Budgeting Basics
What is a budget?
A plan that outlines income and expenses to manage money effectively.
What is credit?
The ability to borrow money with the promise to repay it later.
What does it mean to invest money?
To allocate money into assets with the expectation of generating a profit.
What is financial literacy?
The ability to understand and effectively use financial skills.
What can happen if someone doesn’t understand how credit works?
They may accumulate unmanageable debt and damage their credit score.
Name one benefit of tracking your income and expenses.
Helps identify spending patterns and areas to save money.
Name one danger of using credit cards irresponsibly.
Accumulating high-interest debt that can be difficult to repay.
Why is compound interest called "the 8th wonder of the world"?
Because it allows investments to grow exponentially over time.
Why is financial literacy important for young adults?
It equips them to make informed financial decisions and avoid debt.
Name a common financial mistake people make due to lack of education.
Overspending or failing to save for emergencies.
What is the 50/30/20 budgeting rule?
Allocate 50% to needs, 30% to wants, and 20% to savings or debt repayment.
What is a credit score used for?
To assess a person's creditworthiness for loans and financial products.
Name one type of investment?
Stocks, bonds, mutual funds, or real estate.
How does financial education promote independence?
By enabling individuals to manage their finances without relying on others.
Why do many people struggle with budgeting?
Lack of knowledge on tracking expenses and setting financial goals.
How can budgeting help prevent financial stress?
By ensuring expenses don't exceed income, reducing the risk of debt.
How can learning about debt early help students avoid financial traps?
By understanding interest rates and repayment terms, preventing unmanageable debt.
How can starting to invest young benefit someone later in life?
More time for investments to grow, leading to greater wealth accumulation.
Name one real-life situation where financial literacy is crucial.
Managing student loans, budgeting for living expenses, or planning for retirement.
How can poor financial decisions impact mental health?
Financial stress can lead to anxiety, depression, and other mental health issues.
Why should students learn to create a personal budget before graduating?
To prepare for financial independence and responsible money management.
What are student loans, and why is it important to understand them?
Loans for education expenses; understanding them helps manage repayment and avoid default.
What’s the difference between saving and investing?
Saving is setting aside money with minimal risk; investing involves risk for potential higher returns.
How can teaching finance reduce generational poverty?
Educated individuals can build wealth and pass on financial knowledge to future generations.
What are long-term effects of financial illiteracy on society?
Increased poverty rates, economic instability, and reliance on social welfare programs.