When you multiply or divide two quantities, you should
add the
relative errors. Thus if you have, say, a relative error of 2% in the mass and 3% in the volume, the relative error in density is 5%. (Which in this case would be 0.135, or 0.1 if we're rounding to 1 dp.)
My instrument for measuring mass had 0.X precision
This means it was limited to one decimal place, not two significant figures. How many sf depends on the absolute mass, e.g for 4.6 g it would be 2 sf, but for 46.3 g it would be 3 sf. That's why it's a good idea to do the relative error calculation as above, and round to the appropriate sf at the end.