Money and Cost of Money Most Missed

What does the term "Pay yourself first" mean in personal finance?

• Paying off all your debts before saving

• Setting aside a portion of your income for savings before spending on anything else

• Paying your bills before saving

• Spending on leisure activities before saving

What is a Certificate of Deposit (CD) and what happens if you cash it before maturity?

• A type of savings account with a fixed interest rate; you lose all interest if cashed early

• A loan from a bank; you pay a penalty if cashed early

• A savings account with a variable interest rate; you gain more interest if cashed early

• A type of savings account with a fixed interest rate; you may incur a penalty if cashed early

Which institutions typically charge the highest interest rates on loans?

• Banks and credit unions

• Pawnshops and payday lenders

• Finance companies and tax preparers

• Credit unions and finance companies

What is a credit union and what is one advantage of using it?

• A for-profit financial institution; higher interest rates on loans

• A non-profit financial institution; lower fees and better interest rates for members

• A government-run financial institution; guaranteed loans

• A private financial institution; exclusive membership

How does overdraft protection work?

• It automatically declines transactions that exceed your balance

• It allows transactions to go through even if you don't have enough funds, often for a fee

• It provides a loan to cover overdrafts without any fees

• It prevents any transactions from occurring if your balance is low

What is compound interest?

• Interest calculated only on the initial principal

• Interest calculated on both the initial principal and the accumulated interest

• Interest that decreases over time

• Interest that is paid only at the end of the investment period

What does the Rule of 72 help you estimate?

• The time it takes for an investment to double at a fixed annual interest rate

• The time it takes to pay off a loan

• The interest rate needed to double an investment in a year

• The time it takes for an investment to halve in value

What is the difference between liquid and less liquid financial products?

• Liquid products are harder to convert to cash; less liquid products are easier

• Liquid products are easier to convert to cash; less liquid products are harder

• Liquid products have higher interest rates; less liquid products have lower rates

• Liquid products are riskier; less liquid products are safer

Why is it important to reconcile a checking account?

• To ensure you have enough funds for future transactions

• To verify that your records match the bank's records and catch any errors or fraud

• To increase your credit score

• To avoid paying taxes

What are tax anticipation loans?

• Loans given based on expected future tax refunds

• Loans that are tax-free

• Loans that must be repaid before taxes are filed

• Loans that are only available during tax season