5.3.3 Financial Literacy

• What is financial literacy?

  Understanding and using financial skills
• Creating and managing a spending plan is known as budgeting
• Saving provides a financial safety net and allows for large purchases.


  True
• Financial literacy improves financial stability and overall well-being.


  True
• Saving provides a financial safety net and allows for large purchases.

  True
• What does borrowing enable in financial planning?

  Significant investments
• Financial literacy helps individuals secure their financial future.

  True
• Responsible borrowing helps avoid financial pitfalls
• What is the primary goal of budgeting?

  Plan how to spend money
• Categorizing expenses is a key principle of budgeting.


  True
• What type of goals should be defined when budgeting?

  Short-term and long-term
• Budgeting helps achieve financial stability by allocating funds effectively.


  True
• What is one benefit of budgeting?

  Improved financial control
• Understanding the importance of financial literacy can empower individuals to manage their money effectively
• Financial literacy contributes to financial stability and well-being.


  True
• Budgeting is the process of creating a plan for how you spend your money
• Sarah used budgeting to save for a down payment on a house
• Regularly reviewing savings progress is essential


  True
• A basic savings account earns interest
• What does it mean to automate savings?

  Automatic transfers to savings
• Match the saving strategy with its purpose:

  Reduce Expenses ↔️ Free up more money for savings

  Monitor and Adjust ↔️ Review savings progress
• A high-yield savings account maximizes the growth of savings
• A Certificate of Deposit (CD) offers variable interest rates based on market conditions.

  False
• Match the loan type with its key consideration:

  Mortgages ↔️ Down payment

  Student Loans ↔️ Repayment plans

  Personal Loans ↔️ Credit requirements

  Credit Cards ↔️ Fees
• What is a key consideration when taking out a mortgage?

  Interest rates
• Credit cards involve revolving credit for purchases
• Prioritizing high-interest debt is a key strategy for responsible debt management.


  True
• Steps to manage debt responsibly

  1️⃣ Prioritize payments

  2️⃣ Consolidate debt

  3️⃣ Negotiate with lenders
• Why is saving a key component of financial literacy?

  Provides safety net, large purchases
• What does borrowing enable in financial literacy?

  Significant investments
• Budgeting involves creating and managing a spending plan
• Investing aims to generate future income
• What does smarter investing achieve in financial literacy?

  Long-term wealth growth
• Financial literacy improves financial stability and overall well-being.


  True
• Steps to create a budget

  1️⃣ Identify Income

  2️⃣ Track Expenses

  3️⃣ Set Financial Goals

  4️⃣ Allocate Funds

  5️⃣ Review and Adjust
• Tracking expenses involves recording fixed, variable, and irregular costs
• Why is reviewing and adjusting a budget important?

  Adapt to changes
• Budgeting is the process of creating a plan for how you spend your money
• Creating a budget helps you gain control over your finances and reduce financial stress
• Saving money is a crucial component of financial literacy and overall financial well-being