Banking
What is the purpose of a checking account?
To store money for everyday spending and allow easy access using checks, debit cards, or electronic transfers.
What does it mean to “live within your means”?
Spending less or equal to what you earn.
What is a credit score?
A number that represents your creditworthiness based on your credit history.
What is the purpose of insurance?
To protect you financially from unexpected events or losses.
What is a stock?
A share of ownership in a company.
What’s the difference between a credit union and a bank?
A credit union is member-owned and often offers better interest rates and lower fees than a traditional bank.
What’s the difference between needs and wants?
Needs are essentials for survival (food, housing), while wants are things you’d like but don’t need.
What’s the typical range of a good credit score?
670–739
What is a premium in insurance terms?
The amount you pay (monthly or annually) for insurance coverage.
What does “diversifying your investments” mean?
Spreading your money across different investments to reduce risk.
What is overdraft protection?
A service that covers transactions when you spend more than you have in your account, often with a fee.
What is an emergency fund, and how much should you ideally have in it?
Savings set aside for unexpected expenses; usually 3–6 months of living expenses.
Name one factor that negatively affects your credit score.
Late or missed payments.
What is a deductible?
The amount you pay out-of-pocket before your insurance covers the rest.
What’s the main difference between stocks and bonds?
Stocks represent ownership; bonds are loans to a company or government.
Why is it important to regularly review your bank statements?
To check for errors, unauthorized transactions, and manage your spending habits.
What is the “sunk cost fallacy”?
When someone keeps spending money on something just because they've already invested a lot, even if it’s not worth it.
What is the difference between a secured and unsecured credit card?
Secured cards require a cash deposit as collateral; unsecured cards do not.
What type of insurance covers damage you cause to others in a car accident?
Liability insurance.
What does “risk vs. reward” mean in investing?
Higher potential returns usually come with higher risk, while safer investments have lower potential returns.
What are the risks and benefits of using mobile banking apps?
Benefits: Convenience, instant access, budgeting tools. Risks: Security threats like hacking or phishing if not careful.
How does “mental accounting” affect financial decisions?
People treat money differently depending on where it comes from or is stored, which can lead to irrational spending choices.
Explain how credit utilization ratio impacts your credit score.
It’s the amount of credit you’re using compared to your total limit. A high ratio lowers your score; below 30% is best.
What is the difference between term life insurance and whole life insurance?
Term covers you for a set time and is cheaper; whole life covers you for your entire life and builds cash value.
What is compound interest, and why is it powerful for investors?
Interest earned on both the original amount and the interest already earned, helps money grow faster over time.