Saving & Investing

can be traded throughout the day

Exchange traded funds...

months

Experts recommend that you accumulate enough to cover 3 to 6 __________________ of expenses in your emergency fund.

Diversifying across asset classes and within each asset class

A commonly used strategy to minimize investing risk is...

Any realized gains would be exempt from capital gains tax

Aleah is 19 and wants to get a head start on investing and opens a brokerage account. All of the following are benefits of doing so EXCEPT...

You can withdraw money at any time without paying a penalty

All of the following are advantages of saving for retirement in a 402(k), EXCEPT...

If the company does not issue new stock, current stockholders could lose their entire investment

All of the following are risks of investing in a single stock, EXCEPT...

your credit score

All of the following should be considered when creating your investing strategy EXCEPT...

Wait until his 30s to start investing

Ben is 24 and wants to start saving for retirement. What can he do to set himself up for success?

His purchasing power will DECREASE because the interest rate is lower than the historical rate of inflation

Daniel has saved $2,000 in a savings account that earns 0.5% interest annually. What will most likely happen to the purchasing power of his savings over time?

Active investing is typically done by a fund manager trying to beat the market while passive investing typically involves investing in a popular index like the S&P 500

How are active investing and passive investing different?

An online savings account is offered by a bank that customers can only access online rather than at a physical bank branch

How is an online savings account different from a traditional savings account?

Wait at least 12 months to sell the investment

If a person would like to avoid having their investment earnings taxed at the same rate as their marginal income tax, they should...

2%

In current markets, which of these represents a competitive but realistic interest rate on a savings account?

Which of the following is TRUE about investing?

It can help you grow your money through the power of compounding

30 months

Joelle wants to have an emergency fund tterm-19o cover 6 months of her expenses. Her monthly gross pay is $4,000 and her monthly expenses are $2,000. If she plans to save 10% of her gross pay each month, how long will it take her to build her emergency fund?

certificate of deposit

Juan saved $1,000 from his summer job cleaning pools. Which of these savings vehicles would work best for him if he doesn't need access to the money for a number of years AND wanted to earn the highest interest rate?

Needs, savings, wants

Needs, savings, wants Fill in the blanks with the correct responses. If you follow the 50-20-30 rule of budgeting, you'll be putting 50% needs wants of your monthly income toward _______________, 20% of your monthly income toward _____________, and 30% of your monthly income toward ______________.

A TDF is actively managed by a fund manager but comes with low fees

Sam is 22, just started his first full-time job, and is selecting his investments through his company's 401(k) plan. Why might a target date fund (TDF) be a good option for Sam?

Social Security is a government program that pools contributions from current workers to then provide retirement support benefits to those who are eligible

Sanjana is explaining what Social Security is to her younger brother. Which of the following descriptions should she use?

Save a certain percentage of each paycheck and deposit it directly in a savings account

Save a certain percentage of each paycheck and deposit it directly in a savings account Which of the following is an effective strategy for personal saving?

The original deposit ($1,000); The year one account balance ($1,010)

The original deposit ($1,000); The year one account balance ($1,010) Stanley deposits $1,000 into a savings account that pays 1% interest. At the end of the first year, he's earned $10 in interest and there is $1,010 in the account. If the account has simple interest, the 1% interest for year two would be based off ____________. If the account has compounding interest, the 1% interest for year two would 109800 be based off

This account pays you interest on money you have put away for later to help your money grow.

Three of these statements best describe a checking account. Which statement best describes a savings account?

Conduct research on the investments she's interested in

Tracie is new to investing and is going to use an app that offers trades with zero fees. After opening her account, Tracie should first...

Dividends and selling the stock at a higher price than they bought it

What are the two ways investors can earn more money from a stock?

An investment in which you loan money to a corporation or government and are paid back with interest and the principal that you originally lent to them.

What is a bond?

Buying an item without giving it much thought, maybe because it's on sale or you see it and simply love it

What is meant by the term "impulse shopping"?

Actively managed mutual funds typically have higher fees than index funds do

What is one difference between actively managed mutual funds and index funds?

Annually

When a bank says their savings account earns 1% interest, that typically means you will earn 1% interest over what period of time (Note: this is not referring to the compounding frequency or frequency of interest payment)?

A bond is considered to be a less diversified investment than a bond fund

Which of the following accurately describes a difference between an individual bond compared to a bond fund?

Robo-advisors eliminate all risk

Which of the following explains why risk is not always bad when it comes to investing?

How much an employee gets from a pension depends on how long they've worked for the employer and how much they earn

Which of the following is TRUE about pension plans?

The stock market fluctuates in the short term and is difficult to predict. It has an average annual return of 6-7%, adjusted for inflation.

Which of the following is TRUE, based on the historic returns of the S&P 500?

Dollar-cost averaging is riskier than lump sum investing

Which of the following is a characteristic of dollar-cost averaging?

lower fees

Which of the following is an advantage of using a robo-advisor compared to hiring most financial advisors?

Historically, savings accounts earn higher returns than investments in the stock market

Which of the following statements about banks is FALSE?

The majority of Americans do NOT have an adequate emergency fund or sufficient amounts of money saved for retirement.

Which of the following statements is TRUE?

Checking accounts and money market accounts

Which of these account types allow you to write checks from the account?

Buying new sneakers the day they come out, because you know others in your class will have them, too

Which of these is an example of "FOMO?"

10-year CD, 5-year CD, Online savings account, Savings account at traditional bank

Which of these lists ranks the savings options from- highest expected interest rate to lowest expected interest rate?

It is extremely difficult to open a savings account, as you typically need at least $10,000 for your initial deposit

Which of these statements about saving is INCORRECT?

As soon as you graduate snd have you first full-time job

Which represents the best time to start saving for your retirement?

Saving goes into an FDIC insured bank while investing typically goes into stock or bond markets

Which statement best describes the difference between saving and investing?

Someone who has a high income so they don't want have to pay tax on their current contributions

Who would benefit the MOST from investing in a Roth IRA rather than another type of retirement account?

The stock market historically has returns higher than the rate of inflation, so your money can actually grow

Why is investing a better option than saving when it comes to planning for retirement?

Bank B

You are 18 years old, opening your first savings account, and are considering three options: BANK A is not FDIC insured, has an interest rate of 5%, and a minimum deposit of $25. BANK B is FDIC insured, has an interest rate of 0.01%, and a minimum deposit of $50. BANK C is FDIC insured, has an interest rate of 0.02%, and a minimum deposit of $10,000. All three have fees competitive with other banks. Which bank is the best option?

A new cell phone, college tuition, a house down payment

You are developing a savings plan and using short-, medium-, and long-term goals to motivate you. Which represents possible goals from short-term to long-term? Save for...

The price of your bond will increase

You buy a bond with a fixed coupon rate of 5%. A year later, similar bonds that are issued have a coupon rate of 3%. Which of the following is TRUE?

Aunt Tina and her family don't have any money saved, and their paychecks are just barely covering monthly expenses, so they use every dollar every month

You overhear your Aunt Tina tell your mom that she, her husband, and their kids are "living paycheck to paycheck." What does Aunt Tina mean by that?

20%

You want to take earnings from your part-time job to pay for a new laptop. Your monthly take-home pay is $500 and the laptop cost $1,200. What percentage of your pay do you need to save in order to buy the laptop in 12 months?

Add at least 10-20% of her paycheck to her savings account and the remaining 80-90% to her checking account

Your sister Reagan has her paycheck direct deposited into her checking and savings accounts each pay period. She asks you how she should split her paycheck between the two accounts. What is the best advice you could offer her to encourage her savings habit?