savings and investments

What is the difference between saving and investing?

Saving is short-term, low risk, and insured while investing is long-term, higher risk, and not insured.

How does inflation affect money?

Inflation decreases purchasing power over time and is a rise in the cost of goods and services.

What is the Time Value of Money?

The relationship between time, money, and interest rate.

What is earned interest?

Payment received for allowing a financial institution to use your money.

How do you calculate earned interest?

Interest = Principal × Interest Rate × Time.

What is compound interest?

Earning interest on previously earned interest.

How does the Rule of 72 work?

72 ÷ Interest Rate = Years to Double Money.

What is the Financial Planning Pyramid?

A tool to balance risk and reward in financial planning.

What are income investments?

Savings accounts, CDs, bonds, money market accounts.

What are growth investments?

Stocks, real estate, collectibles, mutual funds.

Why is diversification important?

Reduces risk by spreading investments across different assets.

What are the types of stock?

Common: Voting rights, variable dividends; Preferred: Fixed dividends, no voting rights.

What are the major stock exchanges?

NYSE: Largest, founded in the 1790s; NASDAQ: Electronic, founded in 1971.

What are stock indexes?

Dow Jones: 30 major companies; S&P 500: 500 large companies.

What is the Fortune 500?

A ranking of the top 500 US companies by earnings.

What is the difference between a bull and bear market?

Bull: Rising prices; Bear: Falling prices.

Why save for retirement?

Needed for financial security after employment ends.

What are the three sources of retirement income?

Social Security, Employer Plans, Personal Savings.

What are retirement accounts?

401(k), 403(b), IRA, Roth IRA, Keogh & SEP Plans.

What is Social Security?

A government program providing retirement benefits based on contributions.

What are military benefits?

Pensions, tuition assistance, insurance, shopping privileges.

What is a reverse mortgage?

A loan against home equity with payments to the borrower.

What is an annuity?

A retirement income stream from an investment purchased through insurance companies.

What is estate planning?

Preparing for asset distribution after death.

What is a will?

A legal document detailing asset distribution.

What are the advantages of credit?

Builds history, convenient, useful in emergencies.

What are the disadvantages of credit?

Debt, high-interest rates, risk of overspending.

What are types of credit?

Revolving, Installment, Cash Loan, Service Credit.

What are the 5 C’s of credit?

Capital, Capacity, Character, Collateral, Condition.

What is a credit score?

A three-digit number assessing creditworthiness.

What are the major credit bureaus?

Equifax, Experian, TransUnion.

What are key laws protecting borrowers?

Equal Credit Opportunity Act, Truth in Lending Act, Fair Credit Reporting Act, Fair Debt Collection Practices Act.

What are types of bankruptcy?

Chapter 7: Liquidation; Chapter 13: Repayment; Chapter 11: Business restructuring.

How long does bankruptcy affect credit?

Stays on credit report for 10 years.

What are types of student loans?

Federal, Parent (PLUS), Private.

What are student loan repayment plans?

Standard, Extended, Graduated, Income-Based.

What is the impact of debt on financial health?

High-interest debt can reduce financial flexibility.

What is the importance of financial planning?

Helps achieve financial goals and security.