Personal Finance Essay

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Assignment 4: Saving and Investing (32.0 points) 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) Someone could lose a job and have to pay a house payment. That person may also have kids to feed and a car payment to make. 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 you should have at least 6 months of expenses in your financial reserve. I think this because you never know what could happen, a tornado could come through and take everything you own and take down the place you work at. I also think this because your boss could lose his temper one day and fire everybody and you might have kids at home, a car payment, or a house payment. 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) I would rather have an account that offered compound interest. Because I can make money from that account faster. This means I could have more money when it comes to having financial issues or retirement. 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) I would rather have an account with daily compounding. I would because I want my account to gain money faster. 5. Which strategy for saving do you think would work best for you? Why? (3-6 sentences. 2.0 points) Cutting a whole in a steel container (to put my money in) that has a lid with a lock on it. I would not have the key to it. 6. Describe two financial goals that you would want to meet before you begin investing.

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