EverFi Module 1 Answers – Financial Literacy
EverFi Module 1, a dynamic and engaging program designed to equip individuals with the essential tools and knowledge they need to navigate the financial landscape confidently.
This module is the first step in a comprehensive journey towards financial empowerment. It introduces important concepts like budgeting, saving, and understanding credit, making these topics accessible to learners of all backgrounds. EverFi transforms financial education into an interactive experience, ensuring that crucial information is not only informative but also engaging and relevant.
By the end of Module 1, students will be better prepared to make informed financial decisions that can positively impact their futures. Let’s dig deeper into the exciting world of finance—where knowledge truly is power!
Understanding the Importance of Financial Literacy with EverFi
Fee someone pays to be able to borrow money?
Answer:
Interest
Explanation:
Interest is the cost of borrowing money, typically expressed as a percentage of the amount borrowed over a period of time. It compensates the lender for the risk taken when providing the loan. Borrowers must repay the principal amount along with the interest incurred.
Sum of money you put into an account or the amount of money you owe on a debt?
Answer:
Principal
Explanation:
Principal refers to the original sum of money invested or borrowed, excluding interest. When you deposit money into an account, that amount is considered your principal. In the context of loans, it represents the amount owed before any interest is applied.
Receive the interest?
Answer:
Lender
Explanation:
A lender is the individual or institution that provides funds to borrowers, charging interest as compensation. The lender earns money through the interest payments made by borrowers, representing a return on their invested capital. Successful lending requires careful evaluation of risk and reward.
Pay the interest?
Answer:
Borrower
Explanation:
A borrower is an individual or entity that takes out a loan and agrees to repay it with interest over time. By borrowing funds, they incur a responsibility to pay interest, which compensates the lender. Managing this obligation is crucial for the borrower’s financial health.
Earns interest on principal only. The money grows at a constant rate. Linear Growth?
Answer:
Simple Interest
Explanation:
Simple interest is calculated only on the principal amount over a specified time period, implying a fixed rate of growth. This method is straightforward, making it easy to predict returns. It is commonly used in short-term loans and savings accounts.
Earns money on principal and interest (interest on interest). Money grows at a changing rate. Exponential Growth?
Answer:
Compound Interest
Explanation:
Compound interest is calculated on both the initial principal and the accumulated interest from previous periods. This results in exponential growth, meaning that the amount of interest earned increases over time, leading to greater overall returns. It is widely used in long-term investments and savings.
How often your bank pays or charges interest?
Answer:
Compounding Frequency
Explanation:
Compounding frequency determines how often interest is added to the principal balance, impacting earnings on investments or costs for borrowers. More frequent compounding leads to increased total interest paid or earned, affecting the overall financial outcome significantly.
The most powerful compounding frequency. It will grow your money the fastest?
Answer:
Daily Compounding
Explanation:
Daily compounding refers to the process of calculating interest on a daily basis, which maximizes the growth potential of investments. This method enables interest to accrue continuously, leading to more substantial returns over time compared to less frequent compounding options.
A quick way to estimate how long it will take money to double?
Answer:
Rule of 72
Explanation:
The Rule of 72 is a simple formula that helps estimate the number of years required to double an investment based on a fixed annual rate of return. By dividing 72 by the interest rate, investors can quickly assess their potential growth and make informed financial decisions.
Accounts designed to let you set aside money that is separate from your checking account?
Answer:
Savings Vehicle
Explanation:
A savings vehicle is an account or investment option that allows individuals to save money safely while earning interest. These accounts help individuals manage savings goals and keep funds separate from daily expenditure accounts, promoting better financial management.
Savings account, money market accounts, Certificate of Deposit?
Answer:
Three types of savings vehicles
Explanation:
These three types of savings vehicles offer varying benefits and interest rates. A savings account provides easy access to funds, a money market account combines features of savings and checking, and a Certificate of Deposit typically offers higher interest for locking funds for a set term.
A plan on how to save your money?
Answer:
Purpose of a budget
Explanation:
A budget is a financial plan that outlines how an individual or household allocates income to various expenses and savings. By setting up a budget, individuals can manage their finances more effectively and work towards achieving long-term financial goals.
Helps you keep track of expenses?
Answer:
Helps you remember to “pay yourself first”?
Let’s you see where you can cut some expenses.
Explanation:
A budget encourages meticulous expense tracking, ensuring that spending remains in check. It also emphasizes the importance of prioritizing savings by setting aside money for future needs. Moreover, by analyzing spending habits, individuals can identify areas for potential savings.
Bringing popcorn instead of buying some?
Answer:
Cutting off data outside as much as you can?
Making your own food and not eating out often?
Explanation:
These practical strategies illustrate how small changes in daily habits can lead to significant savings over time. Bringing snacks from home reduces unnecessary costs, limiting data usage can lower bills, and preparing meals can prevent frequent dining expenses. Each action contributes to better financial health.
Learn to live upon less than you earn?
Answer:
Seek advice from those who are knowledgeable?
Make your wealth work for you.
A part of all I earn is mine to keep.
Explanation:
These four laws emphasize key principles for building wealth sustainably. Living within one’s means fosters financial security, while seeking knowledgeable advice can enhance investment strategies. Allowing wealth to generate income and reserving a portion as savings lays the foundation for long-term financial success.
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