Financial Literacy Flashcard

Front

What is a credit card used for?

Back

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

Front

What is a high-yield online savings account?

Back

A high-yield online savings account typically offers higher interest rates, such as 4.5%, compared to traditional savings accounts.

Front

What is the average interest rate for the S&P 500 over 10 years?

Back

The average interest rate for the S&P 500 over 10 years is approximately 11%.

Front

What is a zero-based budget?

Back

A zero-based budget requires that every dollar of income is allocated to expenses, savings, or debt repayment, ensuring no money is left unassigned.

Front

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

Back

Paying off debt is crucial because high-interest credit card debt can negate the benefits of investing in a Roth IRA.

Front

What are the benefits of having a budget line for savings?

Back

Having a budget line for savings ensures that saving is prioritized and not left as an afterthought.

Front

What is the purpose of an emergency fund?

Back

An emergency fund is designed to cover unexpected expenses, providing financial security.

Front

What is the difference between a traditional IRA and a Roth IRA?

Back

A traditional IRA allows for tax-deductible contributions, while a Roth IRA allows for tax-free withdrawals in retirement.

Front

What is 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 the significance of credit scores?

Back

Credit scores are used by lenders to assess the risk of lending money to individuals, influencing loan approval and interest rates.