Financial Literacy Basics
What is financial literacy?
The ability to understand and effectively use financial skills, like budgeting and saving, to manage money
What are different sources of income?
Active Income
Passive Income
Unearned
What is an expense?
Money you spend to buy goods or services.
What is an investment?
Putting money into something to earn more money over time.
What is a debt/liability?
Money you owe or a financial responsibility.
Name one reason why financial literacy is important.
It helps people make informed decisions with money.
Name two types of passive income.
Interests and Dividend
Name one fixed expense and one variable expense.
Fixed – Rent; Variable – Eating out.
What is the relationship between risk and return?
Higher risk usually means a chance for higher return, but also a bigger chance of losing money.
Name an example of a liability.
A loan or credit card debt.
Give an example of a real-life situation where financial literacy is useful.
Teacher Discretion
What is tax and why do we pay it?
Tax is money we pay to the government to fund public services like schools and hospitals.
What does it mean to "track your expenses"?
To keep a record of how much money you spend and what you spend it on.
Which is riskier: a savings account or shares in a company? Why?
Shares are riskier because their value can go up and down quickly.
What’s the difference between an asset and a liability?
Assets add value to your life, liabilities take money away.
What can happen if someone has poor financial literacy?
They might go into debt, overspend, or struggle with bills.
What is PAYG (Pay As You Go)?
It’s a system where tax is taken out of your wages each pay period.
Why is it important to compare needs vs wants?
To make better spending decisions and avoid wasting money.
What’s the difference between a defensive and a growth investment strategy?
Defensive is safer with lower returns (like bonds), growth aims for higher returns with higher risk (like shares).
Why should you be careful about taking on debt?
Because it can grow quickly and be hard to pay back.
Explain how financial literacy can help with achieving long-term goals.
It helps people budget, save, and plan so they can reach goals like buying a car or going to uni.
If you earn $20 per hour and work 30 hours and spend $50 buying a pair of safety boots to perform your duty, what is your assessable income?
$20*30-$50=$550
You earn $100 a week. You decide to spend 50% of your income on needs, 20% on wants, and save the rest. How much do you save each week?
Needs = $50 (50% of $100)
Wants = $20 (20% of $100)
Savings = $100 - $50 - $20 = $30
Explain how compound interest works and give one example.
You earn interest on both your original amount and the interest you've already earned. Example: $100 invested at 5% compound interest grows more each year.
How can you reduce your liabilities over time?
By paying off debt regularly and avoiding unnecessary loans.