ONLINE FINANCIAL LITERACY STUDY GUIDE

1. The federal government provides insurance to guarantee deposits made at insured

banks. The FDIC insures depositor’s accounts up to $250,000. They insure
deposit accounts such as checking and savings accounts, certificate of deposits
(cd) and money market deposit accounts. Examples of what is not insured by the
FDIC would include stocks, bonds and mutual funds.
2. Direct deposit is an easy way for an employee to be paid, by authorizing your
bank to directly put your paycheck into your checking account.
3. A bank statement is a summary of all the transactions performed during a given
month in your checking account, and can include the following: Deposits,
Checks, POS purchases, withdrawals, and ATM withdrawals.
4. When you receive your bank statement, you should compare it to your check
register to see if there are outstanding transactions, or any errors. You should
then correct any errors in your checkbook. This is called reconciling.
5. When depositing a check you must endorse the back of the check by signing it.
6. A check is a financial instrument and is a written request to transfer money from
your checking account.
7. Overdraft protection is a line of credit that banks offer to their customers to cover
their overdrafts. Overdraft protection kicks in when a customer writes a check for
more than the amount in his or her account.
8. In 1935, Congress passed and Democratic President Franklin D. Roosevelt signed
into law the "Social Security Act." This law created "a system of Federal old-age
benefits" for workers and their families.
9. Social Security's tax rates are as follows:

   Social Security Tax

Employee portion  6.2%
Employer portion  6.2%
Total  12.4%

10. From the beginning of the Social Security program through 2002, the full
retirement age of 65 was not changed. A law passed in 1983 requires that it be
increased in small steps to the age of 67 by the year 2027. Any person born after
1960 now has to be 67 to collect a full social security benefit.
11. The purpose of a budget is not to spend less than you earn. It divides your
monthly expenses into different categories such as groceries and food.
12. When using a credit card, the debtor, pays interest on any balance carried forward
to the following month. If the credit card balance is paid in full, and within the
grace period, no interest needs to be paid. Borrowers are required to pay at least
the minimum balance each month to the creditor. When using a credit card you
must know what your “line of credit” limits are (the maximum you can borrow).
Credit cards are an example of unsecured credit (not backed by assets).
13. The easier it is to convert an asset into cash, the more liquid that asset is said to
be. Very liquid assets would include: cash, savings and checking accounts
examples of less liquid assets would be: property, stocks, bonds, certificate of
deposits (cd).
14. Compound interest arises when interest is added to the amount of a deposit
(principal) or loan, so that, from that moment on, the interest that has been added
also earns interest. In contrast, simple interest does not allow interest to be earned
on the interest, only the principal.
15. Income stocks: An equity security that pays regular, often steadily increasing
dividends, and offers a high yield that may generate the majority of overall returns.
Blue Chip stocks: Stocks of large and well established companies with proven
earnings and solid reputations.
Penny Stocks: Shares of small public companies that trade their stock at inexpensive
prices.
Growth Stock: Shares in companies that are expected to grow faster than average.
16. When owning an automobile the following insurance is an option (although liability
coverage must be purchased):
Collision: Covers damage to your car when you are at fault in an accident.
Liability: Provides protection for injuries to another person and their property.
Comprehensive: Covers the value of your car if it is stolen or vandalized.
Uninsured motorist protection: Protection against hit-and-run drivers and motorists
who have no insurance.
No-Fault insurance: Pays for injuries caused in an accident, regardless of fault.
17. A real estate mortgage is a contract between the borrower and the lender for the
purpose of buying property. Basically, there are 2 types of mortgages:
Fixed rate mortgages: Payment remains the same for the life of the loan.
Variable rate mortgages: Payment varies during the life of the loan. Borrowers
sometimes choose this type of mortgage because the payments tend to be less in the
beginning of the loan and increase in later years.
18. When renting an apartment/home, the tenant (person who pays for property lived in)
pays the landlord (owner of property) rent in lieu of a mortgage payment. Upfront
costs are much lower when renting, although one who rents will never build equity
(the difference between what the property is valued at and what is owed on it)
because he or she do not own the property.
19. There are 3 credit bureaus that report your credit information to businesses. They
include: Equifax, Experian, and Trans Union. In addition to reporting your FICO
score and any other information a bank in seeking on you, they provide help to you
the borrower too. If there is an error on your credit report, you would contact one of
the 3 consumer reporting agencies. You only need to contact 1 of the 3 agencies
when placing a fraud alert on your account due to identity theft.
20. An entrepreneur is someone who is willing to take a risk, and starts his or her own
business. A businessperson is one who is involved and participates in some type of
business, whether it be industrial or commercial.
21. Some interesting facts:
The average cost of a one day hospital stay in the US is $3,949. 00.
The average credit card debt in the US is $15,950.00.
The average life expectancy in the US is 78.7 years old.
The average retirement benefit in the US from the SSA is $1,230.00.
 The average student loan debt is about $35,000.
Norway pays the highest gas prices in the world currently $10.08 a gallon.

23.  A check register keeps track of the checks and check card purchases and
withdrawals you make, in addition to your deposits. An entry is shown here:
 
DATE NO. TO/FOR PAYMENT/   DEPOSIT/ BALANCE FORWARD
DEBT CREDIT $

 1/2/1  123 To Chase Card Services  100. 00      100.00
3
    For Credit card payment        1200.00
 1/4/1  DEP To Deposit      500.00  500.00
3
    For Paycheck        1700.00
    To        
    For        
    To        
    For