Awesome Island Terms

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Flashcards for each of the financial literacy terms for Awesome Island. These terms derive from the JumpStart National Standards.

Budget

1. A spending plan. 2. A record of projected and actual income and expenses over a period.

Career

A profession or field of employment for which one studies or trains, such as financial services or medicine.

Complaint

An expression of dissatisfaction with a product or service, often in the form of a letter to the seller or manufacturer documenting the problem and stating the desired solution.

Debt

Something owed, usually measured in dollars.

Decision making, systematic

A method of selecting a course of action after gathering and evaluating information and considering the costs and benefits of various alternatives and consequences.

Entrepreneur

An individual who conceives of, establishes, operates, and assumes the risks of a business.

Ethics

A set of moral principles or beliefs that govern an individual's actions.

Fraud

Intentional and illegal deception, misrepresentation, or concealment of information for monetary gain.

Income

Money earned from investments and employment.

Insurance

A risk management tool that protects an individual from specific financial losses under specific terms and premium payments, as described in a written policy document.

Interest

1. Cost of borrowing money. 2. Earnings from lending money.

Investing

Purchasing securities such as stocks, bonds, and mutual funds with the goal of increasing wealth over time, but with the risk of loss.

Job

A position of employment with specific duties and compensation. (See Career.)

Peer Pressure

The influence that a social group has on an individual, based on the individual's desire for the group's approval.

Personal Finance

The principles and methods that individuals use to acquire and manage income and assets.

Philanthropy

The act of voluntarily contributing to others' welfare.

Privacy

Freedom from unauthorized release of personal information.

Profit

The positive difference between total revenue and total expenses of a business or investment.

Rent

A periodic fee for the use of property.

Scam

A fraudulent or deceptive act.

Salary

Compensation for work, expressed as an annual sum and paid in prorated portions regularly— usually weekly, bi-weekly, or monthly. (See Wage.)

Saving

The process of setting income aside for future spending. Saving provides ready cash for emergencies and short-term goals, and funds for investing.

Savings Account

A financial institution deposit account that pays interest and allows withdrawals.

Tax

A government fee on business and individual income, activities, or products.

Charitable Gift

Aid to those in need.

Collectibles

Physical objects—such as fine art, stamps, and antiques—that an investor buys in the hope that they will grow in value.

Comparison Shopping

The process of seeking information about products and services to find the best quality or utility at the best price.

Estate

The assets and debts that a person leaves at death.

Expense

The cost of goods and services, including those that are fixed (such as rent and auto loan payments) and those that are variable (such as food, clothing, and entertainment).

Financial Goals

Desired results from one's efforts to achieve personal economic satisfaction.

Financial Plan

A report that identifies a person's financial goals, needs, and expected future earning, saving, investing, insurance, and debt management activities; it typically includes a statement of net worth.

Social Security

number, or another piece of personal information to commit fraud.

Impulse Buying

Purchasing goods or services without considering needs, goals, or consequences.

Interest Income

Money that financial institutions, governments, or corporations pay for the use of investors' money.

Loan Shark

A person who lends money at an exorbitant rate of interest.

Mortgage

A long-term loan to buy real estate, that is, land and the structures on it.

Payment Method

The means of settling a financial obligation, such as by cash, check, credit card, debit card, smart card, or stored value card.

Portfolio

A collection of securities—such as stocks, bonds, mutual funds, and real estate—that an individual investor owns.

Principal

1. An amount of money originally invested, excluding any interest or dividends. 2. An amount borrowed, or an outstanding loan balance.

Record keeping

The process of keeping an orderly account of a person's financial affairs, including income earned, taxes paid, household expenditures, loans, insurance policies, and legal documents.

Risk

A measure of the likelihood of loss or the uncertainty of an investment's rate of return.

Spending Plan

Another name for budget.

Standard of Living

The overall degree of comfort of an individual, household, or population, as measured by the amount of goods and services its members consume.

Values

An individual's beliefs about what is important, desirable, and worthwhile, which often influence decisions.

Wage

Compensation for work, usually calculated on an hourly, daily, or piecework basis and paid on schedule—usually weekly, biweekly, or monthly. (See Salary.)

Auto Insurance

Provides liability and property damage coverage under specific circumstances.

Contract

A legally binding agreement between two or more parties.

Credit

An agreement to provide goods, services, or money in exchange for future payments with interest by a specific date or according to a specific schedule. The use of someone else's money for a fee. (See Open-end credit, Closed-end credit, and Easy-access credit.)

Dividends

Earnings from corporate stock or credit union share accounts.

Emergency Fund

Money set aside for unexpected expenses or for living costs in case of job loss.

Financial Literacy

The ability to use knowledge and skills to manage one's financial resources effectively for lifetime financial security.

Health Insurance

Covers specific medical costs associated with illness, injury, and disability.

Homeowners Insurance

Provides property damage and liability coverage under specific circumstances.

Inflation

An overall rise in the price of goods and services; the opposite of the less common deflation.

Liability

An actual or potential financial obligation.

Liability Insurance

Protects the insured party from others' claims of loss due to the insured's alleged or actual negligence or improper actions.

Life Insurance

Protects dependents from loss of income, debt-repayment, and other expenses after the death of the insured party.

Long-Term Care Insurance

Covers specific costs of custodial care in a nursing facility or at home.

Net Worth

A measure of a person's financial condition at a given time, equal to what that person owns (assets) minus what that person owes (liabilities).

Opportunity Cost

The value of possible alternatives that a person gives up when making one choice instead of another; also known as a trade-off.

Probate Court

The government institution with jurisdiction over a deceased person's will and estate.

Renters Insurance

Protects from losses due to damage to the contents of a dwelling rather than the dwelling itself.

Repossession

Confiscation of collateral, often without notice, if a borrower defaults on a loan.

Risk Management

The process of calculating risk and devising methods to minimize or manage loss, for example, by buying insurance or diversifying investments.

Savings Bond

A document representing a loan of more than one year to the U.S. government, to be repaid, with interest on a specified date.

Savings & Loan Association

A state or federally chartered for-profit financial institution that pays dividends on deposits and makes mortgage loans.

Stock

An investment that represents shares of ownership of the assets and earnings of a corporation.

Warranty

A written guarantee from the manufacturer or distributor that specifies the conditions under which the product can be returned, replaced, or repaired.

Wealth

Accumulated assets; positive net worth.

Collateral

Property that a borrower promises to give up to a lender in case of default.

Collection Agency

A business that specializes in obtaining payments from debtors who have defaulted on their loans.

Compensation

Payment and benefits for work performed; also payment to injured or unemployed workers or their dependents.

Compounding

Calculating interest on both principal and previously earned interest.

Credit Card

A plastic card that authorizes the delivery of goods and services in exchange for future payment with interest, according to a specific schedule.

Credit Union

A state or federally chartered not-for-profit financial cooperative that provides financial services to its member-owners, who have met specific employment, residence, or other eligibility requirements.

Debit Card

A plastic card that provides access to electronic funds transfer (EFT) from an automated teller machine (ATM) or a point-of-sale (POS) terminal.

Deductible

The dollar amount or percentage of a loss that is not insured, as specified in an insurance policy.

Default

The failure to meet a financial obligation or agreement.

Equity

Stock ownership in a corporation.

Finance Charge

The total dollar amount paid for credit. Example: A $100 loan repaid with $9 interest plus a $1 service fee has a finance charge of $10.

Garnishment

A court-sanctioned procedure that sets aside a portion of an employee's wages to pay a financial obligation.

Identity Theft

The crime of using another person's name, credit or debit card number.

Mutual Fund

An investment tool that pools the money of many shareholders and invests it in a diversified portfolio of securities, such as stocks, bonds, and money market assets.

Point of Sale (POS)

The location where a transaction occurs. POS software can track sales, inventory, and customer information.

Rate of Return

Annual earnings on an investment expressed as a percentage of the amount invested; also known as yield. Example: A $3 annual dividend divided by $34 share cost = 0.088, an 8.8% rate of return.

Rule of 72

A rough calculation of the time or interest rate needed to double the value of an investment. Example: To figure how many years it will take to double a lump sum invested at an annual rate of 8%, divide 72 by 8, for a result of 9 years.)

Simple Interest

Interest calculated periodically on loan principal or investment principal only, not on previously earned interest.

Stored-Value Card

Prepaid plastic card that allows purchases up to a set limit, at which point the card is discarded or, if "rechargeable," replenished from an account.

Tip

An amount paid for a service beyond what's required, usually to express satisfaction; also known as a gratuity.

Title Loan

A high-cost, short-term loan that uses the borrower's automobile as collateral.

Capital Gain

Income that results when the selling price of an asset is greater than the original purchase price.

Capital Loss

Monetary loss that occurs when the selling price of an asset is less than the original amount invested.

Close-end Credit

A specific-purpose loan requiring repayment with interest and any other finance charges by a specific date. Examples include most mortgages or auto loans.

Credit Report

An official record of a borrower's credit history, including such information as the amount and type of credit used, outstanding balances, and any delinquencies, bankruptcies, or tax liens.

Credit Score

A statistical measure of a loan applicant's creditworthiness, which is the likelihood of repayment.

Creditworthy

The presumption that a specific borrower has sufficient assets, income, and/or inclination to repay a loan.

Dependent

A person who relies on another individual for support.

Disposable Income

Gross pay minus deductions for taxes.

Diversification

A strategy for reducing some types of risk by selecting a wide variety of investments.

Earned Income

Earnings from employment, including commissions and tips.

FICA

Federal Insurance Contributions Act. (See Social Security.)

Gross Pay

Wages or salary before deductions for taxes and other purposes.

Liquidity

The quality of an asset that permits it to be converted quickly into cash without loss of value. For example, a mutual fund is more liquid than real estate.

Security

1. A legal agreement that records a debt or equity obligation from a corporation, government, or other organization. Examples include stocks and bonds. 2. Collateral for a loan.

Open-end Credit

An agreement with a financial institution that gives a borrower the use of money up to a specified limit for an indefinite time as long as repayment of the outstanding balance and finance charge proceeds on schedule; also known as revolving credit or a revolving line of credit. A credit card is an example.

Payroll Deduction

An amount an employer withholds from a paycheck. Mandatory deductions include various taxes. Voluntary deductions include loan payments, charitable contributions, and direct deposits into financial institution accounts.

Social Security

A federal government program that provides retirement, survivor's, and disability benefits, funded by a tax on income, which appears on workers' pay stubs as a deduction labeled FICA (for Federal Insurance Contributions Act, the enabling legislation).

Take-home pay

Gross wage or salary, plus bonuses, minus deductions such as for taxes, health care premiums, and retirement savings.

Tax Credit

An amount that a taxpayer who meets certain criteria can subtract from tax owed. Examples include a credit for earned income below a certain limit and for qualified post-secondary school expenses. (See Tax deduction and Tax exemption.)

Tax Deduction

An expense that a taxpayer can subtract from taxable income. Examples include deductions for home mortgage interest and for charitable gifts. (See Tax credit and Tax exemption.)

Tax Deferral

The feature of an investment in which taxes due on principal and/or earnings are postponed until funds are withdrawn, often at retirement.

Tax Exemption

Earnings, such as interest from municipal bonds, that are free of certain taxes. (See Tax credit and Tax deduction.)

Unearned Income

Earnings from sources other than employment, including investment returns and royalties.

Business Plan

A description of a company's organizational structure, staff, activities, and marketing and financial plans, including expected sources of income and expenses.

Cash Flow Statement

A summary of receipts and payments for a given period, helpful when preparing a budget; also known as an income and expense statement.

Credit Counseling Service

An organization that provides debt and money management advice and assistance to people with debt problems.

Disability Insurance

Replaces a portion of income lost when a person cannot work because of illness or injury.

Dollar Cost Averaging

A method of investing a fixed amount in the same type of investment at regular intervals, regardless of price.

Easy Access Credit

Short-term loans granted regardless of credit history, often for very short periods and at high interest rates. (See Pawnshops, Payday loans, Rent-to-own, and Title loans.)

Electronic Funds Transfer

The shifting of money from one financial institution account to another without the physical movement of cash.

Employee Benefit

Compensation that an employee receives in addition to a wage or salary. Examples include health insurance, life insurance, childcare, and subsidized meals. Employer-sponsored retirement savings plan Tax-deferred investment programs, such as 401(k) plans for corporate employees and Section 457 plans for state and local government employees, which provide, in some cases, employer matching funds.

Equal Credit Opportunity Act

A federal law that forbids lenders from discriminating against loan applicants on the basis of gender, race, marital status, religion, national origin, age, or receipt of public assistance.

Financial Advisor

A person who provides financial information and advice. Examples include employee benefits staff, bank and credit union employees, credit counselors, brokers, financial planners, accountants, insurance agents, and attorneys.

Grace Period

A time during which a borrower can pay the full balance of credit due and not incur finance charges or pay an insurance premium without penalty.

Individual Retirement Account (IRA)

An investment with specific tax advantages. A traditional IRA defers taxes on earnings until withdrawal and, under certain circumstances, allows the deduction of some contributions from current taxable income. A Roth IRA requires after-tax contributions only, but allows tax-free withdrawals under certain rules.

Lease

A written contract specifying the terms for the use of an asset and the legal responsibilities of both parties to the agreement, such as a landlord and tenant.

Living Will

A document that contains the signer's desires for specific medical treatment in case the person is unable to make medical decisions; also known as a health care directive.

Medicaid

A program, financed by state and federal government tax revenues, to pay specified health care costs care for those who cannot afford them.

Medicare

A federal government program, financed by deductions from wages, that pays for certain health care expenses for older citizens. The Social Security Administration manages the program.

Pawnshop

An easy-access credit business that makes high-interest loans secured by personal property collateral, such as jewelry.

Payday Loan

An easy-access credit business that makes high interest loans for the period of the borrower's pay cycle. This practice is illegal in some states.

Prospectus

A legal document that provides detailed information about mutual funds, stocks, bonds, and other investments offered for sale, as required by the Securities and Exchange Commission.

Rent-to-Own

A plan to buy a product with little or no down payment by renting it until the final payment is made, at which point the total paid far exceeds the product's purchase price.

Transfer Payment

Money that a government provides to citizens for reasons other than current employment or the delivery of goods or services in exchange. Examples include Social Security, veteran's benefits, and welfare.

Time Value of Money

The potential of an investment to increase in value through periodically compounded earnings.

Trust

A legal arrangement through which a trustor manages a trustee's assets for the good of one or more beneficiaries.

Welfare

Aid in the form of money or necessities for those in need; often from a government program.

Will

A legal declaration of a person's wishes for the disposition of his or her estate after death.

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