Chapter 2 Notes Flashcards
maturity
the length of time your deposit stays on account without penalty
standard of living
the economic well being of a country
sinking fund
saving money over time for a large purchase
fixed expense
these expenses stay the same
2 examples of fixed expenses
car payment, mortgage, rent
flexible expense
these expenses vary
2 examples of a flexible expense
groceries, entertainment, utilities bill
self interest
the impulses that encourage us to fulfill our needs and wants
wants
desires for economic goods or services not necessary in order to survive
needs
economic goods and services that are basic for living such as food, clothing, and shelter
usury
charging extremely high rates of interest
finance charge
the total cost of credit
investments
accounts or arrangements in which a person puts his/her money for long-term growth
savings bond
the certificate representing a debt
liquidity
quality of an asset that permits it to be converted quickly into cash w/o loss of value; ease of converting savings into cash
amoral
lacking morals; neither good or bad
compound interest
interest paid on interest previously earned
emergency fund
$500 in readily available cash to be used only in the even of an emergency
interest rate
percentage paid to lender for the use of borrowed money; percentage earned in invested principle
inflation
the rate at which the general level of prices for goods and services rises
interest bearing account
on that earns interest over a specified time period
timed deposit
you have to leave it on deposit for an agreed amount of time
2 examples of a timed deposit
CD or certificate of deposit or a US savings bond
diversification
the practice of dividing the money a person invests between several different types of investments in order to lower risk; a variety of investments
negative savings rate
the savings rate turns negative when a person takes on additional debt
3 reasons people don’t save
lack of discipline, lack of focus, lack of budget
high cost of liquidity
low interest rates
savings bond is…
- guaranteed by the government 2. low risk 3. a loan from the buyer to the government
economists measure savings to…
- help monitor consumer consumption 2. determine the strength of the economy 3. predict shortages
3 reasons people save
for an emergency fund, for purchases, and for wealth building
a financial plan starts with a
budget
the Five Foundations to Personal Finance
- $500 emergency fund 2. get out of debt 3. pay cash for your car 4. pay cash for college 5. build wealth and give
__% of American workers have not even calculated what it would take to retire with dignity
58
__% hope to have a standard of living equal to or better than that of their working years
59
money is ____
amoral
how to save $500
less expenses on entertainment, work (summer job), sell things, allowance
__% of America’s millionaires are first generation rich
80
first generation rich
they started with nothing, did smart stuff, and became millionaires
prioritize spending and say
NO
Murphy’s law
if it can go wrong it will go wrong
__% of 90 days same as cash contracts don’t get paid pack in 90 days so you get saddled with ______
88
a high interest rate
the average car payment in America is
$464 a month
the top four reasons why teens save
- college 2. emergencies 3. big purchases 4. a car
preauthorized checking withdrawals
the bank takes money out of your account for stuff automatically
budget to ______
give, save, THEN spend
it takes an average of ___ years to become a millionaire which means you need ____ and ____
17
hard work, focus, and discipline
the typical millionaire in America goes ______
unnoticed
plastic surgery
cuts up credit card because the credit card just put you in an endless cycle of debt
“savings” means having
contentment and pride
is saving determined by…
how much money you have left at the end of the month (set aside money @ beginning of month/pay period)
balance (as it relates to money and saving
the amount of money in an account
2 benefits gained by saving
security and interest
Ben and Arthur saving example
- the length of time money is invested matters 2. the rate of return matters 3. it’s never too late to start
advantage of a regular savings account
high liquidity
disadvantage of a regular savings account
a low interest rate
