Money
Give me one example of earned income and one example of unearned income
Earned: wages, salary, tips, commissions and bonuses
Unearned: interest from a savings account, bond interest, gifts, and dividends from stock
What does it mean to "pay yourself first"?
Automatically route money from paycheck to savings (before paying bills)
What happens if you only make the minimum payment on your credit card?
It will take longer to pay off your credit card; you may never pay off the balance!
You will pay more money over time in interest
How does insurance work? Hint: who are you sharing the risk with?
Insurance is a form of risk management in which the insured transfers the cost of potential loss to another entity in exchange for monetary compensation- concept of sharing the risk with other policyholders
What is the biggest stock market in the world?
NYSE
What is an example of some form of money that is LIQUID?
Cash, checking accounts, savings accounts, money market mutual funds, most stocks, and government bonds
Identify two differences between savings accounts, money market accounts, and CDs
Different interest rates, different time lengths, different minimum requirements, different liquidity
What law requires that the following information must be disclosed to a borrower when taking out a loan: Annual Percentage Rate (APR), Terms of the loan, Total Cost to borrower
Truth in Lending Act
Define a premium and a deductible
Premium- the amount you are charged for the insurance policy
Deductible- the amount you have to pay out-of-pocket for expenses before the insurance company will cover the remaining costs
What is the difference between a bear and a bull market?
Bear- prolonged period of stock prices trending down
Bull- prolonged period of stock prices trending up
Give an example of someone who hurts the most from inflation and someone who hurts the least
Most: People on fixed incomes, Low income individuals, Banks and other lenders are when they are locked into low interest rates on loans.
Least: High income individuals, Individuals and businesses who owe large amounts of money
Give an example of a BAD lender (Institutions that Charge the Highest Rates for Loans)
What are three ways you can increase your credit score?
Pay bills in full and on time, keep balances low, do not apply for too many credit cards, get a co-signer, monitor your credit reports
What are three things that raise your car insurance?
Gender (males), age (young and old), tickets, accidents, DUIs, purpose of which you drive, type of car, miles on the car, community you live in
Define a stock and give an example of one type of stock.
Define a bond and give an example of one type of bond.
Stock- a share of ownership in a company- blue chip stocks, growth stocks, speculative stocks, penny stocks
Bond- a certificate issued by a government or company promising to pay back borrowed money at a fixed rate of interest on a specified date- government bonds, municipal bonds, corporate bonds
Name one thing that the the United States Department of the Treasury is responsible for.
Managing federal finances, Issuing all treasury bonds, notes and bills, Printing of bills, postage, Federal Reserve notes, and minting of coins, Collection of taxes, duties, and monies paid to and due to the US, Enforcement of federal finance and tax laws (through the IRS), Management of all government accounts and debt issues, Paying all bills of the US government, Overseeing U.S. banks, Identifying and targeting the financial support networks of national security threats
What is a bank reconciliation?
The process of seeing whether an account holder’s records (check register) agree with a bank’s records for an account.
What is a cash advance and what is the issue with it?
Withdrawal of cash from your credit card account (ATM)
You’re borrowing against your credit card to put cash in your pocket, High interest rate, Generally have a transaction fee and a higher interest rate
What is the difference between term life and whole life insurance? Which one is more expensive and why?
Term life insurance- remains in effect for a specified period of time- you pay for a specific amount of time (the term) and if something happens to you during that time your family gets the money (the death benefit)
Permanent (whole) life insurance- remains in effect for the insured’s lifetime and builds a cash value and your family gets the money when you pass away
Whole life more expensive- builds a cash value
What are the two ways people make money off stocks?
Dividends, Capital Gain (selling for a hire price)
Define disposable income
The amount of an individual's income that is left for spending, investing or saving after taxes and personal necessities (such as food, shelter, and clothing) have been paid.
What is the difference between a subsidized and an unsubsidized student loan?
Subsidized – government pays interest while you’re still in school
Unsubsidized – interest accumulates while you are in school and you must pay it
What is the difference between a secured and an unsecured loan and give me an example of each?
Secured loan - has collateral tied to it in case of default (home mortgage, car financing)
Unsecured loan - no collateral (credit cards)
What are the three types of health insurance policies?
Which one do you have to go through your primary care provider?
Which policy is the most flexible?
Which one is the most expensive?
HMO, PPO, POS
HMO
PPO
POS
What is a mutual fund? What is one advantage of a mutual fund?
An investment vehicle that is made up of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and similar assets.
Main advantages: operated by professional money managers, who invest the fund's capital and attempt to produce capital gains and income for the fund's investors, diversified by investing in a variety of stocks and bonds, it is an easy way for small investors to diversify their investment.