Challenges to Saving and Investing

Best for short term goals

• saving

• investing

Best for long term goals

• Saving

• Investing

What does it mean to "pay yourself first"?

• Deposit money into your savings account before spending on anything else.

• Purchase an item you want before something you need.

• Pay all of your mandatory expenses before paying for optional expenses.

• Obtain an additional job to supplement your income.

How do you distribute your money when using the 50-20-30 rule? 

• 50% should be used for fixed/essential expenses, 20% for savings, and 30% for flexible expenses. 

• 50% should be for savings, 20% for flexible expenses, and 30% for fixed/essential expenses

• 50% should be for rent, 20% for groceries, and 30% for entertainment

• 50% should be for gasoline and car maintenance, 20% for rent, and 30% for flexible expenses.

How is compound interest different from simple interest?

• Compound interest is when interest is paid on the principal amount only. Simple interest is when interest is paid on the principal amount and on the interest already earned.

• Simple interest is when interest is paid on the principal amount only. Compound interest is when interest is paid on the principal amount and on the interest already earned.

• The money earned from simple interest can only be accessed after 1 year, while you can access the money earned from compound interest at any time.

• The money earned from compound interest is placed into a separate account, while the money earned from simple interest stays within the same account.

What does it mean to set up an “automatic deposit”?

• You can set up your paycheck to be automatically delivered to your mailing address in an envelope in cash.

• A copy of your paycheck gets automatically sent to the IRS so that you do not need to file taxes for that year.

• You set up an amount of your paycheck to be deposited into an account automatically.

• Your bills are automatically paid for by the bank.

_____ is for emergencies & goals

• Saving

• Investing

_____ is for long-term wealth

• Saving

• Investing

Which of these statements about saving is INCORRECT?

• People often believe they are saving when they buy products at a listed discount, even if they didn't need the product in the first place

• It is extremely difficult to open a savings account, as you typically need at least $10,000 for your initial deposit

• Without a separate savings account to pay yourself first, it's more likely that you'll spend all of your income each month

• Billions of dollars are spent on marketing to persuade consumers to spend money instead of saving it

You are 18 years old, opening your first savings account, and are considering three options:

BANK A is not FDIC insured, has an interest rate of 5%, and a minimum deposit of $25.

BANK B is FDIC insured, has an interest rate of 0.01%, and a minimum deposit of $50.

BANK C is FDIC insured, has an interest rate of 0.02%, and a minimum deposit of $10,000.

All three have fees competitive with other banks. Which bank is the best option?

• Bank A

• Bank B

• Bank C

• All 3 banks are equally good options