Saving Basics
What is the main objective of saving?
→ Maintaining liquidity and meeting short-term financial needs
What is the main goal of investing?
→ To beat inflation and grow wealth
Which comes first: saving or investing?
→ Saving
Goals achieved in less than a year are called what?
→ Short-term goals
What is interest?
→ A reward for lending money
Which accounts typically have lower interest rates?
Checking accounts usually have lower interest rates than savings.
What federal program protects deposits in savings accounts?
→ FDIC (Federal Deposit Insurance Corporation)
Buying gold and holding it for years is an example of what?
→ Investment
Why does money lose value if only saved and not invested?
→ Inflation
Name one short-term savings goal.
→ Vacation, emergency fund, furniture
Name the two main types of interest.
→ Simple and compound
what are the two types of interest? Extra points if you can name which one is better
Compound and Simple. Compound is better
Name one option for saving money with a fixed maturity date and fixed interest.
→ Certificate of Deposit (CD)
What two factors should investors always consider?
→ Risk and volatility
True or False: Without savings, you cannot invest; without investing, savings lose value.
→ True
Buying a car or paying off student loans fits into what type of goal?
→ Medium-term goal
Which type of interest grows faster?
→ Compound interest
What does P stand for in the two interest formulas?
Principal or the starting amount.
True or False: Savings accounts usually allow you to write checks.
→ False
Investments usually fulfill which types of goals?
→ Intermediate- and long-term goals
Both saving and investing help reduce what?
→ Financial worries/stress
Retirement savings and college funds are examples of what kind of goals?
→ Long-term goals
Which account earns a higher rate than standard savings but often requires a larger deposit?
→ High-yield bank account
What measurement of time is used when calculating interest?
Years
What savings plan authorized by Section 529 helps families pay for college?
→ 529 Plan (Qualified Tuition Plan)
Name one investment vehicle for retirement.
→ 401(k), Roth IRA, bonds, investment properties
What financial principle makes your money “grow money”?
→ Compounding
: What employer-sponsored plan helps employees save for retirement?
→ 401(k)
Which savings vehicle is NOT FDIC insured but invests in low-risk securities?
→ Money Market Fund
What is the formula for compound interest (No notes)
A=P(1+r/n)^nt