CORE VOCAB
Assets - Liabilities
What is net worth?
How easily you can access your money
What is liquidity?
Best account for everyday/TRANSACTIONAL spending
What is a checking account?
Percentage of Americans who cannot afford a $1,000 emergency
A loan to a company or government
What is a bond?
Money set aside for future needs with low risk
What is saving?
The amount of money you can earn from an investment
What is return?
Best account for emergency savings
What is a savings account?
One reason people struggle financially: wages not keeping up with this
What is inflation?
A fund that trades like a stock with lower fees
What is an ETF?
Putting money aside to grow it over time
What is investing?
The chance of losing money
What is risk?
Best savings vehicle for highest guaranteed return
What is a CD?
A student says, “I don’t need an emergency fund because I can just use a credit card.” Evaluate this thinking.
What is flawed because it leads to debt, interest, and financial stress instead of financial security?
A professionally managed pool of investments associated with higher fees
What is a mutual fund?
Taking substantial risk for potentially large gains
What is speculating?
A CD compared to checking has lower liquidity but higher ________.
A CD compared to checking has lower liquidity but higher RETURN.
A student has $6,000 and wants better interest but still some access
What is a money market account?
A student has $1,000 and chooses to invest it all instead of keeping any emergency savings. Evaluate this decision.
What is risky because emergencies may require quick access to money, and investing reduces liquidity and could lead to losses?
Spreading investments to reduce risk
What is diversification?
Explain the difference between saving and investing in terms of risk and return
Saving has low risk and low return, while investing has higher risk and higher potential return.
A student needs money in 2 months but chooses a CD — explain the mistake.
mismatching liquidity/time horizon because the money is locked
A student splits money between savings and a CD — explain why this is a strong strategy
What is balancing liquidity and return / diversification of goals?
Explain why “pay yourself first” reduces financial stress
What is ensuring savings before spending, building security and emergency funds?
A student invests all their money in one stock. Evaluate this decision and suggest a better strategy
What is high risk due to lack of diversification; a better strategy is spreading investments across multiple assets?