Financial Literacy Flashcard

Front

What is the primary difference between assets and liabilities?

Back

Assets provide future economic benefit, while liabilities represent future obligations.

Front

How does compound interest primarily work?

Back

Interest is earned on both the principal and accumulated interest.

Front

What is the main purpose of an emergency fund?

Back

To cover unexpected expenses and avoid debt.

Front

Why is it important to review your credit report regularly?

Back

To check for errors and monitor credit health.

Front

What is the effect of inflation on purchasing power?

Back

It decreases purchasing power over time.

Front

What does the time value of money concept state?

Back

Money is worth more now than the same amount in the future.

Front

How does supply and demand affect personal finance?

Back

It influences interest rates and the cost of goods and services.

Front

What is the formula for calculating net worth?

Back

Assets minus liabilities.

Front

What does opportunity cost represent?

Back

The potential benefits lost when choosing one option over another.

Front

Why is tracking every transaction important?

Back

To understand where your money is going and identify spending patterns.