Basics
What is Financial Literacy?
The possession of skills, knowledge, and behaviors that allow an individual to make informed decisions regarding money
The Three Components of a Budget
Income, Expenses, and Surplus/Deficit
What is Interest?
The Cost of Borrowing Money
What is a Credit Card
A card that allows the cardholder to borrow money (up to the set limit) from the financial institution that issued the card. However much is borrowed is what needs to be paid back within a certain time frame, or else there there will be consequences.
The Four Types of Financial Aid
Grants, Scholarships, Federal Work-Study, and Loans
Why is financial literacy important? Give at least two reasons.
Helps you develop a set of healthy and sustainable financial habits
Helps you avoid financial stress
Helps empower your independence
Helps you achieve your dreams
Helps you secure a comfortable future
What should you do with a budget surplus?
Save or invest the money.
Simple: Interest is earned based on only the principal (beginning) amount
Compound: Interest is earned based on the principal amount + prior interest earned
What happens if you don't pay off your credit card balance?
Interest is applied to the owed amount.
Which financial aid forms are utilized by private colleges?
CSS Profile and FAFSA.
What is the first step to financial literacy, and why is it necessary?
The first step is to assess your financial situation. It's important since you have to work with real values in order to create a realistic budget.
What is the 50/30/20 Budget?
50% of Income: Needs
30% of Income: Wants
20% of Income: Savings/Debt
Percentage on a High-Yield Savings Account
4% to 5%
How do you avoid credit card debt?
Use it like a debit card. If your debit card would decline, or spending that amount of money would leave you in a financially uncomfortable position, don't spend that much money with your credit card.
You can also just not use the card.
What is the purpose of filling out the FAFSA.
You become eligible for federal loans and potentially eligible for a Pell Grant.
True or False: An emergency fund takes away all stress.
False
How do you avoid a budget deficit?
Analyze your spending to eliminate or reduce any egregiously unnecessary spending.
Certificate of Deposit
A type of savings account that holds a fixed amount of money for a certain period of time and results in a higher interest rate being paid to you by the bank
Why is it so difficult to pay off credit card debt?
The interest (which is often high) on the debt accrues daily and compounds, so it spirals out of control very quickly.
Subsidized Loans versus Unsubsidized Loans
Subsidized Loans: The interest accrued while the student is in college is paid by the government.
Unsubsidized Loans: The responsibility to pay the interest accrued while the student is in college is on the student
What is the purpose of an emergency fund?
You may lose your job, become ill, or not be able to work due to surgery. An emergency fund takes away some stress since you have some money to fall back on.
Why should you track and adjust your budget?
You may recognize that less or more of your money needs to be allocated to a specific category. Therefore, adjusting your budget helps to optimize your funds.
Treasury Bills
Money lent to the government that will be paid back on the agreed-upon date at a higher rate due to the government paying you interest.
How do you get out of deep credit card debt?
You settle on a payment plan based on total debt (that would have accrued at the end of payments) divided by the frequency of payments.
Last-Dollar Scholarship
A type of scholarship that covers any expenses that are not covered by grants and scholarships