Savings for Large Purchases - Chapter 3, Lesson 4
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Questions and Answers

Save up and pay for things with __________.

cash

What payments should you avoid for life?

Car payments

If you invested __________ per month in mutual funds from age 25 to 65, you could have $3.6 million in a mutual fund.

$554

What is the percentage of principal charged by the lender for use of its money?

<p>Interest rate</p> Signup and view all the answers

What is the amount of interest charged on a debt but not yet collected called?

<p>Accrued interest</p> Signup and view all the answers

What is the third foundation?

<p>Pay cash for your car</p> Signup and view all the answers

Study Notes

Key Financial Terms and Concepts

  • Cash: Recommended method for purchases; encourages saving rather than accruing debt.

  • Car Payments: Long-term financial burdens to avoid; contribute to overall debt and can hinder financial freedom.

  • Investment Potential: Investing $554 monthly from age 25 to 65 could potentially yield $3.6 million, highlighting the power of compound interest in mutual funds.

  • Interest Rate: Represents the cost of borrowing; expressed as a percentage, it is critical for understanding loan agreements.

  • Accrued Interest: Refers to the interest on a loan that builds up over time but has not yet been paid; important for calculating total debt and future payments.

  • Pay Cash for Your Car: This principle is part of the third foundation of financial management, emphasizing the avoidance of car loans to maintain better financial health.

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Description

Test your knowledge on important financial concepts related to saving for large purchases with these flashcards. Learn about cash, car payments, investment strategies, and interest rates as you prepare for responsible financial management. Each card presents a key term and its definition to help reinforce your understanding.

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