Money & Budgeting
What’s the difference between a need and a want?
A need is something essential for living (like food or housing), while a want is something nice to have but not necessary (like video games or designer clothes).
What does ATM stand for?
Automated Teller Machine.
What does it mean to invest your money?
To put money into something (like stocks or bonds) expecting it to grow in value over time.
What is a budget?
A plan for how you will spend and save your money.
Why is it helpful to set financial goals?
They give you direction for saving and spending, helping you stay motivated and make smarter money choices.
What’s the main difference between a debit card and a credit card?
A debit card uses money from your bank account; a credit card borrows money that you must pay back later.
What is a stock?
A share of ownership in a company.
What is net income?
The amount of money you take home after taxes and deductions—your “take-home pay.”
What’s the 50/30/20 rule used for?
It’s a budgeting guideline: 50% of income for needs, 30% for wants, and 20% for savings or debt.
What is a credit score used for?
It measures how likely you are to repay borrowed money—used by lenders to decide if you qualify for loans or credit.
What is compound interest?
Interest earned on both the original amount (principal) and on previous interest.
Define opportunity cost.
The value of what you give up when you choose one option over another.
Why is it important to have an emergency fund?
It helps cover unexpected expenses (like car repairs or medical bills) without going into debt.
What’s one reason a bank might charge interest on a loan?
It’s how the bank earns money for lending—it compensates for the risk of not being repaid and the time value of money.
What does diversifying your investments mean, and why is it important?
Spreading your money across different investments to reduce risk—if one loses value, others might not.
What does liquidity mean in finance?
How easily something can be turned into cash without losing value.
Give one example of a fixed expense and one variable expense in a monthly budget.
Fixed expense: rent, insurance, or car payment.
Variable expense: groceries, entertainment, or utilities.
Name one benefit and one risk of using credit cards.
Benefit: build credit, earn rewards, convenience.
Risk: debt from overspending, high interest rates.
If inflation rises, what usually happens to the purchasing power of your money?
It decreases—your money buys fewer goods and services.
What is human capital, and how can you increase it?
Your skills, knowledge, and experience—improved through education, training, or work experience.