1. Goals, Saving, Interest, & Banking.

Question 1

When choosing, people must choose things and…

Answer 1

Give up others

Question 2

The consequences of your choice will…

Answer 2

Lie and take effect in the future.

Question 2

The consequences of your choice will…

Answer 2

Lie and take effect in the future.

Question 3

Long-term Goal

Answer 3

Something a person or organization plans to achieve at least five years in the future.

Question 4

Short-term Goal

Answer 4

Something a person or organization plans to achieve within one-year time period.

Question 5

Key principles that influences financial planning

Answer 5

• People must make choices due to scarcity.
  
  • Every choice incurs an opportunity cost.
  • All choices have consequences, that lie in the future.

Question 6

Applying key principles to financial planning should include:

Answer 6

• A budget that details how one plans to use limited income satisfy wants.
• Save more rather than spend more.
* Financial plans and financial products should be taken into account when achieving goals.

Question 7

It’s common knowledge that failing to plan means…

Answer 7

Planning to fail.

Question 8

Every goal should…

Answer 8

Be listed in priority order.
Have an estimated cost.
Have an approximate time period needed to achieve the goal.

Question 9

What can you do now that will put you on a path to achieving your financial goals?

Answer 9

1. Develop your human capital.
2. Put your savings to work to earn money.
3. Stay away from conspicuous consumption.

Question 10

How can you guard against spending that keeps you from attaining savings goals?

Answer 10

• Have a plan that you must revisit regularly
• Use social support (friends and family) to remind yourself not to spend unnecessarily.
• Keep money where you don’t have immediate access to it. (in the bank)

Question 11

Putting money to work, that has been set aside, is crucial to achieving…

Answer 11

Long-term Goals

Question 12

Interest is a payment in…

Answer 12

compensation of opportunity cost for a saver/lender.

Question 13

Interest

Answer 13

Money paid regularly, at a particular rate for the use of borrowed money.

Question 14

Maturity

Answer 14

The length of time money is borrowed or invested.

Question 15

Principal

Answer 15

An original amount of money invested or lent.

Question 16

Calculating simple interest is based on the equation:

Answer 16

INTEREST = PRINCIPAL x RATE x TIME(MATURITY)

Question 17

Compound Interest.

Answer 17

Interest that is earned not only on the principal but also on the interest already earned.

Question 18

The Rule of 72

Answer 18

A mathematical rule for determining the number of years it will take for an investment to double in value. The number of years is determined by dividing 72 by the annual rate of return. Thus, an investment expected to earn interest at a rate of 8% will double an investor’s funds in 72/8, or 9 years. Dividing 72 by the number of years in which an investor wishes to double his or her return will yield the necessary rate.

Question 19

Time Value of Money

Answer 19

This is the value of a sum of money at a different period of time.
     - the amount of 
 money one would 
 need to receive 
 today to equal a 
 certain sum in the 
 future.

Question 20

Bank

Answer 20

A financial institution that provides various products and services to its customers, including checking and savings accounts, loans and currency exchange.

Question 21

Credit Union

Answer 21

A non profit financial institution owned by its members’ offers various financial services including accounts and loans; regulated by the National Credit Union Association. (NCUA)

Question 22

Savings and Loan Association

Answer 22

A type of financial institution that specializes in but it is not restricted to lending money to consumers for mortgages (home loans). A savings and loan association is also called a thrift.

Question 23

FDIC

Answer 23

Federal Deposit Insurance Corporation; the federal agency that guarantees depositors’ savings up to $250,000 per account in most commercial banks, savings banks and savings association

Question 24

NCUA

Answer 24

National Credit Union Association; the federal agency that regulates credit unions and administers the insurance fund that insures member credit unions’ deposits. Depositors’ accounts with members credit unions are insured up to $250,000

Question 25

Savings account

Answer 25

An interest-bearing account (passbook or statement) at a financial institution.

Question 26

Checking account

Answer 26

A financial account into which people deposit money and from which they withdraw money by writing checks.

Question 27

Check

Answer 27

A written order to a financial institution directing the financial institution to pay a stated amount of money, as instructed, from the costumer’s account.

Question 28

Deposit

Answer 28

Money put into a financial account. Also, to place money in a financial account.

Question 29

Certificate of Deposit (CD)

Answer 29

A certificate by a bank to a person depositing money in an account for a specified period of time (often six months , one year or 2 years). A penalty is charged for early withdrawal from CD accounts.

Question 30

Consumer Loan

Answer 30

A loan made to an individual or household for purpose of buying or paying for a consumer good (car, appliance, etc.)

Question 31

Broker

Answer 31

An individual who provides investment services to other individuals, assisting in the buying and selling of stocks, bonds and other investment instruments.

Question 32

Payday loans

Answer 32

A loan issued to a borrower who writes a post-dated check made out to a lender (usually a company specializing in payday loans and other financial services targeted to low-income customers) for the amount he or she wishes to borrow plus a fee.

The lender gives the borrower cash in the amount stated on the check, minus the fee, and holds the check until the borrower’s next payday, when the lender cashes it. No credit background check is required.

The cost (in fees and interest) to those who use payday loans is often very high, however, when calculated as an APR.

Question 33

Debit Card

Answer 33

A small, specially coded plastic card issued by a bank; allows the cardholder to transfer funds electronically and immediately from his or her checking account, as if the cardholder were writing a check to pay for purchase.

Question 34

Credit Cards

Answer 34

A small, specially coded plastic card issued by a bank, business etc., authorizing the card holder to purchase goods and services on credit.

Question 35

Automated Teller Machine (ATM)

Answer 35

A machine that provides cash and performs banking services (for deposits and transfers of funds between accounts, for example) automatically when accessed by customers using plastic cards coded with personal identification numbers (PINs).

Question 36

Direct Deposit

Answer 36

he electronic transfer of a payment (for month’s salary, for example) directly from the payer’s account to the recipient’s account.

Question 37

Remote Deposit

Answer 37

This is the process of depositing funds from a home or office without visiting a financial institution. The customer scans an image of the check and then transmits it to the financial institution where the transaction is completed.

Question 38

Loans

Answer 38

An amount of money provide by one party to another with the understanding that the money will be returned, in full, often with interest.

Question 39

Automated Bill Payment

Answer 39

a process that allows consumers to make regular bill payments from their banking accounts using electronic methods.

Question 40

Automated Clearing House (ACH)

Answer 40

An electronic network for financial transactions in the U.S. the network processes batches of debits and credits to various financial institutions allowing for fast, safe and efficient transfer of funds.
• The Automated Clearing House (ACH) is the system used to process electronic monetary transactions.

Question 41

Check Clearing for the 21st Century Act (Check 21)

Answer 41

An act of Congress that allows banks to use and transmit digital images of checks rather than transport paper checks for return.
• This allows for services like remote deposits of checks and facilities bill-paying.
• The Check clearing for the 21st Century Act, or Check 21, makes check processing easier and less expensive for financial institutions by creating substitute checks that can be exchanged electronically.

Question 42

Bank Account

Answer 42

An arrangement by which a bank funds on behalf of a depositor. Also, balance of funds held under such an arrangement, credited to and subject to withdrawal by the depositor.

Question 43

Signature Card

Answer 43

A document bearing a person’s signature, held on file in a financial institution. In cases of suspected forgery, signatures of doubtful origin can be checked against those recorded on signature cards.

Question 44

Check Register

Answer 44

A form (usually located in the back of a checkbook) on which users of checking accounts may record checks they have written and deposits they have made. Information thus recorded helps people keep track of balances in their accounts.

Question 45

Bank Statement

Answer 45

A monthly summary providing the status of depositor’s financial accounts (checking and/or savings).

Question 46

Opening and maintaining a checking or savings account involves:

Answer 46

• Completing an application
  
  • Completing a signature card
  • Presenting approved identification document
  • Writing/maintaining checks, stubs, and check register.
  • Endorsing checks (signing the back of the check, which transfers ownership)
  • Completing deposit & withdrawal documents.

Question 47

What are some steps to take to correct errors on a bank statement?

Answer 47

1. Verify the mistake.
2. Contact your bank.
3. Adjust your records.

Question 48

Reconciliation

Answer 48

The process of comparing one’s financial records (checkbook or passbook) to the records of the financial institutions (bank statement) to find the errors.