Banking 101
What is a checking account used for?
Daily transactions like paying bills or shopping.
What is interest?
Money earned or paid as a percentage of a savings balance or loan.
What is credit?
The ability to borrow money now and pay it back later.
What is a budget?
A plan for managing income and expenses.
What is the term for money earned before deductions are taken out?
Gross Income
What is the main purpose of a savings account?
To set aside money and earn interest.
What is an emergency fund?
Money set aside to cover unexpected expenses.
What is the extra cost called that you pay for borrowing money?
Interest.
Give one example of a fixed expense.
Rent, car payment, or subscription fee.
What is the money you take home after taxes and deductions?
Net income
Name one benefit of direct deposit.
It’s convenient, fast, and secure.
Why is compound interest better than simple interest for savings?
Compound interest earns interest on both the principal and previously earned interest.
How does a high credit score benefit you?
It helps you qualify for loans with lower interest rates.
What’s the difference between needs and wants?
Needs are essential for living, like food and housing; wants are non-essential, like entertainment.
Name one type of tax deducted from a paycheck.
Federal tax, state tax, Social Security, or Medicare.
If you withdraw $50 from your account with $200, what’s your remaining balance?
$150.
If you save $100 a month for 12 months, how much will you have?
$1,200
What happens if you only pay the minimum payment on a credit card?
It takes longer to pay off the balance, and you pay more in interest.
If you spend $500 on bills and save $200, how much do you have left from $1,000?
$300.
If your gross income is $2,000 and your deductions total $500, what is your net income?
$1,500.
What is the term for the amount of money in your account?
Account balance.
What’s one reason to start saving early?
You have more time to grow your savings through interest.
If a loan has a 10% annual interest rate, what is the monthly interest rate?
0.833% (10% ÷ 12 months)
What percentage of your income should ideally go toward savings?
20% (based on the 50/30/20 rule).
What government program do Social Security taxes fund?
Retirement benefits for seniors and disability insurance.