Financial Literacy Flashcard

Credit cards should be used for everyday purchases like gas, groceries, eating out, and travel, rather than large purchases.

A high-yield online savings account typically offers higher interest rates, such as 4.5%, compared to traditional savings accounts.

The average interest rate for the S&P 500 over 10 years is approximately 11%.

A zero-based budget requires that every dollar of income is allocated to expenses, savings, or debt repayment, ensuring no money is left unassigned.

Paying off debt is crucial because high-interest credit card debt can negate the benefits of investing in a Roth IRA.

Having a budget line for savings ensures that saving is prioritized and not left as an afterthought.

An emergency fund is designed to cover unexpected expenses, providing financial security.

A traditional IRA allows for tax-deductible contributions, while a Roth IRA allows for tax-free withdrawals in retirement.

Compound interest is the interest on a loan or deposit calculated based on both the initial principal and the accumulated interest from previous periods.

Credit scores are used by lenders to assess the risk of lending money to individuals, influencing loan approval and interest rates.