International Baccalaureate (IB) Practice Exam

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Which of the following steps is the First Foundation?

  1. Get out of debt

  2. Save a $500 emergency fund

  3. Pay cash for your car

  4. Build wealth and give

The correct answer is: Save a $500 emergency fund

The First Foundation in personal finance is to save a $500 emergency fund. This step is crucial as it provides a financial cushion for unexpected expenses, which can help prevent a person from going into debt when emergencies arise. Having this emergency fund in place allows individuals to handle unforeseen circumstances, such as a medical emergency or car repair, without resorting to credit cards or loans. It serves as a foundational step for building a more secure financial future, allowing people to focus on eliminating debt and making larger financial goals. This step emphasizes the importance of preparing for the unexpected and establishes financial stability before progressing to other financial milestones.

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