Financial Literacy Final Review

List 3 key differences between federal and private student loans.

1. Federal loans require you to pay the government back usually with interest and over a period of time 2. Private student loans require you to pay them back with no interest but sooner 3. Federal loans offer need-based and private loans do not

Your Federal student loans will default to the Standard Plan, which has a term of _______.

10 years

I forgot to pay my credit card bill one month. For how long will that payment information show up on my credit report?

7 years

You have to fill out what form when you are employed?

A W-4

What are some examples of fees that can be seen on a bank statement?

A maintenance fee, overdraft fee, ATM fees

What do you receive after you file the FAFSA?

A student aid report.

List some ways to get money OUT of your checking account.

ATM, writing a check, cashback with debit purchase, transfer between accounts, debit purchase, peer to peer payments- venmo and paypal, electronic fund transfers, go to the bank and withdraw money

Some benefits we receive as a result of government spending

Air quality, National Parks maintenance, public school education

Your teacher tells you about the importance of checking your credit report. Which government-run website allows you to download your credit report for free on an annual basis?

Annualcreditreport.com

When is the deadline to file your tax return?

April 15th

Which strategy will help you save the most money?

As soon as you receive your paycheck, put a fixed amount or percentage of your money directly into your savings.

What describes what a "dependent" is for tax purposes?

Children under the age of 19, Anyone permanently disabled, Full-time students under the age of 24

Who tracks all of your credit information?

Companies named Equifax, Experian and TransUnion

What are Pre-Tax Deductions and Contributions?

Contributions taken out of your paycheck BEFORE taxes are calculated on your income, such as a 401K

What is the difference between a copay and coinsurance?

Copay is typically a flat fee, coinsurance is a percentage of the health care service

Renter's Insurance

Covers your personal property

What factors determine the interest rate that will be charged for money borrowed when using credit?

Credit score, what it is for, credit history, employment status and history

Three largest categories of federal government spending?

Defense, social security, and Medicare/Medicaid

What does it mean to "pay yourself first"?

Deposit money into your savings account before spending on anything else.

List some ways to get money INTO your checking account.

Direct deposit, deposit at the bank or deposit through phone- mobile deposit, ATM, Peer to peer payments, transfer between accounts

Why is it best to file the FAFSA as early as possible?

Every college or university has its own FAFSA deadline. Financial aid is awarded on a first come, first served basis.

Deductions taken from your pay stub

Federal and state taxes, social security, medicare, insurance, etc.

Discretionary spending

Federal spending that happens at the discretion of the president and congress that happens every year

What is one advantage of Federal student loans?

Federal student loans have lower credit standards (are easier to get) than private loans, which may require a co-signer.

Ways you can file your taxes?

Filling out paper forms and mailing them, Digital tax preparation software, Having a professional file your taxes for you

Why does the estimated starting salary after college matter?

Flexibility and security.

Who qualifies for a Direct Plus Loan?

Graduate students, Parents of a college student

Which of these options depicts the types of financial aid from MOST attractive to LEAST attractive?

Grants/Scholarships, Work-study, Federal loans, Private loans

What is the difference between gross and net pay?

Gross pay is before taxes and deductions are subtracted, and net-pay is your take-home pay.

In which of the following plans will your insurance NOT pay if you go out-of-network?

HMO

What are two examples of employer contributions?

Health Insurance and 401k

Term

How long you have in order to pay the loan back

What is a cosigner and what considerations should they make before co-signing a loan?

If the person is responsible and if you trust them enough, you want them to have good credit so you can have a better rate

When are you required to file a tax return?

If you are a dependent and under the age of 65, and single, and earned income was more than $12,550 and unearned income was more than $1,100

Collision insurance

If you caused the accident but have damages to your own vehicle

Comprehensive insurance

If you hit a deer or a telephone pole, anything that isn't insured

What is an advantage of using a credit card?

If you pay off your balances every month in full, it's like getting a short-term interest-free loan.

In what month does the FAFSA become available and when should you submit it?

In October and you should submit it asap.

What is the purpose of a bank statement?

It help you keep track of your transactions and spending

What is a W-4?

It is given on the first say on the job, an it is to let employers know how much money to withhold from an employee's paycheck for taxes. You include your name and address, marital status, and social security number.

What is a W-2?

It is received in January. You will have one for each one of your employers in the previous year. It is information on how much you earned and how much you paid in taxes for the previous year.

What is the net price of a college?

It is the sticker price minus any grants or scholarships you earn.

What do you think it means that your money is FDIC/NCUA insured: up to $250,000?

It means that if you put money in an account and the bank burns down or someone robs them, they have to give you back your money

By when must your employer send out your W-2?

January 31st

List three key actions you can take to be a "responsible borrower"

Know the loan, only take out what you need, know location of college

Examples of discretionary spending

Military, education

How often do customers typically receive a bank statement for their checking account?

Monthly

Revolving loan

More like a credit card, rolls into the next month, the balance depends on the usage rather than a set amount of money

Unsecured loan

No collateral but higher interest rate

Do you only file the FAFSA once?

No, you need to file the FAFSA every year you are in school.

The largest source of fees for banks when it comes to checking accounts is...

Overdraft fees

What are the two most important factors in calculating your credit score?

Payment history and types of accounts

Interest

Percentage you give the bank, annual rate

FDIC Insurance is...

Protection for bank customers' deposits up to $250,000, guaranteeing their money is still available if the bank goes out of business

What is a student aid report?

Provides basic information about your financial aid eligibility. You receive this after you fill out the FAFSA.

What are the three primary sources of health insurance?

Purchased from the Health Insurance Marketplace, Employer sponsored, medicaid

What is an I-9?

Received when you start a job. You use it to prove that you are eligible to work inthe U.S., and you must provide forms of identification when submitting it.

What does FICA consist of?

Social Security and Medicare

Examples of mandatory spending

Social security, medicare and health

What is diversification?

Spreading out investments to reduce risk

What is the difference between stocks and bonds?

Stocks represent portions of ownership in a business, while bonds are loans to a company or government.

What is a 1040?

Tax return form that you use to file your tax return every year.

Suppose you need to borrow more than $5,500 during your Freshman year of college. Where do you think you can obtain that loan?

The PLUS loan, apply for grants and scholarships, private loan

Principal

The amount of money borrowed

What is an outstanding balance?

The amount you still owe after you have made your most recent payment.

Select TWO statements that correctly describe a Direct Subsidized Loan and a Direct Unsubsidized Loan.

The borrower is responsible for paying all of the interest on a Direct Unsubsidized Loan. The government pays the interest on a Direct Subsidized Loan while the student is in school and during the grace period.

Which best describes how a credit card works?

The credit card company extends you a line of credit. You purchase "stuff" and then have the choice to pay the balance in full or a minimum payment each month.

What is a direct deposit?

The electronic transfer of a payment directly from the account of the payer to the recipient's account.

Why is it more difficult to get out of debt when only paying the minimum payment?

The majority of your minimum payment is going toward interest and finance charges and only a small amount toward the principal.

Loan Servicer

The organization that collects payments on a federal student loan, responds to customer service inquiries, and performs other administrative tasks associated with maintaining a loan on behalf of a loan holder.

Why is it important for insurance companies to have a large pool of people paying premiums?

The premium payments of all the insured clients will cover the costs for the emergencies of the few who need it.

Which of the following is a TRUE statement about check cashing stores.

They make their money by charging fees for transactions that can be done for free by customers with a traditional checking account.

Secured loan

They use things you have as collateral, and so the interest rate is lower

What two factors is your investment needs based on?

Time Horizon (how much time until retirement) & Risk Tolerance (how risky of an investor you are)

The purpose of insurance is to...

Transfer risk

The fund reduces your risk (investing in less stock and more conservative investments) the closer you get to retirement. True or False?

True

The further you are from retirement, the more risky you can be. True or False.

True

True or False: Student loans are disbursed immediately to you, and you use the funds to pay things like tuition, fees, room and board, etc.

True

You deposit a birthday check by using the bank app that you have on your smartphone. What is the standard amount of time that you will need to wait in order to get access to these funds?

Usually 1-7 business days later

What is a danger of taking a variable rate loan?

Variable-rate loans increase or decrease based on the current interest rate environment. Your interest charges and monthly payments could go higher or lower depending on the change in interest rates.

What is expected family contribution? (EFC)

What is determined that your family can pay out of pocket. You can find it on the student aid report.

What affects how much you pay in taxes?

What state you live in, your salary, and the cost of living.

Things you need to know when filing a tax return.

What type of income you earned this year, how much income you earned, and are you claimed as a dependent on anyone else's tax return

Explain how the monthly payment on a loan is affected by each of the following factors: a higher interest rate, a larger down payment, a longer term, a higher loan amount.

When there is a higher interest rate the monthly payment will be higher due to more money going towards the interest. With a larger down payment, there will be lower monthly payments and also less total interest paid. A longer term will mean lower monthly payments which means more total interest paid. A higher loan amount will cause the monthly payments to be higher in general, also depending on the term length.

What is the advantage of paying your credit card balance in full each month?

You avoid paying any interest and fees.

What is one benefit of using a tax filing software?

You can avoid the costs of having to pay a professional, though you may have to pay for the software or e-filing online.

A key difference between a debit and credit card is...

You can build a credit score when using a credit card responsibly, not with a debit card and You can pay interest when using a credit card, not with a debit card

Why do you think the amount you can borrow as a freshman is less than the amount you can borrow as a sophomore, and then as a junior and beyond?

You make more of a commitment, you accrue more interest

When signing up for a new checking account, you answer "Yes" to receive overdraft protection. On this day, you have $10 in our account and go out and use your debit card to buy lunch for $12, a movie ticket for $12 and dinner for $15. What is likely to be the outcome resulting from these transactions?

You will likely be charged an overdraft fee for one or more of the transactions and also will need to repay the bank for the amount overdrawn ($29).

Reading through a credit card disclosure (aka the Schumer Box), you see the APR for a specific card is set at 9.99%-23.99%. Which statement is true?

Your APR will be within that range, depending on the strength of your credit history.

List two examples of items that could be used as collateral for a secured loan.

Your house and car

What is the benefit of having a fixed interest rate loan?

Your interest rate stays the same, therefore, the amount of interest you pay stays the same.

How much student loan debt should you have?

Your total student loan debt should not exceed your expected first-year salary after graduating college.

Installment

a set payment

Promissory Note

a written and signed promise to pay a sum of money at a specified time

When loans are amortized, monthly payments are _________, while the interest portion of the monthly payment ________ and the principal portion of the monthly payment _________ over time.

constant, decreases, increases

Direct deposit typically refers to your ___________ sending your _________ electronically to your bank account.

employer, paycheck