Unit 0-1 Flashcards
exchange value
how much $ something is worth, monetary (ex. diamond has more $ value than water bottle)
use value
how useful something is, utility/usefulness, (ex. water bottle is more useful than diamond in the desert)
opportunity cost
what you could’ve been doing or have instead, (ex. you could make $ now but you don’t & go to school instead to make even more money in the future)
diminishing marginal utility
the more you have of something, the less useful it becomes to you (ex. 3 servings of food but by the 100th you become sick and don’t want another)
4 things financial behavior is driven by
- inner values
- social values
- physical values
- financial values
inner values
how we see ourselves and how others see us
social values
desire to belong in a group
physical values
desire to be healthy, tangible aspects of life, external world, physical health, general well-being
financial values
what we think or believe about money
endowment effect
assigning more value to things you own already rather tahn things you could own
sunk cost fallacy
feeling like you need to get your “money’s worth”
transaction utility
chasing a bargain “high”, feeling like you got a deal
mental accounting
separating money into imaginary categories in your mind, different sources of income feel like different kinds of $ to spend on different things
ways to put $ into your bank account
bring to bank
check deposit
ATM deposit
mobile deposit
direct deposit
mobile transfer
ways to take $ out of your account
ATM withdrawal
debit/credit card purchases
online bill payments
mobile transfer
check payment
withdraw from teller @ bank
checking account
doesn’t earn interest, meant for daily transactions
avoidable banking fees
- maintenance/service fee
- out-of-network ATM fees
- overdraft fee
- insufficient funds fee (if you don’t opt for overdraft protection)
- wire transfer fees
- early account closing fee
savings account
earns compound interest, not meant for regular transactions (fee if use too frequently)
compound interest
investment plus interest on interest, more effective long-term
compound interest equation
A=P(1+r/n)^nt
rule of 72
excessive transaction fee
charged when savings acct holders withdraw over the fed limit (6 withdrawals/transfers per month)
budget savings system
50% needs, 30% wants, 20% savings
habit cycle steps
cue, routine, reward, start with small tweaks rather than drastic changes
3 challenges to savings
- credit cards
- inflation
- living paycheck to paycheck
advantages of personal internet banking
easier bill payments, ability to sync accounts with apps, 24/7 access, direct deposit, payment apps
interpolation line of best fit
used to estimate a value between two known data values
extrapolation line of best fit
used to estimate a value outside the range of known values
correlation coefficient
number from -1 to 1 that tells you how closely the equation models the data. the closer r is to 1 or -1, the stronger fit the line is. the sign just tells you negative or positive correlation.
freemium
service offered as free with additional service charges
traditional/online savings account
low interest rates, can only withdraw a few times a month to avoid fee
certificate of deposit
deposit a fixed amount of $ for a fixed amount of time, mid-ish interests
money market account
interest-bearing account (middle ground btwn checking and savings account), can write checks/pay bills directly from account
how to boost banking security
multi factor authentication
automatic logging out after inactivity
skip public wifi, cellular data on a VPN, check for web page encryption by looking for https
ask for text alerts when large transactions occur/balance falls below a threshold
direct deposit
automatic transfer, don’t have to wait for funds to clear to use, commonly used for paychecks, tax refunds and benefits
person to person payment apps fee characteristics
standard transfer=no fee
instant transfer=usually a fee
pros of cashless society
reduced crime rates, digital paper trail, less money laundering, less time/cost to handle $, easier currency exchange internationally
cons of cashless society
personal info exposed to data breach, no alternative $ source in tech issues/hackers, tech learning curve, lack of control over spending, poor/unbanked will have harder time
