Financial Literacy

 Discounts and Percentages

• What is a percent? A portion of the total.

• How do you convert fractions to percentages? This involves converting the fraction to a decimal and then multiplying by 100.

• How do you calculate an amount based on a percentage? Multiply the base value by the percentage (in decimal form).

• What is the base value? The numerical value to which a part is compared.

• How do you convert a percentage to a decimal? Divide the percentage by 100.

• What is the relationship between percentages, decimals, fractions, and ratios? They are all different ways to represent the same proportional relationship.

• What is a ratio (proportion)? A comparison of two quantities.

• How do you calculate the percentage of a given amount? (Part / Whole) * 100

• Why are wholesale and retail discounts offered? To incentivize bulk purchases and clear inventory.

• How are increased sales directly related to discounts? Discounts can stimulate demand, leading to higher sales volumes.

• What is a seasonal discount? A discount offered during a specific time of year.

• What is the difference between trade and cash discounts? Trade discounts are offered to businesses in the same trade, while cash discounts are offered for early payment.

• What are the terms for early payment discounts? These are incentives for paying invoices early, such as "2/10, n/30".

• What does "2/10/n/30" mean in discount terminology? A 2% discount if paid within 10 days, with the net amount due in 30 days.

• What is a trade discount? A discount offered to businesses in the same trade.

• What is the relationship between discounts and consumer action? Discounts often motivate consumers to make purchases.

💰 Savings

• What are some consumer choices for saving? Savings accounts, money market accounts, and certificates of deposit (CDs).

• What is the relationship between saving and investing? Saving is setting aside money for future use, while investing is using money to generate a return.

• What is the time value of money? The concept that money available today is worth more than the same amount in the future due to its potential earning capacity.

• How do you use the Rule of 72? 

• Years=72/InterestRate

• Years=72/InterestRate. It estimates how long it will take for an investment to double.

• What is financial liquidity? The ease with which an asset can be converted into cash without affecting its market price.

• What is the discipline associated with saving money? Consistently setting aside a portion of income and avoiding unnecessary spending.

• What are insured savings accounts? Savings accounts that are protected by insurance, such as FDIC insurance.

• Why should one have a savings account? To safely store money, earn interest, and have funds available for future needs.

• What is simple interest? Interest calculated only on the principal amount. Formula: 

• SimpleInterest=Principal×Rate×Time

• SimpleInterest=Principal×Rate×Time

• What is the difference between simple and compound interest? Simple interest is calculated only on the principal, while compound interest is calculated on the principal and accumulated interest.

🏦 Checking Accounts

• Why should one have a checking account? For convenient management of funds, paying bills, and making transactions.

• How do you open a checking account? By providing identification, filling out an application, and depositing funds.

• What are the advantages and disadvantages of online banking? Advantages include convenience and accessibility, while disadvantages include security risks and potential technical issues.

• What are paperless bank statements? Bank statements provided electronically rather than on paper.

• What are the three types of check endorsements? Blank, restrictive, and special endorsements.

• What is overdraft protection? A service that covers transactions when an account holder doesn't have enough funds.

• How do you reconcile a bank statement? By comparing the bank statement to your own records (check register) and resolving any discrepancies.

• What is the FDIC? Federal Deposit Insurance Corporation; it insures deposits in banks and savings associations.

• What is the difference between a debit and a credit card? A debit card uses funds directly from your bank account, while a credit card allows you to borrow money.

• Why is it important to maintain a check register? To keep track of transactions and maintain an accurate record of account balances.

• Why is it important to develop a solid relationship with your bank by taking good care of your checking account? To receive better service and potentially qualify for loans or other financial products.

• What is direct deposit? An electronic transfer of a payment directly from the payer's account to the recipient's account; it offers convenience and faster access to funds.

• What is a checking account routing number? A unique code that identifies the bank or financial institution.

• What is the role of the drawer for a checking account? The account holder who writes the check.

• What is the role of the payee for a checking account? The person or entity to whom the check is made payable.

✍ Decision Making

• How does Maslow’s Hierarchy of Needs affect financial decisions? It prioritizes needs (e.g., shelter, food) before wants (e.g., entertainment, luxury items).

• What is the process of gathering data before making a financial decision? Researching options, comparing prices, and seeking advice.

• Why is it important to determine possible outcomes associated with different possible financial decisions? To evaluate the potential risks and rewards of each option.

• What are the steps associated with decision making? Identifying the problem, gathering information, evaluating alternatives, making a decision, and reviewing the decision.

• How do changing financial situations impact decision making? They require adjusting financial plans and priorities.

• How is financial decision making impacted by long-term and short-term goals? Long-term goals require careful planning and saving, while short-term goals may involve immediate spending.

• What is the difference between rational vs. emotional financial decision making? Rational decisions are based on logic and analysis, while emotional decisions are driven by feelings and impulses.

• Why should some financial decisions be given more time to make? To allow for thorough research and avoid impulsive choices.

• How does decision making require flexibility due to unexpected events? Unexpected expenses or changes in income may require adjusting financial plans.

• How does financial decision making involve a system of prioritization? By allocating resources to the most important needs and goals first.

• How does decision making differ for large purchases vs. daily purchases? Large purchases require more planning and research, while daily purchases are often routine.

• How do you distinguish the difference between financial wants and needs? Needs are essential for survival and well-being, while wants are desires that are not necessary.

• How do you choose the best financial planner for different circumstances? By considering their qualifications, experience, and fees.

• Why is a financial budget important? It helps track income and expenses, set financial goals, and make informed decisions.

• Why is it important to maintain accurate financial documents to make the best decisions? Accurate records provide a clear picture of financial health and facilitate informed decision-making.

税 Taxes

• What are the different types of taxes? Income tax, property tax, sales tax, excise tax, etc.

• How are taxes used to encourage and discourage business? Tax incentives can encourage certain business activities, while high taxes can discourage others.

• How does the government use taxes? To fund public goods and services, such as infrastructure, education, and defense.

• What are property taxes? Taxes on real estate and other property.

• List the top expenditures that use property taxes. Education, public safety, and local government services.

• What are public goods? Goods and services provided by the government, funded by tax dollars.

• What is the role of the Internal Revenue Service (IRS)? To administer and enforce federal tax laws.

• What is a progressive income tax? A tax in which the tax rate increases as the taxable amount increases.

• What are sales taxes and how are they used? Taxes on the sale of goods and services, used to fund state and local government programs.

• How do different states compete for business with no sales taxes vs. sales taxes? States with no sales taxes may attract businesses and residents seeking lower taxes.

• When is the tax filing deadline? April 15th.

• What is a tax deduction? An expense that can be subtracted from gross income to reduce taxable income.

• What is a tax exemption? A fixed amount that can be deducted from gross income to reduce taxable income.

• What is a tax holiday? A period during which certain taxes are temporarily suspended or reduced.

• What are excise taxes? Taxes on specific goods, such as alcohol or tobacco.

• What is a tariff? A tax on imported goods and how it is used for trade deals.

• What are FICA taxes? Taxes that fund Social Security and Medicare.

📈 Investing

• What are different types of investments? Stocks, bonds, real estate, mutual funds, etc.

• What are the risks associated with different types of investments? Market risk, credit risk, liquidity risk, etc.

• What is the investment liquidity? The ease with which an asset can be converted into cash without affecting its market price.

• How do you buy and sell investments? Through a broker or online trading platform.

• What is the relationship between risk and rate of return on an investment? Higher risk investments typically offer the potential for higher returns, but also carry a greater risk of loss.

• What is the difference between simple and compound interest? Simple interest is calculated only on the principal, while compound interest is calculated on the principal and accumulated interest.

• What agencies regulate financial markets and protect investors? Securities and Exchange Commission (SEC)

• How do you evaluate professional financial advisors? By considering their qualifications, experience, and fees.

• What are different types of stocks and how do you invest by purchasing stocks? Common stock and preferred stock. You can invest by purchasing stocks through a broker or online trading platform.

• What are bonds? A debt instrument issued by a corporation or government; it pays interest.

• How is real estate an investment possibility? It can generate rental income and appreciate in value over time.

• What are speculative investments? High-risk investments with the potential for significant gains or losses.

• How is the level of risk associated with the possible rate of return on an investment? Higher risk investments typically offer the potential for higher returns, but also carry a greater risk of loss.

• How are broker and investment planner fees calculated? As a percentage of assets under management or as a flat fee.

• What is the importance of estate planning? To ensure that assets are distributed according to your wishes after your death.

• Why is there a need for wills to distribute investments of a deceased person? To provide legal instructions for the distribution of assets.

🗓 Budgeting

• What is a budget and what is its important impact on a person’s future? A plan for managing income and expenses; it helps achieve financial goals.

• What is the difference between fixed and variable (flexible) expenses in a budget? Fixed expenses are consistent each month, while variable expenses fluctuate.

• What is the difference between active and passive income? Active income is earned through direct work, while passive income is earned from investments or other sources.

• What is the reason for a budget? To track income and expenses, set financial goals, and make informed decisions.

• What are the categories in a budget? Income, expenses (fixed and variable), and savings.

• Why should a percentage of income be budgeted for savings? To build wealth and achieve financial security.

• What is opportunity cost when making financial decisions? The value of the next best alternative that is forgone when making a decision.

• How do you define depreciation for automobiles, appliances, and other equipment? The decrease in value of an asset over time.

• What is the first step for creating a budget? Monitoring and categorizing spending.

• How is careful maintenance of a checking account related to successful budgeting? It helps track income and expenses accurately.

🛡 Insurance

• What is insurance? A contract that protects against financial loss.

• What is the role of the insurance agent? To sell insurance policies and provide advice.

• What is an insurance policy? A contract between an insurer and an insured that outlines the terms and conditions of coverage.

• Why is there a need for health insurance? To cover medical expenses.

• Who is a beneficiary? The person or entity designated to receive the benefits of an insurance policy.

• What is the life insurance concept? It provides financial protection to beneficiaries upon the death of the insured.

• Why is there a need for liability insurance? To protect against financial losses resulting from legal claims.

• What is homeowner’s and renter’s insurance? Homeowner’s insurance covers damage to a home, while renter’s insurance covers personal property in a rented dwelling.

• What is an insurance deductible? The amount the insured pays before the insurance company pays.

• What is an insurance premium and how is it calculated? The amount paid for insurance coverage; it is calculated based on risk factors.

• What is the difference between term and whole/universal life insurance? Term life insurance provides coverage for a specific period, while whole/universal life insurance provides lifelong coverage and may include a cash value component.

• What is co-insurance? A percentage of medical expenses that the insured must pay after the deductible is met.

• What are the functions of insurance agencies? To sell insurance policies, process claims, and provide customer service.

• What is the risk concept and its relationship to the premium charged by the insurance agency? Higher risk individuals are charged higher premiums.

• What is collision insurance? Insurance that covers damage to a vehicle resulting from a collision.

• What is medical payments insurance? Insurance that covers medical expenses resulting from an accident.

• What is an automobile insurance deductible? The amount the insured pays before the insurance company pays for vehicle damage.

• What is an umbrella liability insurance policy? Extra liability insurance coverage that protects assets beyond the limits of other policies.

🛍 Consumer Awareness

• What are the Consumer Bill of Rights? The right to safety, the right to be informed, the right to choose, the right to be heard, the right to satisfaction of basic needs, the right to redress, the right to consumer education, and the right to a healthy environment.

• How is consumer awareness directly related to making the best purchase decisions? Informed consumers make better choices and avoid scams.

• List responsibilities associated with consumer awareness. Stay informed, follow instructions, use products properly, speak out against wrongdoing, and lawfully purchase goods and services.

• Describe the importance of using Consumer Reports, other consumer publications, and consumer feedback on social media when making purchasing decisions. They provide valuable information and insights.

• What are product recalls? The removal of a product from the market due to safety concerns.

• Explain the importance of reading product labels for product content, expiration date, manufacturing location, warnings, and possible dangers. To make informed decisions and avoid potential hazards.

• Define the importance of comparison shopping before making purchases. To find the best value and avoid overpaying.

• Why is it important to seek opinions from satisfied/unsatisfied customers and product experts. To gain insights into product quality and performance.

💳 Credit Cards

• Define credit and how it should be used wisely for large purchases. Borrowing money with the agreement to repay it later, often used for significant expenses like homes or cars.

• Explain the appropriate use for credit. For planned purchases and in situations where it's more practical than cash.

• List and define the C’s of credit (character, cash flow, capacity, collateral, capital, and conditions). These are factors lenders assess to determine creditworthiness.

• Explain the dangers of using too much credit. Debt accumulation, high interest charges, and potential damage to credit score.

• Describe how credit has a major impact on life. Affects ability to obtain loans, rent an apartment, and even get a job.

• Define different types of financial credit (installment, non-installment, revolving, mortgage, and line of credit). Each type has different terms and repayment structures.

• Explain how consumers who are classified as a greater financial risk pay higher interest rates for credit. Lenders charge higher rates to compensate for the increased risk of default.

• List the major credit reporting agencies and the need to be aware of our personal credit report. Experian, Equifax, and TransUnion. Monitoring credit reports helps detect errors and fraud.

• Describe five influencers that are used to determine if an individual or business receives credit (debt usage, age of accounts, types of accounts, and credit inquiries). These factors are used to assess creditworthiness.

• Explain the difference between a secured and unsecured credit loan. Secured loans are backed by collateral, while unsecured loans are not.

• Explain the tax advantage of a mortgage (deduction of interest paid on a mortgage). Homeowners can deduct mortgage interest from their taxable income.

• Explain how impulse buyers should take time before making purchases on credit. To avoid overspending and accumulating debt.

• Explain the importance of paying credit cards on time. To avoid late fees and maintain a good credit score.

📈 Return on Investment

• Define an investment and rate of return. An asset acquired with the goal of generating income or appreciation; the percentage gain or loss on an investment.

• Define a financial portfolio. A collection of investments held by an individual or organization.

• Calculate rate of return by dividing dollar increase by amount of the original investment. 

• RateofReturn=(DollarIncrease/OriginalInvestment)

• RateofReturn=(DollarIncrease/OriginalInvestment)

• Explain the importance of time when building a financial portfolio. Time allows investments to grow and compound.

• Explain the importance of diversification when making investments. To reduce risk by spreading investments across different asset classes.

• Explain how greater financial risk can result in greater losses or gains. Higher risk investments have the potential for higher returns, but also carry a greater risk of loss.

• Differentiate between insured and uninsured investments. Insured investments are protected against loss, while uninsured investments are not.

• Describe how investment in the Stock Market works. By buying and selling shares of publicly traded companies.

• Describe how economic and other news events can impact the Stock Market. News events can influence investor sentiment and market volatility.

• Explain the value of investing in real estate. It can generate rental income and appreciate in value over time.

• Explain the importance of matching the type of investment to the individual’s financial philosophy and anxiety level. To ensure comfort and confidence in investment decisions.

🦹 Identity Theft

• Define identity theft. The fraudulent acquisition and use of a person's personal information.

• Explain four types of identity theft (medical, criminal, financial and child identity). Each type involves different forms of misuse of personal information.

• Explain how identity theft has increased with increased use of technology. Technology provides more opportunities for criminals to access and misuse personal information.

• Describe systems to protect individuals from identity theft. Credit monitoring, fraud alerts, and strong passwords.

• Describe vulnerable populations (elderly, hearing impaired, etc.) who are targets of identity theft. These groups may be more easily deceived or manipulated.

• Describe procedures to avoid becoming a victim of identity theft. Shredding documents, using strong passwords, and being cautious online.

• Define credit card fraud. The unauthorized use of a credit card.

• Explain the importance of not sharing personal, financial, or social security information on the telephone or the internet. To prevent identity theft and fraud.

• Describe how to detect spam telephone calls. By being wary of unsolicited calls and requests for personal information.

• Explain the importance of blocking unwanted telephone calls. To prevent harassment and potential scams.

• Describe scam schemes. Fraudulent plans or schemes to deceive individuals and obtain money or personal information.