Banking
What is a checking account primarily used for?
Everyday transactions like deposit’s, withdrawal, and bill payment.
What is a budget?
A plan for how to spend and save your money based on income and expenses.
What is a credit score used for?
To measure how trustworthy you are in repaying debt, used by lenders to decide loan approval and interest rates.
What is insurance?
A financial product that protects against loss or damage in exchange for regular payments.
What is a stock?
A share of ownership in a company.
What is the purpose of the FDIC and what does it insure up to?
The FDIC protects deposits in banks up to $250,000 per depositor, per insured bank.
What is the 50/30/20 rule in personal budgeting?
50% for needs, 30% for wants and 20% for savings and debt repayment.
Name two factors that impact your credit score.
Payment history and credit utilization.
What does a premium refer to in insurance?
The amount you pay to keep your insurance active.
What is the main difference between a stock and a bond?
A stock is ownership and a bond is a loan to a company that pays interest.
What’s the difference between a debit card and a credit card?
A debit card pulls money directly from your bank account. A credit card borrows money that you repay later.
What is opportunity cost and how does it relate to financial decisions?
The value of the next best alternative you give up when you make a choice.
What is the difference between secured and unsecured credit?
Secured credit is backed by collateral but unsecured credit isn’t.
What is the difference between a deductible and copay?
A deductible is an amount you pay out of pocket before insurance kicks in. A copay is a fixed amount paid for a service.
What is diversification and why is it important in investing?
Spreading investments across different assets to reduce risk.
What is an overdraft fee and how can you avoid it?
A fee charged when you spend more than what’s in your account. You can avoid it by opting out of overdraft coverage or tracking your balance.
What is the concept of mental accounting in behavioral economics?
Treating money differently depending on where it comes from or how it’s labeled.
What does APR stand for and why is it important when using credit?
Annual percentage rate, it show the yearly cost of borrowing including interest and fees.
Why is it important to have liability coverage in auto insurance?
It pays for damages or injuries you cause to others in an accident, protecting you from lawsuits or huge expense.
What is the S&P 500 and why is it a good indicator of market performance?
A stock index of 500 major U.S companies, it represents a broad snapshot of the market.
Explain the role of the Federal Reserve in the U.S banking system.
The Federal Reserve regulates banks, controls monetary policy, sets interest rates, and helps ensure economic stability.
Explain loss aversion and how it might affect someone’s spending or investing habits.
People feel losses more strongly than gains, leading them to avoid risk even when the potential reward is high.
Explain how credit utilization ratio affects your credit score.
It‘s the percentage of available credit you’re using, lower is better.
Explain how risk pooling works in the insurance industry and why its important.
Everyone pays into a pool, the money is used to cover losses of the few who need it. It spreads risk and keeps premiums manageable.
Explain compound interest and how it applies to long-term investing strategies.
Interest is earned on both the initial principal and the accumulated interest, over time it can significantly grow investments.