1 What is inflation risk? Prices on items or services may go up and down. The chance that the cash flow from an investment won’t be worth as much in the future because of changes in purchasing power.
2 What are opportunity costs? Give an example of an opportunity cost. Things you give up when you make a choice. An example is not going to McDonald’s or getting a polar pop everyday and saving that money for better choices
3 What is the time value of money? Increases in the amount of money because of interest earned. When you put money in the bank it usually earns interest which makes it worth more.
4 What is future value? Amount of money multiplied by the interest rate and amount of time the money is earning interest.
5 What is shared decision making? Having two or more people negotiate or compromise to make financial decisions.
Critical Thinking Questions
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Describe each step. The first step is to analyze your current financial situation. How much money do you have saved and how much you make each month? How much do you spend each month? The second step is to identify your short term and long term goals. Do you want to get a full time job or attend college? What do you want to do in 5 years buy a house, get married, and have children? The third step is to identify ways to reach your goals. You have to increase your income or reduce spending. Get two jobs; take your lunch to work instead of eating out every day, cut back on cable or renting movies. Decide on a course of action and begin applying your chosen path to reach your goals. You may need to talk to a professional investor. The final step is to review and make changes to your goals as you need