Personal Finance Chap. 2

Interest paid on interest previously earned

Compound interest

The persistent increase in the cost of goods and services or the persistent decline in the purchasing power of money

Inflation

The first foundation is ___ in an emergency fund. You should do this as quickly as possible.

$500

Instead of borrowing money for large purchases, you should set money aside in a ___ over time.

A. Sinking fund

Which of the following is not one of the three basic reasons for saving money?

B. Have money available to lend to friends

Make sure this money is kept in the __ and that you ONLY use it for emergencies. You can't keep the money handy, because it will get spent.

Bank

Looking back at the Ben and Arthur story, how did Ben come out ahead even though he invested less money than Arthur?

Ben started early and Arthur started later and could never catch up. Ben was younger that Arthur when he started.

At your age, a fully funded emergency fund should be:

D. $500

If you don't have money saved to pay for these things, then __ will start looking like an easy answer

Debt

Money

Economy

_____ are going to happen. Count on it. The first foundation, a beginner emergency fund, is $500.

Emergencies

A savings account that is set aside to be used only for emergency expenses.

Emergency fund

The 3 basic reasons for saving money are? 1. ____ fund 2. __________ 3. ____ building

Emergency, purchases, wealth

An emergency fund allows you to have money available for any surprise ____.

Expenses

When it comes to saving money, the amount you save is determined by how much you have left at the end of the month once all of your spending is done.

False

When you're older and out of school, you'll need to __ your emergency fund into a dull three to ___ months worth of expenses.

Grow, six

Why do you need an emergency fund at your age ?

Incase for small emergencies ️like has and flat tires

What two things do you consider when evaluating the time value of money?

Interest and inflation

An account that generates interest income on the available balance in the account

Interest bearing account

A rate which is either charged (on debt) or paid (on investment account) for the use of money

Interest rate

Debt ___ solves problems. At best, it just delays one problem while creating another one!

Never

When you're in high school, you won't have the same expenses as your ___ (like needing to put a new roof on the house). For you, a surprise expense might be fixing a flat tire or replacing a broken cell phone

Parents

The value of money goes down

Recession

What is the first foundation? Explain how and why the dollar amount will change as you get older.

Save a $500 emergency fund. This will change over time because the more you make the more you can save and put back and the more likely you will be to need it

Keep your emergency fund in a _____ savings account away from your spending money.

Separate

Saving money over time for a large purchase

Sinking fund

Save a $500 emergency fund

The 1st foundation

Get out of debt

The 2nd foundation

The 5 steps to financial success

The 5 foundations

Build wealth and give

The fifth foundation

Pay cash for college

The fourth foundation

Pay cash for your car

The third foundation

Your income level greatly affects your savings habits.

True