Finance Flashcards
(27 cards)
Types of Bank Accounts
Chequing Accounts:
Savings Accounts
Chequing Accounts: Designed for daily transactions like deposits, withdrawals, and bill payments.
Savings Accounts: Intended for saving money with interest earned on the balance.
Credit Cards
Credit Limit:
Interest Rates:
Minimum Payment:
Principal:
interest:
Credit Limit: The maximum amount you can borrow.
Interest Rates: Charged on outstanding balances not paid by the due date.
Minimum Payment: The smallest amount you must pay each month; paying only this amount can lead to high interest charges over time.
principal: Og amount of money being lent out
Interest : the fee paid out by the borrower to a lender for the privilege of being able to borrow that money.
Important Considerations
Overdraft Protection:
Fees:
Credit Score Impact:
Overdraft Protection: Allows transactions that exceed your account balance, often with fees.
Fees: Can include monthly maintenance fees, ATM withdrawal fees, and transaction fees.
Credit Score Impact: Responsible use of credit cards can improve your credit score, while misuse can harm it.
Income
Sources: Can include wages, allowances, gifts, and investment returns.
Expenses
Fixed Expenses:
Variable Expenses:
Expenses
Fixed Expenses: Regular, unchanging costs like rent or subscriptions.
Variable Expenses: Costs that fluctuate, such as groceries or entertainment.
Budgeting Methods
Envelope System:
Pay Yourself First:
50/30/20 Rule:
Budgeting Methods
Envelope System: Allocate cash for specific spending categories; once the envelope is empty, no more spending in that category.
Pay Yourself First: Automatically transfer a portion of your income into savings before spending.
50/30/20 Rule: Allocate 50% of income to needs, 30% to wants, and 20% to savings or debt repayment
Tracking Tools
Digital Tools:
Manual Methods:
Digital Tools: Apps and spreadsheets can help monitor income and expenses.
Manual Methods: Journals or envelopes can be used for budgeting.
Borrowing
Types of Credit:
Credit Cards:
Lines of Credit:
Loans:
Borrowing
Types of Credit:
Credit Cards: Short-term borrowing with high interest rates.
Lines of Credit: Flexible borrowing up to a set limit, often with lower interest rates than credit cards.
Loans: Fixed amounts borrowed for specific purposes, like student loans or car loans.
Responsible Borrowing:
Only borrow what you can repay.
Avoid borrowing for non-essential items.
Understand the terms and interest rates before borrowing.
Investing
Types of Investments:
Stocks:
Bonds:
Mutual Funds:
Stocks: Ownership in a company; potential for high returns but also high risk.
Bonds: Loans to governments or corporations; generally lower risk and return.
Mutual Funds: Pools of investments managed by professionals; offer diversification.
Risk and Return:
Risk and Return:
Higher potential returns often come with higher risk.
Diversification can help manage risk.
Leverage:
Leverage:
Borrowing money to invest can amplify both gains and losses.
If the investment loses value, you still owe the borrowed amount.
Creating a Budget – Quick Notes
Step 1:
Step 2:
Step 3:
Step 4:
Step 5:
Step 1: List your income (money you earn).
Step 2: List your expenses (money you spend), split into needs, wants, and savings.
Step 3: Make sure you don’t spend more than you earn.
Step 4: Set goals (short-term and long-term).
Step 5: Review and adjust your budget regularly.
Why it’s important: Budgeting helps you manage money, avoid overspending, and save for future needs
Understanding Money
Definition:
Forms of Money:
Understanding Money
Definition: Money is a medium of exchange used to buy goods and services.
Forms of Money: Includes coins, bills, and digital currency
Spending Money
Needs vs. Wants:
Needs:
Wants:
Needs: Essential items like food, clothing, and shelter.
Wants: Non-essential items like toys, games, and snacks.
Making Choices: Prioritizing needs over wants helps in managing money effective
Setting Goals
Short-Term Goals:
Long-Term Goals:
Importance:
Short-Term Goals: Saving for a toy or game.
Long-Term Goals: Saving for a bicycle or special outing.
Importance: Goals provide motivation and direction for saving
Saving Option
Description / Timeframe
Drawback
Benefit
Savings Account
Short-term; easy access; earns small interest
Low interest rate
Safe, insured, easy to access
Borrowing Option
Description / Timeframe
Drawback
Benefit
Credit Card
Short-term borrowing; repay monthly High interest if not paid in full
Convenient; builds credit history
✅ Good Debt
Debt that helps you increase your long-term wealth or improve your future.
Example: Student loans, mortgage, business loan
❌ Bad Debt
Debt used to buy things that lose value or aren’t necessary, often with high interest.
Example: Credit card debt for shopping, payday loans.
What is a grant?
What is a grant?
➝ Money you receive for education that does not need to be paid back.
What is a student loan?
➝ A loan designed to help students pay for postsecondary education (e.g., tuition, books, living expenses).
Debit Card
V.S
Credit Card
Debit Card:
A debit card is a payment card that allows you to access the money you already have in your bank account so that you can make purchases. Debit simply means a withdrawal of funds from your account.
Your money
No interest
No credit score impact
Credit Card:
A credit card is a payment card that you can use to make purchases using borrowed money, up to a certain limit, with the understanding that you will pay it back to the credit-card company later.
Borrowed money
Interest if unpaid
Builds credit score
cash advances?
which are when you can use your credit card to withdraw or transfer cash, rather than just purchase something. However, this is not recommended,
