financial_qa_conversations.csv

Question,Answer
What is compound interest?,Compound interest is interest earned on both the original principal and previously earned interest. It's often called 'interest on interest' and can significantly boost your savings over time.
How much should I save for retirement?,"Financial experts typically recommend saving 10-15% of your income for retirement. The exact amount depends on your age, current savings, and retirement goals. Starting early gives compound interest more time to work."
What's the difference between a Roth and traditional IRA?,Traditional IRAs offer tax deductions now but you pay taxes in retirement. Roth IRAs use after-tax dollars now but withdrawals in retirement are tax-free. Your current vs. expected future tax rate helps determine the best choice.
Should I pay off debt or invest?,"Generally, pay off high-interest debt (like credit cards) first since the guaranteed return of eliminating interest often beats potential investment returns. For low-interest debt, you might consider investing while making minimum payments."
What is dollar-cost averaging?,Dollar-cost averaging means investing a fixed amount regularly regardless of market conditions. This strategy can reduce the impact of market volatility by purchasing more shares when prices are low and fewer when prices are high.
How do I build an emergency fund?,"Start by saving $1,000 as a starter emergency fund, then work toward 3-6 months of expenses. Keep it in a high-yield savings account that's easily accessible but separate from your regular checking account."
What credit score do I need to buy a house?,"Most conventional loans require a credit score of 620 or higher, though FHA loans may accept scores as low as 580. Higher scores typically qualify for better interest rates and terms."
How can I improve my credit score?,"Pay all bills on time, keep credit utilization below 30%, don't close old credit cards, and check your credit report for errors. Payment history and credit utilization are the most important factors."
What is diversification in investing?,"Diversification means spreading investments across different asset types, sectors, and geographic regions to reduce risk. The idea is that different investments perform well at different times, smoothing overall returns."
When should I refinance my mortgage?,"Consider refinancing when rates drop significantly below your current rate, when your credit has improved, or when you want to change loan terms. Factor in closing costs to determine if it makes financial sense."