International Baccalaureate (IB) Practice Exam

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What financial practice can help prevent impulsive spending?

Living paycheck to paycheck
Separating saving and spending accounts
Using credit cards frequently
Paying only minimum balances on debts

The correct answer is: Separating saving and spending accounts

Separating savings and spending accounts is an effective financial practice to help prevent impulsive spending because it creates a clear distinction between funds that are allocated for immediate use and savings that are reserved for future goals or emergencies. This separation encourages individuals to be more mindful of their spending habits. When finances are organized in this way, individuals are less likely to dip into their savings for impulsive purchases, as they visualize their money as belonging to specific categories, making it easier to prioritize needs over wants. By keeping savings in a dedicated account, individuals can also develop a better understanding of their financial status, making it easier to stick to a budget and resist the temptation to overspend. This practice reinforces the importance of financial planning, helping individuals focus on long-term goals instead of short-term gratification.