Questions and Answers: Personal Finance

Topics: Investment, Rate of return, Compound interest Pages: 3 (1144 words) Published: December 8, 2014
1. Describe a real or made up but realistic situation that could cause you or someone you know to have to use money from a financial reserve. (3-6 sentences. 2.0 points) I put money into a financial reserve for college. I will not touch the money till then. I can add but not subtract from it.  

2. How many months' worth of expenses do you think your financial reserve should include? Describe at least two reasons for this decision. (3-6 sentences. 2.0 points) As many as I can have saved up into it. Depends on wether I am working, and what my income is. Cause I could lose a job.  

3. Would you rather have a savings account that offered simple interest, or an account that offered compound interest? Why? (3-6 sentences. 2.0 points) It would depend on the amount of money in savings but the quarterly interest is probably better. It is better to receive compound interest if you plan in keeping money in your savings for 10 years. With a compound interest savings account, you make interest on your interest. With other accounts you do not.  

4. If you were opening a savings account with compound interest, would you prefer an account that offers annual compounding, quarterly compounding, or daily compounding? Why? (3-6 sentences. 2.0 points) I would want an account that offers quarterly compounding so I can continue putting money in my bank so that interest will grow on it. Although I am not sure what I will choose when I am older, I think this one sounds the best and most intriguing.   I just want to have a lot of interest on my savings account as I grow older.  

5. Which strategy for saving do you think would work best for you? Why? (3-6 sentences. 2.0 points) The simple answer to successful saving is regularity. For the working masses that usually means having their designated savings withdrawn from their earnings and deposited into the appropriate vehicle (i.e. 401K, etc.) before they see their paycheck  

6. Describe two financial goals that you would want to...
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