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100 Financial Literacy Flashcards

Discover this comprehensive collection of 100 Financial Literacy Flashcards designed to boost your financial knowledge! These flashcards cover key topics like budgeting, investing, saving, and managing debt, providing essential insights to enhance your money skills. Perfect for beginners and finance enthusiasts alike, these flashcards offer clear, concise definitions and tips to help you master personal finance concepts quickly and effectively. Start improving your financial literacy today! (100 cards)

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1
Q

What is a budget?

A

A financial plan that outlines income and expenses over a period of time.

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2
Q

Why is budgeting important?

A

It helps manage money, control spending, and reach financial goals.

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3
Q

What is a zero-based budget?

A

A budgeting method where every dollar is assigned a purpose, and income minus expenses equals zero.

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4
Q

What is the 50/30/20 rule?

A

A budgeting method that allocates 50% of income to needs, 30% to wants, and 20% to savings and debt repayment.

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5
Q

What are fixed expenses?

A

Expenses that remain the same each month, like rent or a car payment.

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6
Q

What are variable expenses?

A

Expenses that can vary each month, like groceries or entertainment.

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7
Q

What is an emergency fund?

A

A savings fund set aside for unexpected expenses or financial emergencies.

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8
Q

How much should you save in an emergency fund?

A

Typically 3-6 months’ worth of living expenses.

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9
Q

What is discretionary spending?

A

Non-essential spending on items like dining out or hobbies.

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10
Q

What is a sinking fund?

A

Savings for specific future expenses, such as a vacation or car repairs.

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11
Q

What is compound interest?

A

Interest calculated on both the initial principal and the accumulated interest from previous periods.

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12
Q

What is the rule of 72?

A

A formula to estimate the number of years required to double an investment at a fixed annual rate of interest.

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13
Q

What is an IRA?

A

Individual Retirement Account, a tax-advantaged account for retirement savings.

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14
Q

What is a 401(k)?

A

An employer-sponsored retirement plan where employees can contribute a portion of their paycheck pre-tax.

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15
Q

What is dollar-cost averaging?

A

Investing a fixed amount of money at regular intervals, regardless of market conditions.

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16
Q

What is an ETF?

A

Exchange-Traded Fund, a type of investment fund traded on stock exchanges, much like stocks.

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17
Q

What is a mutual fund?

A

An investment vehicle that pools money from many investors to purchase a diversified portfolio of securities.

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18
Q

What is a stock?

A

A share in the ownership of a company, representing a claim on part of the company’s assets and earnings.

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19
Q

What is a bond?

A

A fixed income investment where an investor loans money to a company or government that borrows the funds for a defined period.

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20
Q

What is a dividend?

A

A portion of a company’s earnings distributed to shareholders.

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21
Q

What is a credit score?

A

A numerical representation of your creditworthiness based on your credit history.

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22
Q

What is considered a good credit score?

A

Typically, a score of 670-739 is considered good.

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23
Q

What is a credit report?

A

A detailed report of your credit history prepared by a credit bureau.

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24
Q

What is APR?

A

Annual Percentage Rate, the yearly interest rate charged on borrowed money.

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25
What is a secured credit card?
A credit card backed by a cash deposit, used by those with poor or no credit history to build credit.
26
What is a debt-to-income ratio?
A measure of your monthly debt payments compared to your monthly income.
27
What is a minimum payment?
The smallest amount you can pay on a credit card bill to avoid late fees.
28
What is a balance transfer?
Moving debt from one credit card to another, often to take advantage of lower interest rates.
29
What is a personal loan?
A loan that can be used for various purposes and is paid back in installments.
30
What is a payday loan?
A short-term, high-interest loan typically used to cover expenses until the next payday.
31
What is gross income?
Total income before taxes and deductions.
32
What is net income?
Income remaining after taxes and deductions are taken out.
33
What is passive income?
Income earned with minimal effort, such as rental income or dividends.
34
What is earned income?
Income from working, such as wages, salaries, and tips.
35
What is a W-2 form?
A tax form that reports wages paid to employees and the taxes withheld.
36
What is a W-4 form?
A tax form that tells your employer how much federal income tax to withhold from your paycheck.
37
What is a 1099 form?
A tax form used to report income from freelance work or other non-employee compensation.
38
What is FICA?
Federal Insurance Contributions Act; taxes that fund Social Security and Medicare.
39
What is tax deduction?
An expense that can be subtracted from gross income to reduce taxable income.
40
What is a tax credit?
A dollar-for-dollar reduction in the amount of taxes owed.
41
What is financial independence?
Having enough income to cover living expenses without being dependent on employment.
42
What is FIRE?
Financial Independence, Retire Early; a movement aimed at achieving financial independence and retiring early.
43
What is a financial goal?
A specific objective to be achieved with money over a defined period.
44
What is retirement planning?
The process of determining retirement income goals and the actions necessary to achieve them.
45
What is estate planning?
The process of arranging for the disposal of an individual's assets after death.
46
What is a will?
A legal document that outlines how a person's assets should be distributed after death.
47
What is a trust?
A fiduciary arrangement where one party holds assets on behalf of another.
48
What is a beneficiary?
A person or entity entitled to receive benefits or assets from a will, trust, insurance policy, or retirement account.
49
What is a financial advisor?
A professional who provides financial services and advice to individuals or businesses.
50
What is a financial plan?
A comprehensive evaluation of an individual's current and future financial state by using currently known variables to predict future cash flows, asset values, and withdrawal plans.
51
What is health insurance?
A type of insurance that covers medical expenses.
52
What is life insurance?
A contract that pays out a sum of money to beneficiaries upon the insured's death.
53
What is term life insurance?
Life insurance that provides coverage for a specific period of time.
54
What is whole life insurance?
Life insurance that provides coverage for the insured's entire lifetime and includes an investment component.
55
What is auto insurance?
Insurance that covers damages to vehicles and injuries to people in an accident.
56
What is renters insurance?
Insurance that covers personal belongings and liability in a rented property.
57
What is homeowners insurance?
Insurance that covers damages to a home and the owner's belongings.
58
What is disability insurance?
Insurance that provides income in the event the policyholder is unable to work due to a disability.
59
What is liability insurance?
Insurance that provides protection against claims resulting from injuries and damage to people and property.
60
What is an insurance premium?
The amount paid for an insurance policy.
61
What is a mortgage?
A loan used to purchase real estate, with the property itself serving as collateral.
62
What is a down payment?
The initial payment made when buying a property, typically a percentage of the total price.
63
What is equity in real estate?
The difference between the market value of a property and the amount owed on it.
64
What is a fixed-rate mortgage?
A mortgage with a constant interest rate and monthly payments that do not change over the loan's term.
65
What is an adjustable-rate mortgage (ARM)?
A mortgage with an interest rate that can change periodically based on an index.
66
What is a real estate agent?
A licensed professional who assists in buying, selling, or renting properties.
67
What is a home appraisal?
An assessment of a property's value by a qualified professional.
68
What are closing costs?
Fees and expenses paid during the finalization of a real estate transaction.
69
What is a property tax?
A tax assessed on real estate by the local government.
70
What is a title in real estate?
A legal document that certifies ownership of a property.
71
What is a personal loan?
A type of loan that can be used for any purpose and is repaid in fixed installments.
72
What is a student loan?
A loan designed to help students pay for education-related expenses.
73
What is an auto loan?
A loan used to purchase a vehicle, with the vehicle serving as collateral.
74
What is a payday loan?
A short-term, high-interest loan typically due on the borrower's next payday.
75
What is a loan term?
The length of time you have to repay a loan.
76
What is collateral?
An asset pledged as security for a loan, which can be seized if the loan is not repaid.
77
What is a cosigner?
A person who agrees to repay a loan if the borrower defaults.
78
What is interest?
The cost of borrowing money, usually expressed as a percentage of the principal.
79
What is a principal in a loan?
The original amount of money borrowed or the remaining amount owed on a loan, separate from interest.
80
What is a default on a loan?
Failure to repay a loan according to the terms agreed upon in the contract.
81
What is a 401(k)?
An employer-sponsored retirement savings plan where employees can contribute a portion of their wages.
82
What is an IRA?
Individual Retirement Account, a tax-advantaged account for retirement savings.
83
What is a Roth IRA?
A type of IRA where contributions are made after-tax, and withdrawals during retirement are tax-free.
84
What is a pension?
A retirement plan where an employer provides monthly income to retired employees based on salary and years of service.
85
What is Social Security?
A federal program that provides retirement, disability, and survivor benefits.
86
What is a required minimum distribution (RMD)?
The minimum amount that must be withdrawn from certain retirement accounts each year after reaching a certain age.
87
What is a retirement annuity?
A financial product that provides a steady income stream during retirement.
88
What is a retirement age?
The age at which a person chooses to retire, often around 65-67 years old.
89
What is a Roth 401(k)?
A retirement savings plan offered by employers, combining features of a Roth IRA and a traditional 401(k).
90
What is a retirement portfolio?
A collection of investments aimed at generating income during retirement.
91
What is inflation?
The rate at which the general level of prices for goods and services rises, eroding purchasing power.
92
What is deflation?
A decrease in the general price level of goods and services.
93
What is a recession?
A significant decline in economic activity across the economy, lasting more than a few months.
94
What is diversification in investing?
The practice of spreading investments across various assets to reduce risk.
95
What is liquidity?
The ease with which an asset can be converted into cash without affecting its market price.
96
What is net worth?
The value of all assets minus liabilities.
97
What is financial literacy?
The ability to understand and effectively use various financial skills, including personal financial management, budgeting, and investing.
98
What is a side hustle?
A job or business that someone engages in outside of their main employment to earn extra income.
99
What is frugality?
The practice of being economical with resources, avoiding waste, and making cost-effective decisions.
100
What is a financial plan?
A comprehensive evaluation of an individual's current and future financial state by using currently known variables to predict future cash flows, asset values, and withdrawal plans.

Personal Finance (1 decks)

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