Basic Financial Literacy

A budget is a plan that outlines your income and expenses over a specific period of time. It helps you track your spending and ensure that you are not overspending.

Debit cards are linked to your checking account and allow you to spend money that you already have. Credit cards, on the other hand, allow you to borrow money from a bank or credit union and pay it back over time.

The annual percentage rate (APR) is the total amount of interest you will pay on a loan over its lifetime, expressed as a percentage of the loan amount.

Fixed-rate loans have an interest rate that remains the same over the life of the loan, while variable-rate loans have an interest rate that can change over time. Variable-rate loans typically have a lower initial interest rate than fixed-rate loans, but the interest rate can increase over time.

A savings account is a deposit account at a bank or credit union that allows you to save money for future expenses. Savings accounts typically offer a lower interest rate than checking accounts, but they are also safer and more secure.

Checking accounts are used for everyday transactions, such as paying bills, writing checks, and withdrawing cash. Savings accounts are used for long-term savings, such as saving for a down payment on a house or a child's education.

An emergency fund is a savings account that is set aside to cover unexpected expenses, such as a car repair, a medical bill, or a job loss. Emergency funds typically have a balance of three to six months' worth of living expenses.

Stocks represent ownership in a company, while bonds represent a loan to a company. When you buy a stock, you are essentially buying a small piece of the company. When you buy a bond, you are lending money to the company and agreeing to receive interest payments over time.

A retirement account is a savings account that is set aside for retirement. Retirement accounts typically offer tax advantages, such as tax-deferred growth and the ability to make tax-deductible contributions.

Traditional IRAs offer tax-deductible contributions, while Roth IRAs offer tax-free withdrawals. With a traditional IRA, you can deduct your contributions from your taxable income, but you will have to pay taxes on your withdrawals in retirement. With a Roth IRA, you cannot deduct your contributions from your taxable income, but your withdrawals in retirement are tax-free.

A 401(k) plan is a retirement savings plan offered by many employers. With a 401(k) plan, you can contribute a portion of your paycheck to a retirement account. Your contributions are typically tax-deductible, and your employer may also contribute to your account.

Defined benefit plans guarantee a certain level of retirement income, while defined contribution plans do not. With a defined benefit plan, your retirement income is based on a formula that takes into account your salary, years of service, and other factors. With a defined contribution plan, your retirement income is based on the amount of money you contribute to your account and the investment returns you earn.

Social Security is a government program that provides retirement income, disability benefits, and survivors benefits to workers and their families.

Medicare is a government health insurance program for people aged 65 and older, while Medicaid is a government health insurance program for low-income individuals and families. Medicare offers basic health coverage, including hospital care, doctor visits, and prescription drugs. Medicaid offers more comprehensive coverage, including long-term care and dental care.

Life insurance is a contract between you and an insurance company. You pay premiums to the insurance company, and in return, the insurance company agrees to pay a death benefit to your beneficiaries in the event of your death.