Rule of 72 + Budgeting
What does the Rule of 72 estimate in personal finance?
Answer: The number of years it takes for an investment to double at a fixed annual interest rate.
What is the basic principle behind investing money?
Answer: Putting money into assets with the goal of generating future profit or income.
What is the main function of taxation in a country’s economy?
Answer: To generate revenue for public services and infrastructure.
What is the primary benefit of having insurance?
Answer: It protects individuals from large unexpected financial losses.
Whose face is featured on the U.S. $100 bill?
Answer: Benjamin Franklin
Using the Rule of 72, how long will it take an investment to double if the interest rate is 6%?
Answer: 12 years (72 ÷ 6 = 12).
What is market risk, and how does it impact investments?
Answer: The possibility of losing money due to changes in the overall market, such as economic downturns.
What type of tax is taken directly from your paycheck?
Answer: Income tax.
True or False: Car insurance policy can only cover people on you policy.
Answer: False- can cover people not on your policy driving in your car
When was the phrase “In God We Trust” added on U.S. currency?
(give the rough era/events happening in that time)
Answer: Civil War era
What is the primary purpose of creating and maintaining a budget?
Answer: To manage income and expenses, avoid debt, and plan for financial goals.
How does diversification reduce investment risk?
Answer: It spreads money across different assets or sectors, lowering the impact of a single loss.
How does inflation affect the purchasing power of money?
Answer: It decreases the amount of goods and services that money can buy over time.
What does it mean when someone says insurance is a “risk management tool”?
Answer: It helps transfer financial risk from an individual to an insurance company.
Why is U.S. currency considered "fiat money"?
Answer: Because it has value by government decree and isn’t backed by a physical commodity like gold- just paper
If your monthly income is $2,000 and fixed expenses are $1,600, how should you allocate the remaining $400?
Answer: Save a portion, spend on needs/wants, and potentially invest or build an emergency fund.
Why might someone choose a high-risk investment over a low-risk one?
Answer: High-risk investments often have the potential for higher returns.
What is the difference between nominal income and real income?
Answer: Real income is adjusted for inflation; nominal income is not.
What is the role of a deductible in an insurance policy?
Answer: It’s the amount the policyholder must pay before the insurance company pays their share.
Which federal agency is responsible for printing U.S. paper money?
Answer: The Bureau of Engraving and Printing.
Why is it important to revisit and adjust your budget regularly?
Answer: Because income, expenses, and financial goals can change over time.
What network is cryptocurrency traded over?
Answer: The Blockchain
How can inflation impact long-term savings if left in a basic savings account?
Answer: The real value of savings can decline if the interest rate doesn’t keep up with inflation.
Why might a young adult consider getting renter’s insurance?
Answer: To protect personal belongings from theft, fire, or other damage in a rented space.
What’s the origin of the term “buck” for a dollar?
Answer: It came from frontier trade, where deerskins (bucks) were used as a medium of exchange.