Financial Literacy

All of financial literacy units

Gross Income

Your total earnings before any taxes or deductions

Net Income

Your income minus mandatory deductions

What are some mandatory paycheck deductions?

Federal taxes, state taxes, local taxes, medicare, and social security

Discretionary Income

The money left over from your net income after you’ve paid for all your necessities (housing, food, bills)

Fixed Expenses

Costs that stay the same (rent, insurance, subscriptions)

Variable Expenses

Costs that change based on consumption, lifestyle, or choices (groceries, gas)

Planned Expenses

All costs you budget for, to meet your financial goals

Unplanned Expenses

Costs that arise unexpectedly and aren’t part of your regular budget (medical bills, job loss, emergency repairs)

Net Worth

The sum total of everything you own minus thee sum total of everything you owe

Assets

Anything of monetary value that you own

Liabilities

Financial obligations or debts that must be paid to others

Budget

A plan for managing your money by tracking how much you earn versus how much you spend

Scarcity

Having limited resources to meet the demand of unlimited wants and needs

What is opportunity cost?

The next best choice you give up when making a decision, the benefits of the other options in a decision

Debit Card

Uses your money directly from your bank account

Credit Card

Lets you borrow money from the issuer to pay back later

What does the F.D.I.C. do?

They insure your money at a bank for up to $250,000 in case the bank goes bankrupt

A.P.R.

The annual percentage rate is the basic rate you pay on borrowed money

Prime Rate

The interest rate that banks charge their most credit worthy customers

Interest

The cost of borrowing money, a percentage fee charged over time

Lender

Provides funds with the expectation of being repaid

Borrower

Receives funds and has to pay them back

Supply

The amount of a commodity, product, or service available

Demand

Buyers desire for a product

Equilibrium

Where supply and demand meet

Credit Union

A member-owned, non-profit business that does the same things as a bank

Banks

For-profit, owned by shareholders

What are the benefits of credit?

Credit building, rewards, emergency funds, consumer protection

What are the costs of credit?

Debt cycle (falling behind), credit score damage, fees, high interest, and an overspending risk

What is the rule of 72?

Used to estimate how long it takes for an investment or debt to DOUBLE

How does the rule of 72 work?

You divide 72 by an interest rate and that answer is how long it takes for money to double

Inflation

The general increase in the prices of goods and services across an economy overtime

Optimizing

To make the best or most effective use of something

Financial Aid

Funding provided to help students cover the costs of higher education

Scholarship

A form of financial aid that does not need to be repaid

Subsidized Loan

A need-based federal loan for undergraduates where the government pays the interest while you’re in school

Unsubsidized Loan

A federal loan for college students where you pay all the interest from day one

Soft Skills

Non-technical

Hard Skills

Technical

Collateral

An item of value used to guarantee a lender being paid back for a loan

Co-signer

A person who agrees to pay a loan if the borrower does not

Term Insurance

A more affordable insurance, but only lasts for a set period of time

Whole Life Insurance

More expensive, but never expires

Insurance

A contract where you pay a insurance company regularly and they cover damages

Deductible

The amount you pay first before insurance covers the cost of something

Co-pay

A fixed fee that you pay for a specific service when you get it (Doctor’s visit, prescription)

What are 3 items that all drivers must have if they are stopped?

Drivers license, vehicle registration, and proof of insurance

Stocks

Unit of ownership in a company

Stock Split

Divides existing shares/stocks into smaller, lower-priced ones to boost affordability

Odd Lot

A trade of under 100 shares

Round Lot

The standard 100-share trading unit, designed for market efficiency

How many federal reserve banks are there?

12

What is the closest federal reserve bank to Green, Ohio?

The one in Cleveland

How does the federal reserve system work?

It regulates the economy

What are capital gains?

The profit you make when you sell on asset for more than you paid for it

Why is it important to save at a younger age?

Compound interest, financial discipline, tax advantages

Monetary Policy

Influences money supply through interest rates

Fiscal Policy

Influences the governments spending through TAXES

What is the I.R.S.?

Tax collection agency

What is the minimal wage in Ohio?

$10.70, and $5.35 for tipped workers

When is someone paid 1 ½ times their regular rate of pay?

Overtime pay

What is April 15th important?

Tax day

What is C.P.I.?

A monthly report that tracks the cost of everyday items, acting sa the main measure for inflation

How does the government determine the C.P.I.?

Tracks price changes for a “market basket” of goods and services

W2

Money you recieve from your employer

W4

When you get a job

1020 or 1040

Any interest you can claim on income taxes

20/10 rule

Yearly income (0.2) = yearly debt load

Yearly income / 12 (0.1) = monthly debt load

Adam Smith

Provided the foundation idea of capitalism from his book ‘Wealth of Nations”