankruptcy before you throw any more money down the drain.

2. What is the maximum percentage of your take-home pay that should be taken up by regular monthly expenses, such as food, utilities, car payments and rent or mortgage?
a) 80%
b) 65%
c) 36%

3. What's the best way to stem big losses in your investments when the stock market tumbles?
a) Don't buy stocks in the first place. Stick with money-market funds, passbook savings accounts or the mattress.
b) Be the first to sell everything at the slightest hint of a downturn in the market.
c) Diversify your portfolio.

4. What is a flexible spending account?
a) A Bloomingdale's credit card with a credit limit of $100,000.
b) A savings account that doubles as a checking account.
c) An employer benefit that allows one to pay for such expenses as child care and medical bills with pre-tax dollars.

5. What is considered a deductible expense by the IRS?
a) Credit-card interest payments.
b) Private-school tuition.
c) Telephone and taxi expenses incurred while performing charitable work.

6. How often should you update your will?
a) Whenever your situation changes -- such as a new job, new baby, new house, etc.
b) When you remarry.
c) Every three years.

7. What's the best way to save for your child's college education?
a) Invest in one of the new "education IRAs."
b) Invest in high-risk, aggressive-growth stocks and don't withdraw the money until your child is ready to start college.
c) Invest each month in a stock mutual fund with moderate risk. Take advantage of tax-free investments such as the new education IRA. Then withdraw the money four years before your child enters college.

8. What is the biggest mistake people make when it comes to 401(k)s offered by their employers?
a) Failing to invest any money in their 401(k).
b) Opting to hold all of their 401(k) investments in company stock.
c) Being too conservative an investor in their 401(k).

9. Which investment has proved to be the best weapon against inflation over time?
a) Stocks
b) Bonds
c) Gold
10. At what age should a child start getting an allowance?
a) 8
b) 3
c) 16

Source: http://www.usaweekend.com/wealth/money_basics_quiz.html