1. Describe a real or made up but realistic situation that could cause you or someone you know to have to use money from a financial reserve. (3-6 sentences. 2.0 points)
A situation in which someone would use their financial reserve is if they were to lose their job and were poor or homeless. They would use the money to help provide for themselves until they can get a job. Or if you are on a tight income and need money for the hospital.
2. How many months' worth of expenses do you think your financial reserve should include? Describe at least two reasons for this decision. (3-6 sentences. 2.0 points)
I think about two months’ worth should be in financial reserve. Just in case you don’t have an income for a while or if someone needs money. Two would be my best guess or you could go with three to be safe.
3. Would you rather have a savings account that offered simple interest, or an account that offered compound interest? Why? (3-6 sentences. 2.0 points)
In would go with compound interest. In compound interest the interest builds over time in the account. So you will end up making interest on interest.
4. If you were opening a savings account with compound interest, would you prefer an account that offers annual compounding, quarterly compounding, or daily compounding? Why? (3-6 sentences. 2.0 points)