Saving
An emergency fund is usually how many months of expenses?
3-6 months
What is compound interest?
Interest earned on both the original money you invested and the interest that money has already earned.
True or False: Higher risk can mean higher reward.
True
What is a 401(k)?
An employer-sponsored retirement savings plan
Term for spreading your investments across different assets to reduce risk?
Diversification
True or False: Savings are more risky than investments.
False - Investments are risking than savings options.
What do stocks represent?
Ownership in a company
Which is generally riskier: stocks or bonds?
stocks
What is a Roth IRA?
A retirement account where withdrawals are tax-free
What is the stock market index that tracks 500 large U.S. companies?
New York Stock Exchange (NYSE)
What does “pay yourself first” mean?
Put money into savings before spending
A collections of investments pooled together
mutual fund
What is the term for how much your investment grows or shrinks over time?
Rate of Return
A shortcut used to estimate how many years it will take an investment to double
Rule of 72
What is the term principal mean?
The original amount of money saved or invested
Provide 2 savings options
Savings account, high yield accounts, CDs, and money market accounts
What are bonds?
Loans to governments or companies that pay interest
Which is safer: a savings account or the stock market?
Savings Account
Profit made when an investment is sold for more than its purchase price
Capital Gains
What does "liquidity" mean in investing?
How easily you can turn an investment into cash
What is the main difference between saving and investing?
Saving is low risk with guaranteed returns; investing has higher risk and potential growth
What does diversification mean?
Spreading money across different investments to reduce risk
Money lost when an investments is sold
Capital loss
What factors make stock prices change?
social, physical, economic, suppy and demand
What is the formula for calculating simple interest?
Principal (original dollar amount) x Rate x Time