Financial Values Practice Quiz - Everfi Answers

A budget is used to plan and track income and expenses, allowing you to allocate funds for essential needs and savings. It helps in making informed spending decisions and maintaining financial stability.

Savings refer to the portion of income reserved for future use or emergencies. This practice is fundamental for building financial security and handling unexpected expenses.

A credit card lets you borrow money up to a set limit, and you are charged interest if you carry a balance. It is important to use credit responsibly to avoid high-interest debt.

Needs include essentials like food, shelter, and clothing, which are necessary for survival. Wants, on the other hand, are non-essential items that provide additional comfort or luxury.

Your bank account balance shows the amount of available money at a specific time. Monitoring this balance is essential for effective money management and avoiding overdrafts.

Compound interest grows by adding interest to the principal so that it earns interest over time, resulting in exponential growth. Simple interest, however, is calculated solely on the original principal amount.

Diversification involves spreading your investments across various assets to minimize risk. This strategy reduces the impact of a poor-performing investment on your overall portfolio.

The time horizon defines the period you have to achieve a savings goal, influencing both the amount to save and the appropriate investment strategies. A clear timeline helps you plan and adjust your savings strategy effectively.

Opportunity cost is the value of the next best alternative that is foregone when making a decision. It is a key concept in understanding the true cost of choices in both personal and economic contexts.

As inflation rises, the purchasing power of money declines, meaning you receive less value for the same amount of money. This makes it important to plan finances with inflation in mind for long-term goals.

An emergency fund serves as a safety net for unexpected costs, such as medical bills or sudden repairs. This reserve helps prevent reliance on debt when unforeseen financial challenges arise.

APR stands for Annual Percentage Rate and reflects the cost of borrowing over a year, including interest and fees. It is an important metric to compare different loan and credit card offers.

A checking account is designed for everyday use, allowing for frequent deposits, withdrawals, and payments. It is essential for managing daily financial transactions efficiently.

Banks compound interest by periodically adding the earned interest to the principal. This method allows future interest calculations to be based on an increasingly larger amount, accelerating savings growth.

A solid credit history demonstrates responsible borrowing and repayment behavior. Lenders use this record to determine creditworthiness, often resulting in better interest rates and loan terms.

Understanding opportunity cost helps you compare the benefits of different options before making a decision. This awareness leads to more thoughtful and effective financial planning.

Market equilibrium is reached when supply equals demand, setting the price for goods and services. This concept is essential to understanding how markets function and adjust to changes.

Dollar-cost averaging involves investing a constant amount at regular intervals, reducing the risk of market volatility. This approach can lower the average cost per share over time and smooth out market fluctuations.

Budgeting software aids in monitoring income and expenses in real time. It provides insights and detailed analysis, which assist users in making better financial decisions and maintaining disciplined spending habits.

The time value of money concept states that money available now is more valuable than the same amount in the future due to its growth potential via compounding interest. This makes early and consistent saving essential for long-term financial goals like retirement.