Ramsey Classroom - Chapter 3

45% of Americans have less than $1,000 saved for a(n) _______

emergency

You'll have less freedom with your money if you . . .

are paying for things in your past

Once you have a $500 emergency fund, you should . . .

save it until you have an emergency

The first step you should take when you want to make a large purchase is . . .

decide how much you'll need to save and the time frame you want to save it in

The best way to build wealth is to start investing early. You should start investing money . . .

once you're out of college, living debt-free, and have 3-6 months of living expenses saved

Why do some accounts, like savings accounts at your local bank, earn interest?

Because the bank pays you to use your money

It's not IF an emergency will happen, but _______.

when

If you really want to save money, you've got to . . .

live on less than you make

The only place you should keep your emergency fund money is...

A savings account or money market account.

If people saved the equivalent of a car payment each month for a year or two (instead of spending it on payments and interest), they could have enough money to buy a car with cash for much cheaper!

True

Which two habits are the most important for building wealth and becoming a millionaire?

Consistently investing money and patience to give it time to grow

The interest rate on a savings account determines . . .

How quickly your money will grow over time

Debt is a tool to use to make you wealthy.

False

You should budget in this order: giving, savings, spending

True

The purpose of an emergency fund is to...

Be able to cover an unexpected expense with cash and protect you from having to pile up debt when something goes wrong

Why do stores rarely advertise the full price of big purchases like smartphones?

By showing you only the monthly payment, they make the product seem affordable

_______ is a millionaire's best friend

compound growth

Compound interest is earned at a fixed rate, while ________ is an average based on an investment's past performance.

compound growth

What is the goal of an emergency fund?

To have cash on hand for unexpected events

The main reasons for saving your hard-earned money are...

Emergencies, large purchases, and wealth building

Once you're out of school, have started your career, and have zero debt, your emergency fund should have _________.

3-6 months of living expenses

What is the Third Foundation?

Pay cash for your car

The top three careers reported among millionaires were _____________, _____________, and ___________.

Accountants; engineers; teachers

In order to outpace inflation when investing, your investments need to have a lower rate of return than the rate of inflation.

False

While saving money isn't easy at first, it will make your life a lot _______ in the future if you make it a habit now

easier

90% of millionaires make over $100,000 a year.

False

Which of these would count as a legitimate reason to use your emergency fund?

Your car tire blew

The amount of interest charged on a debt but not yet collected is called...

Accrued interest

One of the main reasons we build wealth is so that we can . . .

give to those in need

Which principle says that a certain amount of money today is worth more than the same amount in the future?

The time value of money

Define compound interest

interest calculated on the principal (original investment) as well as the interest already added to the account

A large purchase is

a purchase that requires a significant amount of money

An interest rate is

the percentage of principal charged by the lender for the use of its money