Finance 101
What does financial literacy mean?
Understanding how to earn, save, borrow, and manage money.
Define gross pay
Income before deductions
List two required deductions.
Federal Taxes
Medicare Taxes
Social Security Taxes
State Taxes
Define credit
The ability to borrow money and repay it later
Credi card balance = $600, limit = $1200. What is the utilization?
50%
Name one consumer protection law.
Fair Credit Reporting Act
Truth in Lending Act
Fair Debt Collection Practices Act
Define net pay
Take-home pay after deductions
List two optional deductions
Health Insurance
Retirement
Union Dues
FSA
What is the difference between secured credit and unsecured credit?
Secured = backed by collateral (car, deposit, mortgage)
Unsecured = based on credit history (credit card)
Simple interest on $2,000 at 10%APR for 3 years.
(just the interest, not the total owed)
$600
What are the 5 steps of decision-making models?
1) Identify the problem
2) Gather Info
3) Evaluate Options
4) Make a Decision
5) Review Decision
What is an optional deduction? Give an example of one.
A deduction from your pay that is not required. Examples: Retirement, Health Insurance, Union Dues
Why do pre-tax deductions reduce taxable income?
Taxes are calculated after deductions are made, lowering what you owe.
What is the difference between revolving credit and installment credit?
Installment = fixed payments until paid off (car loan)
Debt-to-income ratio: $650 monthly debt, $3,200 monthly income
20%
Why does financial responsibility matter for teenagers?
Early choices affect long-term opportunities.
If Net Pay is $2,400 and rent is $720, what % of income is going to rent?
30%
If gross pay is $3,000 and deductions are 25%, what is net pay?
$2,250
What is hidden credit? Give 2 examples.
Financing disguised as regular bills.
Examples: Buy Now, Pay Later, rent-t0-own, payday loans.
Total cost of the loan: Loan amount $5,000 at 8%APR for 4 years.
$6,600
Give one example of a decision in high school that could impact your future 10 years from now.
Taking out student loans
Starting savings
Using credit responsibly
Investing
Why is a job with benefits sometimes better than a higher-paying job without benefits?
Benefits like insurance, retirement, and PTO can add more value than extra money
Which pay schedule will give you 26 paychecks a year?
Bi-weekly
FAFSA is required for what?
To qualify for federal aid for college, like grants, scholarships, work-study, and student loans
$10,000 loan at 10%APR
Paying $400 a month, how many years will it take to repay this loan?
2 years, 4 months