Financial Literacy Quiz Flashcards

Questions and Answers

What is gross pay?

Money you earn before taxes and deductions.

What is net pay?

Money you receive after taxes and deductions.

What is the first thing you should do when creating a budget?

Calculate your take home pay (net pay).

What are items you will typically see on a budget?

Pay, expenses, savings. Signup and view all the answers

Which pay should you use when creating a budget?

Net pay. Signup and view all the answers

What are fixed expenses?

Expenses that stay the same each month. Signup and view all the answers

What are variable expenses?

Expenses that change month to month. Signup and view all the answers

Which type of expenses is easier to reduce when budgeting?

Variable expenses. Signup and view all the answers

What is the 50/30/20 rule?

50% = needs, 30% = wants, 20% = savings. Signup and view all the answers

What is an unsecured loan?

A loan with no asset attached to it. Signup and view all the answers

What is a secured loan?

A loan with an asset attached to it. Signup and view all the answers

What is the possible range of FICO credit scores?

300-850. Signup and view all the answers

What makes up your credit score?

Payment history, credit mix, new credit, credit utilization, and length of credit history. Signup and view all the answers

What are examples of actions that will impact your credit score?

Paying your bill on time (+), applying for multiple cards in one month (-), having a credit card for a long time (+). Signup and view all the answers

What is the minimum payment for a credit card bill?

The smallest amount you can pay without being late. Signup and view all the answers

What are some benefits of having a credit card?

Good for emergencies, could raise your credit score when used responsibly, can earn rewards. Signup and view all the answers

What are some qualities of a checking account?

Money flows in and out easily, connects to your debit card, typically offers no interest. Signup and view all the answers

What are the differences between a savings and checking account?

Savings is meant for letting your money sit and earning interest; checking is for using cash. Signup and view all the answers

What are the 4 types of savings accounts?

Traditional Signup and view all the answers

What is a traditional savings account?

Earns little interest, allows deposits and withdrawals, no minimum balance. Signup and view all the answers

What is an online savings account?

Earns higher interest rates than a traditional savings account. Signup and view all the answers

What is a Certificate of Deposit?

Highest interest rates among the 4 types of accounts. Signup and view all the answers

What is a money market account?

It has checking account features, limited to 6 transactions a month, requires a high minimum balance. Signup and view all the answers

Study Notes

Gross and Net Pay

Gross pay refers to the total earnings before any taxes or deductions.
Net pay is the amount received after all deductions and taxes have been applied.

Budgeting Fundamentals

Start budgeting by calculating your take-home pay, known as net pay.
Common budget items include pay, expenses, and savings.
Use net pay for budgeting purposes to ensure accurate financial planning.

Types of Expenses

Fixed expenses remain constant each month, including mortgage/rent, taxes, insurance, and car loan payments.
Variable expenses fluctuate monthly, such as electricity, heating, gas, water, and groceries.
Variable expenses are easier to adjust in a budget to save money.

The 50/30/20 Rule

Allocate 50% of income for needs, 30% for wants, and 20% for savings.

Loans Overview

An unsecured loan does not require collateral and includes credit cards and student loans.
A secured loan is backed by an asset, such as a car or house, and includes mortgages and car loans.

Credit Scores

FICO credit scores range from 300 to 850, with a score of 700 or above considered excellent.
Major factors influencing credit scores include payment history, credit mix, new credit inquiries, credit utilization, and length of credit history.

Credit Impact Actions

Timely bill payments can positively affect your credit score.
Applying for multiple credit cards within a short time can negatively impact your score.
Long-term credit card use can enhance your credit score if managed responsibly.

Credit Card Payments

The minimum payment is the least amount required to avoid late fees, but it often leads to higher interest charges and a longer pay-off period.

Benefits of Credit Cards

Credit cards are useful for emergencies when cash is unavailable.
Responsible usage can improve credit scores and earn rewards.

Checking vs. Savings Accounts

Checking accounts allow easy access and management of funds, typically providing no interest.
Savings accounts are intended for earning interest and saving money over time, not for daily transactions.

Types of Savings Accounts

Traditional savings accounts earn minimal interest and have no minimum balance requirements.
Online savings accounts offer higher interest rates due to lower operational costs.
Certificates of Deposit (CDs) provide the highest interest rates but require funds to be locked in for set terms (e.g., 1, 3, or 5 years).
Money Market accounts combine checking features, allow check writing and bill payments but are limited to six transactions per month and generally require a higher minimum balance.

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Description

Test your knowledge of financial terms and concepts with this engaging flashcard quiz. Learn about gross pay, net pay, and budgeting essentials to enhance your financial literacy. Perfect for beginners seeking to understand personal finance basics.