Appendix 3

Question 1

Budget

Answer 1

Budget – a detailed schedule that documents your expected financial inflows (revenues earned and received) and outflows (expenses incurred and paid)

Question 2

Discretionary costs

Answer 2

Discretionary costs – costs that you have control over

Question 3

Non-discretionary costs

Answer 3

Non-discretionary costs – costs that you have little control over

Question 4

What’s the difference between savings and chequing accounts?

Answer 4

Savings accounts are interest-earning accounts that are different than your chequing account.

Question 5

What is credit?

Answer 5

• Credit refers to your ability to obtain goods and resources without immediate payment.
• Your credit score is a numerical indicator of your creditworthiness.

Question 6

Advantages of Credit Cards?

Answer 6

• Credit cards allow holders to make a purchase now and pay later.
• Credit cards are convenient and safe, and make it easier to track expenditures.
• Some credit cards offer perks.

Question 7

Disadvantages of Credit Cards?

Answer 7

• Credit cards can make financial discipline hard.
• Interest rates on credit cards can be high and the cards often impose fees.
• Late payments can damage your credit.

Question 8

What should you know about your credit card agreement?

Answer 8

• Grace period
• Interest rate
• Late fees
• Annual fees

Question 9

When not to use your credit card?

Answer 9

DISCIPLINE IS NEEDED!

• Put the credit card down when you are in trouble.
• Do not use credit until you can control your credit habits.
• Consistently pay a substantial amount each month toward the debt.
• Consider using cash or a debit card.

Question 10

Investing

Answer 10

Investing – reducing consumption in the current period in order to build wealth

Question 11

How to build wealth?

Answer 11

• Starting early is key!
• Start with a small amount and wealth will grow.
• The longer you keep a sum of money invested, the more you earn.
• Compounding is a powerful force.

Question 12

Investment Options

Answer 12

• Common stock
• Preferred stock
• Bonds
• Certificates of deposit
• Mutual funds
• Exchange traded funds

Question 13

What is the Role of a Broker?

Answer 13

• Investors rely on a brokerage firm to buy/sell securities.
• Full-service brokers offer a range of services.
• Discount brokers offer fewer services.
• You can buy stocks directly from the company through direct stock purchase plans (DSPPs).
• Companies also offer dividend reinvestment plans (DRIPs) that allow stockholders to reinvest.

Question 14

Diversification, Risk, and Return

Answer 14

• Diversification reduces risk.
• Investments with potential high returns are usually riskier.
• Young investors are less concerned with risk in pursuit of higher returns.
• Older investors often become more conservative.

Question 15

What Is My Best Investment?

Answer 15

Your best investment is YOU!

Devote time, effort, and money to your education, training, and health.

Secure an internship during your college or university years and look for other work opportunities to gain experience.