Budgeting Basics
What is a budget?
A plan for managing income and expenses.
Why is it important to save money?
To prepare for emergencies, future goals, and financial security.
What is credit?
The ability to borrow money with the agreement to pay it back later, often with Interest.
Name one way families use money in daily life.
Buying groceries, paying bills, or covering transportation costs.
What is financial literacy?
The ability to understand and use financial skills, such as budgeting, saving, and investing.
Name two reasons why having a budget is important.
Helps track spending and reach financial goals.
What isthe difference between a checking account and a savings account?
A checking account is for daily transactions, while a savings account is for storing money and earning interest.
Why is a good credit score important?
It affects loan approvals, interest rates, housing opportunities, and even job applications.
What might happen if someone does not manage their money properly?
They may accumulate debt, struggle to pay bills, or lack savings for emergencies.
Name one key financial concept everyone should know.
Budgeting, saving, investing, credit management, or debt management.
What are the 3 main components of a budget?
Income, expenses and savings.
Stocks and bonds
What is the main difference between a credit card and a debit card?
A credit card allows borrowing money up to a limit, while a debit card deducts money directly from a checking account.
Give an example of a short-term and a long-term financial goal.
Short-term: Saving for a new phone.
Long-term: Saving for college or a house.
What are the benefits of having an emergency fund?
Provides financial security in unexpected situations like job loss, medical emergencies, or car repairs.
Explain the 50/30/20 budgeting rule.
50% for needs, 30% for wants, 20% for savings and debt repayment.
Explain how compound interest helps grow savings.
Interest is earned on both the initial amount and any previously earned interest.
Name two ways to build good credit.
Paying bills on time, keeping credit utilization low, and avoiding excessive debt.
Why is financial literacy important?
It helps individuals make informed decisions, avoid financial pitfalls, and plan for a stable future.
How does financial literacy help people make better decisions?
It enables informed financial choices, reduces debt, and promotes long-term financial stability.
What is zero-based budgeting?
A budgeting method where every dollar is assigned a purpose, so income minus expenses equals zero.
What is a retirement account and why is it important?
A savings account for retirement (e.g., 401(k), IRA) that helps people prepare for the future.
What is one danger of having too much debt?
High-interest payments can lead to financial stress and make it harder to pay off what is owed.
How does money management impact future career opportunities?
Good money habits reduce financial stress and allow for better career choices and investment in future opportunities
Explain one real-world situation where financial literacy is necessary.
Buying a car, applying for a loan, renting an apartment, or planning for retirement.