Foundations in Personal Finance high school edition Chapter 2 – Flashcards
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Compound interest
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Interest paid on interest previously earned; credited daily, monthly, quarterly or semiannually.
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Emergency fund
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Five hundred dollars in readily available cash to be used only in the event of an emergency; the goal of the First Foundation.
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Interest rate
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Percentage paid to a lender for the use of borrowed money (in debt); percentage earned on invested principal (in investing).
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Five Foundations
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The five steps to financial success.
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Sinking fund
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Saving money over time for a large purchase.
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1. Save a $500 _________ Fund
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emergency
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2. Get out of __________
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debt
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3. Pay ____________ for your car
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cash
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4. Pay cash for ______________
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college
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5. Build ______________ and ______________
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wealth, give
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7. The First Foundation is $________in an emergency fund. You should do this as quickly as possible.
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500
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8. When you're in high school, you won't have the same emergency expenses as your ______ (like needing to put a new roof on the house). For you, a surprise expense might be fixing a flat tire or replacing a broken cell phone.
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parent
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9. An emergency fund allows you to have money available for any surprise _______.
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expenses
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10. If you don't have money saved to pay for these things, then ______ will start looking like an easy answer.
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debt
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11. Debt ______ solves problems. At best, it just delays one problem while creating another one!
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never
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12, 13. When you're older and out of school, you'll need to ______ your emergency fund into a full three to ______ months' worth of expenses.
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grow, six
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14. Make sure this money is kept in the ______ and that you ONLY use it for emergencies. You can't keep the money handy, because it will get spent.
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bank
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15. Keep your emergency fund in a ______ savings account away from your spending money.
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seperate
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16. ______ Fund
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Emergency
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17. ______
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Purchases
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18. ______ Building
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Wealth
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19. ______ are going to happen. County on it. The First Foundation, a beginner emergency fund, is $500.
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Emergencies
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20. The second thing you save money for is _______
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purchases
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21, 22. Instead of ______ to purchase, pay cash by using a ____fund approach.
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borrowing, sinking
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23. The third thing you save money for is ______ building.
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wealth
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24. ______ is the key ingredient when it comes to wealth building.
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Discipline
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25. Building wealth is a ______ not a sprint.
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marathon
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26, 27. ______ ______ is a mathematical explosion. You must start ______.
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Compound Interest, now
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How to calculate Compound Interest
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FV=PV (1+r/m)^mt
