Chapter 2 Notes

Question 1

maturity

Answer 1

the length of time your deposit stays on account without penalty

Question 2

standard of living

Answer 2

the economic well being of a country

Question 3

sinking fund

Answer 3

saving money over time for a large purchase

Question 4

fixed expense

Answer 4

these expenses stay the same

Question 5

2 examples of fixed expenses

Answer 5

car payment, mortgage, rent

Question 6

flexible expense

Answer 6

these expenses vary

Question 7

2 examples of a flexible expense

Answer 7

groceries, entertainment, utilities bill

Question 8

self interest

Answer 8

the impulses that encourage us to fulfill our needs and wants

Question 9

wants

Answer 9

desires for economic goods or services not necessary in order to survive

Question 10

needs

Answer 10

economic goods and services that are basic for living such as food, clothing, and shelter

Question 11

usury

Answer 11

charging extremely high rates of interest

Question 12

finance charge

Answer 12

the total cost of credit

Question 13

investments

Answer 13

accounts or arrangements in which a person puts his/her money for long-term growth

Question 14

savings bond

Answer 14

the certificate representing a debt

Question 15

liquidity

Answer 15

quality of an asset that permits it to be converted quickly into cash w/o loss of value; ease of converting savings into cash

Question 16

amoral

Answer 16

lacking morals; neither good or bad

Question 17

compound interest

Answer 17

interest paid on interest previously earned

Question 18

emergency fund

Answer 18

$500 in readily available cash to be used only in the even of an emergency

Question 19

interest rate

Answer 19

percentage paid to lender for the use of borrowed money; percentage earned in invested principle

Question 20

inflation

Answer 20

the rate at which the general level of prices for goods and services rises

Question 21

interest bearing account

Answer 21

on that earns interest over a specified time period

Question 22

timed deposit

Answer 22

you have to leave it on deposit for an agreed amount of time

Question 23

2 examples of a timed deposit

Answer 23

CD or certificate of deposit or a US savings bond

Question 24

diversification

Answer 24

the practice of dividing the money a person invests between several different types of investments in order to lower risk; a variety of investments

Question 25

negative savings rate

Answer 25

the savings rate turns negative when a person takes on additional debt

Question 26

3 reasons people don’t save

Answer 26

lack of discipline, lack of focus, lack of budget

Question 27

high cost of liquidity

Answer 27

low interest rates

Question 28

savings bond is…

Answer 28

1. guaranteed by the government 2. low risk 3. a loan from the buyer to the government

Question 29

economists measure savings to…

Answer 29

1. help monitor consumer consumption 2. determine the strength of the economy 3. predict shortages

Question 30

3 reasons people save

Answer 30

for an emergency fund, for purchases, and for wealth building

Question 31

a financial plan starts with a

Answer 31

budget

Question 32

the Five Foundations to Personal Finance

Answer 32

1. $500 emergency fund 2. get out of debt 3. pay cash for your car 4. pay cash for college 5. build wealth and give

Question 33

__% of American workers have not even calculated what it would take to retire with dignity

Answer 33

58

Question 34

__% hope to have a standard of living equal to or better than that of their working years

Answer 34

59

Question 35

money is ____

Answer 35

amoral

Question 36

how to save $500

Answer 36

less expenses on entertainment, work (summer job), sell things, allowance

Question 37

__% of America’s millionaires are first generation rich

Answer 37

80

Question 38

first generation rich

Answer 38

they started with nothing, did smart stuff, and became millionaires

Question 39

prioritize spending and say

Answer 39

NO

Question 40

Murphy’s law

Answer 40

if it can go wrong it will go wrong

Question 41

__% of 90 days same as cash contracts don’t get paid pack in 90 days so you get saddled with ______

Answer 41

88

a high interest rate

Question 42

the average car payment in America is

Answer 42

$464 a month

Question 43

the top four reasons why teens save

Answer 43

1. college 2. emergencies 3. big purchases 4. a car

Question 44

preauthorized checking withdrawals

Answer 44

the bank takes money out of your account for stuff automatically

Question 45

budget to ______

Answer 45

give, save, THEN spend

Question 46

it takes an average of ___ years to become a millionaire which means you need ____ and ____

Answer 46

17

hard work, focus, and discipline

Question 47

the typical millionaire in America goes ______

Answer 47

unnoticed

Question 48

plastic surgery

Answer 48

cuts up credit card because the credit card just put you in an endless cycle of debt

Question 49

“savings” means having

Answer 49

contentment and pride

Question 50

is saving determined by…

Answer 50

how much money you have left at the end of the month (set aside money @ beginning of month/pay period)

Question 51

balance (as it relates to money and saving

Answer 51

the amount of money in an account

Question 52

2 benefits gained by saving

Answer 52

security and interest

Question 53

Ben and Arthur saving example

Answer 53

1. the length of time money is invested matters 2. the rate of return matters 3. it’s never too late to start

Question 54

advantage of a regular savings account

Answer 54

high liquidity

Question 55

disadvantage of a regular savings account

Answer 55

a low interest rate