4. Loans

• Personal Loans: Unsecured, fixed repayment terms, used for major expenses.
• Auto Loans: Secured by the vehicle; risk of repossession if unpaid.
• Student Loans:
  • Federal: Fixed rates, income-driven repayment, forgiveness options.
  • Private: Higher rates, fewer protections.
• Mortgages:
  • 15- or 30-year loans for buying homes.
  • Types: Fixed-rate, adjustable-rate (ARM), FHA, VA loans.

Key Loan Terms

• APR (Annual Percentage Rate)
• Principal (amount borrowed)
• Interest
• Term length

6. Investing Basics

• Why invest? Beat inflation, grow wealth, prepare for retirement.
• Types of investments:
  • Stocks (ownership in companies)
  • Bonds (lending to governments/companies)
  • Mutual funds & ETFs (pooled investments)
  • Real estate
• Risk vs. reward:
  • Higher potential return usually means higher risk.
  • Diversification reduces risk.
• Retirement accounts:
  • 401(k): Employer-sponsored, tax advantages.
  • IRA (Traditional/Roth): Individual retirement accounts.

7. Retirement Planning

• Why plan early? Compounding interest makes money grow faster over time.
• Common strategies:
  • Save at least 15% of income toward retirement.
  • Maximize employer 401(k) match (free money).
  • Use Roth IRA for tax-free withdrawals later.
• Estimate retirement needs:
  • Rule of 25: Multiply annual expenses by 25 to estimate savings goal.
  • 4% Rule: Safe withdrawal rate in retirement.