Financial Literacy Flashcards
6 cards from real NEDP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Financial Literacy flashcards as text
What is the difference between a debit card and a credit card?
Answer: A debit card draws directly from your bank account; a credit card borrows money you repay later.
Debit cards pull funds immediately from your checking account. Credit cards extend a line of credit you repay — potentially with interest.
You invest $1,000 at 5% simple interest for 3 years. How much interest do you earn?
Answer: $150
Simple interest = Principal × Rate × Time = $1,000 × 0.05 × 3 = $150.
What is the primary benefit of contributing to a 401(k) retirement plan through your employer?
Answer: Contributions reduce your taxable income and may include employer matching.
Traditional 401(k) contributions are pre-tax, lowering taxable income, and many employers match a percentage of contributions — free money.
Which of the following best explains 'opportunity cost'?
Answer: The value of the next-best alternative you give up when making a choice
Opportunity cost is what you forgo when you choose one option over another — the cost of the road not taken.
A bank offers a savings account with 3% annual interest compounded monthly. What does 'compounded monthly' mean?
Answer: Interest is calculated and added to the balance each month, earning future interest on interest.
Compounding means earned interest is added to the principal, so you earn interest on the growing total each period.
What information is typically found on a W-2 form?
Answer: Annual wages earned and taxes withheld by an employer
Employers send W-2 forms showing total annual wages paid and federal/state taxes withheld, used to file income tax returns.