Personal Finance: Chapter 2

Why is having a fully funded emergency fund so important when it comes to your financial well-being? A) As long as you have a good-paying job, you really don't need an emergency fund. B) The purpose of an emergency fund is to set money aside for unexpected financial emergencies and to provide a sense of financial security. C) The purpose of an emergency fund is to have money set aside for large purchases, like vacations. D) None of the above

B

________ is a fixed income instrument that represents a loan made by an investor to a borrower (typically corporate or governmental). CD Mutual Fund Bond Stock

Bond

Which of these is not a key to saving money? A) Focus B) Making saving a habit and a priority C) Your income D) Discipline

C

Why should interest earned not be a factor with your emergency fund? A) Inflation can eat up the interest earned. B) Interest-bearing accounts at banks earn a high rate of interest, therefore, interest is not a concern. C) The emergency fund is not intended to grow wealth. D) None of the above

C

Jimmy has built up his savings account. At this point he has enough money in savings if something goes wrong and doesn't think he'll need to dip into it for a few years. He goes to his bank to see what his options are. The bank offers him a deal where if he invests $2,000 for 3 years they will give him a 4% interest rate that is compounded monthly. What type of investment did Jimmy use? CD Mutual Fund Bond Stock

CD

_______ is a product offered by banks and credit unions that provides an interest rate premium in exchange for the customer agreeing to leave a lump-sum deposit untouched for a predetermined period of time. CD Mutual Fund Bond Stock

CD

Interest paid on interest previously earned -compound interest or interest?

Compound Interest

Which of the following is not a reason your emergency fund should be kept in a separate savings account away from your spending money? A) So that you do not get your spending and saving money confused. B) So that it is clear what money is only to be used for emergencies. C) So that it is not too easy to access. D) So that your emergency fund savings can earn a lot of interest.

D

Money set aside and left alone for unexpected events. -emergency fund or savings account?

Emergency Fund

What are the 3 reasons to save?

Emergency fund, Big purchases, Build Wealth

Americans have naturally high savings rates.

False

The first thing you should save for is your retirement fund.

False

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

You should keep your emergency fund in the same account as your spending money.

False

Your income level greatly affects your saving habits.

False

Save a $500 emergency fund -the First Foundation or the Fourth Foundation?

First Foundation

The five steps to financial success -five money myths or Five Foundations?

Five Foundations

Staci has some money saved up and is looking to start investing. She is really nervous about it so she wants something that has very low risk associated with it. She remembers hearing about bonds in high school but she forgets which is less risky, a government issued bond or a corporation bond. Which bond should she invest in if she wants the lowest risk?

Government Bond

Investors who do best over the long term buy and _____. Sell Hold Share Invest

Hold

Percentage paid to a lender for the use of borrowed money, or the percentage earned on invested principal -interest rate or savings rate?

Interest Rate

What is an example of a grown adult emergency?

Medical emergency

You should hold off on investing for retirement until you have college or other post-secondary education paid for.

Ms.Baker says false but it's really true

Larry wants to start really investing his money. He has saved for a long time and he's ready to become a serious investor. He knows nothing about how the stock market works other than what he learned in high school. He doesn't want all the risks associated with buying and selling stocks all the time. Plus, the idea of putting his money in one company scares him. He knows it is important to diversify his investments, but he doesn't want to have to check his stocks every day and worry about them. What type of investment should Larry use? CD Mutual Fund Bond Stock

Mutual Fund

_________ is a type of financial vehicle made up of a pool of money collected from many investors to invest in securities like stocks, bonds, money market instruments, and other assets. CD Mutual Fund Bond Stock

Mutual Fund

When a person intentionally invests money in a place where it can earn more money -sinking fund or wealth building?

Wealth Building

___________ investing is the purchase, ownership, lease, or sale of land and any structures on it for the purpose of earning money. Real estate generally breaks down into four categories: residential, commercial, industrial, and land. Stock Real Estate Investments Retirement Planning

Real Estate Investments

__________ refers to the allocation of savings or revenue for retirement. The goal of retirement planning is to achieve financial independence. Stock Real Estate Investments Retirement Planning

Retirement Planning

What type of retirement account should you put your money in? Traditional IRA Roth IRA

Roth IRA

When you purchase a company's stock, you're purchasing a small piece of that company, called a ______. Part Share Ownership Holding

Share

Saving money over time for a large purchase. -installment loan or sinking fund?

Sinking Fund

As a young adult, a fully funded emergency fund is $______

$1000

If you need to save $1,000 for a new laptop and you'll need it in six months, what would your monthly savings goal need to be?

$166.67

If you need to save $1,000 for a new laptop and you'll need it in six months, what would your weekly savings goal need to be?

$41.67

At your age, a fully funded emergency fund is $_______

$500

Over the last century, the stock market has posted an average annual return of ______ 1% 3% 10% 15%

10%

As a grown adult a fully funded emergency fund is $______

3-5 months of expenses

What is an example of a high school student emergency?

Phone repair

A ______ is a type of investment that represents an ownership share in a company. Stock Real Estate Investments Retirement Planning

Stock

What is an example of a young adult emergency?

Tire repair

An interest-bearing account is an account that generates interest income on the available balance in the account.

True

When youʹre in high school, you wonʹt have the same emergency expenses as your parents.

True