Financial Literacy Test Review 2015

  1. A Month in the Life

Concepts: Budgeting; Income and Wealth; financial choices; setting goals; pay yourself first; saving; spending

  1. Goal
  2. Budget Sheet
  1. Assets(own) and Liabilities (Expenses or debts)
  2. Pay Yourself First
  3. Wages, Salaries; income
  4. Wealth (Net Worth)
  5. Balanced, Surplus, Deficit Budgets
  6. Factors that influence the accumulation of wealth: Income; Expectations; Current interest rates; taxes
  1. Expenses
  1. Variable Expenses
  2. Periodic Expenses
  3. Fixed Expenses
  1. From Dreams to Reality

Concepts: Investment Saving

(investing= allocating money to use in a venture that offers the possibility of increased value as interest, income or worth)Check out the following before you put your money into any of these investments: Safety(FDIC) , Rate of Return(stock, market risk, inflation;principal) , Liquidity(how easy does it convert to cash)

Loan Own

Low risk High Risks

Income Investments Growth Investments

Usually Short -Terms Usually Long- terms

Savings Account
(loaning money to a financial institution) / Stocks (owner)
(owning part of a company)
U.S. Savings Bonds (creditor)
(loaning money to the federal government) / Real Estate
(owning property)
Certificates of Deposit
(loaning money to a financial institution) / Collectibles
(owning material items)
Money Market Deposit Account
(MMDA or CMA)
Loaning money to a financial institution / Mutual Funds
(owning funds made up of a combination of investment types)
Corporate and Government Bonds
(loaning money to companies and government agencies
  1. Your Credit, Your Future

Concepts: Credit Choices; credit reports; finance charges

compound interest: A= P (1 + r/n) nt

simple interest: I = PRT

Advantages:Disadvantages

Immediate possession / overspending
flexibility / Higher costs
safety / Impulse buying
Emergency funds
Character reference

Kinds of Credit (consumer credit is either loan credit(finance a purchase) or sales credit(buy goods and services now, but pay later)

Home Mortgages=long term(30, 25,20,15 years) loans to purchase a house or condo
Auto and Consumer Loans=loans for specific items (car with installment payments
Charge Accounts=Department stores: Dillards, Lowes, Boses, Star Furniture (higher interest than the bank or credit union)
Credit Cards= card holder may shop in different places….Visa, Mastercard, Discover Card. May make installment payments
(Not American Express because bill due in full in 30 days)
The cost of a credit card; 90 days interest-free credit; no annual fee; only 1.5 percent interest per month on the unpaid balance; no payments required for 6 to 12 months….

The three C’s of Credit help to create your FICO score…….A good score 700+

  1. Character – personal qualities of honesty and willingness to repay debts in a timely way
  2. Capacity - ability to re-pay your debts based on your income sources, how much you earn and your debt/income ratio
  3. Collateral – assets of value (money in the bank or tangible property (collateral)

The Card Game | FRONTLINE | PBS

  • cards/

The Case of the Missing Identity

(What did John Do Wrong”)-Don’t disclose personal info to strangers (especially your social security number); Demand privacy at an ATM(protect your pin number); Shred credit solitation appliciations applications you toss because you changed your mind; When completing a credit bill, precede it with a $sign .00; Beware of unknown recipients on the internet; Don’t send credit application information over an unsecured website………..

Concepts: Fraud; Identity Theft

  1. Fraud
  1. Identity theft
  1. Phishing (The FTC)
  1. Protect Yourself

(Insurance + pool the risk of an expensive personal injury or property damage risk with others)

Concepts: Insurance

Automobile insurance / Unintentional car damage
Health Insurance / Covers personal and family medical expenses
Dental Insurance / Covers dental expenses(preventive care)
Life Insurance / Provides financial support for dependents in the event of the policy holder’s untimely death
Disability Insurance / Covers personal income when illness or injury prevents the policy holder from working
Property Insurance / Protects personal possessions in the event of fire, flood, theft, natural disasters, etc.
Liability Insurance / Protects a legally responsible individual from unintentionally injuring someone or his or her property
Fiscal Policy:
Congress must pass a law
Taxes (Raise or Lower)
Government Spending (+ -) / Monetary Policy:
Decision by the Federal Reserve Bank:
The Reserve Requirement
The Discount rate (interest rates)
Buy/Sell Bonds