Financial Literacy Final Review

Front

What is Financial Literacy?

Back

Financial literacy is the ability to understand and effectively use various financial skills, including personal financial management, budgeting, and investing.

Front

Define Budgeting.

Back

Budgeting is the process of creating a plan to spend your money, ensuring that you can cover your expenses while saving for future goals.

Front

What is the purpose of a Savings Account?

Back

A savings account is a deposit account held at a financial institution that provides a modest interest rate. It is used to save money while keeping it accessible.

Front

Explain the concept of Compound Interest.

Back

Compound interest is the interest on a loan or deposit calculated based on both the initial principal and the accumulated interest from previous periods.

Front

What is a Credit Score?

Back

A credit score is a numerical expression of a person's creditworthiness, based on their credit history, used by lenders to assess the risk of lending money.

Front

Define the term 'Investment'.

Back

An investment is an asset or item acquired with the goal of generating income or appreciation.

Front

What is the difference between a 'Need' and a 'Want'?

Back

A 'Need' is something essential for survival (e.g., food, shelter), while a 'Want' is a desire for something that is not essential (e.g., luxury items).

Front

What is the significance of an Emergency Fund?

Back

An emergency fund is a savings account that is set aside for unexpected expenses, providing financial security and peace of mind.

Front

Explain the term 'Debt-to-Income Ratio'.

Back

The debt-to-income ratio is a personal finance measure that compares an individual's monthly debt payments to their monthly gross income, used by lenders to evaluate borrowing risk.

Front

What is a Mutual Fund?

Back

A mutual fund is an investment vehicle that pools money from many investors to purchase a diversified portfolio of stocks, bonds, or other securities.