Saving Basics
What percentage of Americans have less than $1,000 saved?
45%
Which earns more interest over time? simple interest or compound?
Compound
What is the goal of an emergency fund?
To have cash for unexpected expenses.
What is the first step in developing a budget?
Know your income sources and amounts
How do interest rates affect savings accounts?
Higher the rate the more the money you earn.
What should you do after establishing a $500 emergency fund?
Keep it for and emergency.
What are the main reasons for saving money?
Emergency fund, large purchases, and wealth building.
Where is the best place to store your emergency fund?
In a savings or money market account.
What are the benefits of starting to save early?
What is the time value of money?
Money now is worth more than money in the future.
What is the first step when making a large purchase?
Know how much you need and how long you need to save for it.
What is accrued interest?
Interest charged on a debt/investment but has not yet collected.
What determines how fast your money will grow?
The interest rate.
What is inflation?
Prices going up over time.
What does "compound interest" mean?
Interest calculated on the initial principal and also on the accumulated interest from previous periods.
When should you start investing money?
After College, Debt free, and once savings is established.
Why do stores rarely advertise full prices of big purchases?
To make it seem more affordable.
What is the relationship between inflation and the value of money?
Inflations reduces the purchasing power of money
What is a stock?
Partial Ownership of a company.
When we are computing calculating compound interest, what does the term "principal" represent?
Your initial investment or loan amount.
Why do savings accounts earn interest?
The banks loan out our money and pay us interest.
What is the average based on an investment's past performance?
Compound Growth
Why should savers expect higher nominal interest rates during high inflation?
To protect the purchasing power of their savings.
Grandma gives you $500 dollars for your birthday. You decided to invest that money. Earning a interest rate of 10 percent compounded annually. How much money would you have at the end of 5 years?
Daily Double
805.26
What is the difference between a savings account and a money market account?
Daily Double
Money market accounts often have higher interest rates based on the stock market.