Financial Literacy Flashcard

Front

What is a credit card used for?

Back

Credit cards should be used for everyday expenses like gas, groceries, eating out, and travel, rather than large purchases.

Front

What is a Roth IRA?

Back

A Roth IRA is a retirement account where contributions are made with after-tax dollars, allowing earnings to grow tax-free.

Front

Why is it important to pay off debt before investing in a Roth IRA?

Back

Credit card debt often has high interest rates that can negate the benefits of investing in a Roth IRA.

Front

What is a typical interest rate for a savings account at a local bank?

Back

A typical interest rate for a savings account at a local bank is around 0.02%.

Front

What does the 50/30/20 budget rule represent?

Back

The 50/30/20 budget rule allocates 50% of income to needs, 30% to wants, and 20% to savings and debt repayment.

Front

What are the tax benefits of a Roth IRA?

Back

The earnings in a Roth IRA are not taxed, allowing for tax-free growth.

Front

What is 'Guilt Free Spending' in the context of budgeting?

Back

Guilt Free Spending refers to the portion of your budget allocated for discretionary spending, which is 30% in the 50/30/20 rule.

Front

What is the maximum contribution limit for a Roth IRA?

Back

The maximum contribution limit for a Roth IRA is $7,000 per year for individuals under 50.

Front

What happens if you withdraw contributions from a Roth IRA?

Back

You can withdraw your contributions from a Roth IRA at any time without penalty, but withdrawing earnings may incur taxes.

Front

What is the difference between fixed costs and variable costs?

Back

Fixed costs remain constant regardless of activity level, while variable costs fluctuate with production or sales.