Chapter 2 Savings
| Question | Answer |
|---|---|
| What two things do you consider when evaluating the time value of money? | Inflation and interest rate (or rate of return) |
| What are the essentials of wealth building? | Discipline, time, and compound interest |
| Why do you need an emergency fund at your age? | Emergencies can happen at any age |
Moreover, what are the essential elements of wealth building?
Terms in this set (30)
- Compound Interest. Interest paid on interest previously earned.
- Emergency Fund. Five hundred dollars saved to be used ONLY in the event of an emergency.
- Interest rate.
- Sinking Fund.
- Inflation.
- Interest- Bearing Account.
- 1st Foundation.
- 2nd Foundation.
Subsequently, question is, what does it mean to have a negative savings rate *? If your savings rate is negative, it doesn't necessarily mean that you don't have any savings. It means you're spending more than you earn, so you're dipping into your savings or you're borrowing to pay for purchases.
Correspondingly, when it comes to saving money the amount you save is determined by how much you have left?
When it comes to saving money, the amount you save is determined by how much you have left at the end of the month once all of your spending is done. When you're older and out of school, you'll need to grow your emergency fund into a full three to six months' worth of expenses.
What is an account that generates interest income on the available balance in the account?
Chapter 2 - Saving - Review
| A | B |
|---|---|
| True or False: An interest-bearing account is an account that generates interest income on the available balance in the account | True |
| True or False: When you are in high school, you will not have the same emergency expenses as your parents? | True |
What country has a negative savings rate?
Some countries even had a negative savings rate, including Latvia, Greece, Portugal, South Africa, and Denmark, and it's not necessarily because they're financially irresponsible. In Denmark, negative interest rates discourage savings and encourage borrowing.When a person intentionally invests money in a place where it can earn more money?
Ch. 2 Vocabulary| A | B |
|---|---|
| Compares after-tax income to the money people spend on a variety of items | Savings Rate |
| The five steps to financial success | Five Foundations |
| Save a $500 emergency fund | the First Foundation |
| When a person intentionally invests money in a place where it can earn more money | Wealth Building |
Does your income level affect your saving habits?
Your income levels greatly affect your savings habits. Americans typically maintain a very high savings rate. When it comes to saving money, the amount you save is determined by how much you have left when all your spending is done. Money today has different buying power than the same amount of money in the future.What is a sinking fund quizlet?
sinking fund. 1)A sinking fund is a fund established by an economic entity by setting aside revenue over a period of time to fund a future capital expense, or repayment of a long-term debt. 2) To establish a sinking fund, the issuer deposits cash in an account with the trustee.What is wealth building?
Wealth building is the process of generating long-term income through multiple sources. This refers to more than job-based income and instead includes savings, investments and any income-generating assets. The wealth building definition relies on proper financial planning and insight into one's future financial goals.Why is it called a sinking fund?
Based on the history of sinking funds being used to pay down the national debt in 18th century England, my best guess is that it is called “sinking” fund because the debt obligation is slowly “sinking”, or debt is being paid down over time.What is the first foundation?
First Foundation Inc. provides integrated investment management, wealth planning, consulting, trust, and banking services. The Company offers long-range consulting services, estate planning, financial competency education, and life skills training. First Foundation serves customers in the United States.Which reasons can be fixed by having a money plan?
Since budgeting allows you to create a spending plan for your money, it ensures that you will always have enough money for the things you need and the things that are important to you. Following a budget or spending plan will also keep you out of debt or help you work your way out of debt if you are currently in debt.Why do people borrow money for large purchases instead of using a sinking fund?
Most of the people borrow money for large purchases instead of using sinking fund because for immediate money requirement borrowing money is an easy thing and time effective way whereas sinking fund requires pre planning and it takes time but it is also a safe and efficient way for clearing the debts.For what purpose should you use the sinking fund approach?
A sinking fund is a sum of money that you set aside (usually by saving a bit each month) that's completely separate from your savings account or your emergency fund. A sinking fund can be used to pay for home repairs, save for a new car, pay for your vacation, or cover large medical bills.What is emergency savings quizlet?
Purpose of an Emergency Fund. -Allows you to have money available for any surprise expenses. -prevents you from going into debt. Purpose of a Sinking Fund. Way to save up for a large purchase by setting aside money each month.What is the first foundation explain how and why the dollar amount?
Chapter 2 Savings| Question | Answer |
|---|---|
| What is the First Foundation? Explain how and why the dollar amount will change as you get older. | Save $500 for emergency fund. As you get older, your responsibilities become greater and more expensive. |
| Money set aside and left alone for a "rainy day." | Emergency fund |
