Adult Roles & Financial Literacy Strand 7 Saving, Investing and Risk Management Vocabulary
Terms in this set (65)
Also known as the Federal Reserve System or the Fed.
The central banking system of the United States. Created on December 13, 1913 with the enactment of the Federal Reserve Act.
Federal Deposit Insurance Protection
A US government operation acting as an independent agency created by the banking act of 1933.
As of August 2014 it provides deposit insurance of up to $250,000 for each depositers account in member banks. As of August 27, 2014 the FDIC insured accounts at 6,638 institutions .
National Credit Union Administration
An independent federal agency that regulates, charters and supervises federal credit unions.
National Credit Union Share Insurance Fund
Managed by the NCUA and backed by the credit of the US government. The NCUSIF insures the deposits of 98 million account holders in all federal credit unions and majority of state chartered credit unions.
A financial institution licensed to receive deposits. In most countries banks are regulated by the national bank or central bank.
Member owned financial cooperative. Created and operated by its members.Profits are shared with its owners.
Investment or Brokerage Firm
a financial institution whose main responsibility is to put buyers and sellers together to complete financial transactions. Brokerage companies are compensated through commissions after the transaction has been successfully completed.
A company that offers insurance policies to the public either directly or through an employers benefit plan. An insurance company can specialize in one type of insurance (auto, health, life etc.) or offer a variety of insurance.
A captive finance company. A subsidiary whose main purpose is to provide financing to customers buying the parent companies product. Can be mid sized or giant depending on parent company size.
Consumer Banking Technologies: Direct Deposit/Direct Debit
Being paid or paying electronically
(Automatic deposit or using a debit card)
Consumer Banking Technologies: Remote Check Deposit
Imaging and depositing a check using a smartphone.
On line bill pay
Consumer Banking Technologies: Mobil Payments
Pay for something using Apple Pay, Google Wallet, Softcard
Consumer Banking Technologies: Consumer to Consumer (C2C)
payments through services such as PayPal, Popmoney, Square cash
Consumer Banking Technologies: Re-loadable pre-paid debit cards
Prepaid debit cards, when it runs out you can add more cash. Green Dot, American Express Serve, Visa debit card, Costco cash card, various store debit cards
Pay Your Self First (PYF)
automatically route your specified savings from each paycheck to a savings account or retirement account.
Always pay yourself first before you pay any other expenses.
Money put aside for profit. A financial holding that is purchased with he expectation of increased value; investments can be secured or unsecured.
The return on investment is usually dependent on Risk. higher risk=higher return but can result in bigger losses. lower risk=lower return but losses won't be as big.
The profit on the money that is invested.
interest figured or paid on the original amount of the loan or account.
Interest paid or to be paid on both the principal and on the accumulated unpaid interest on money saved over a period of time.
Basically the interest is earning interest whether you earn it or pay it.
Money saved over a period of time. Money is set aside on a regular basis to be used for future use.
Certificate of Deposit
A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate and can be issued in any denomination. CDs are issued by commercial banks and credit unions. They are insured by the FDIC. The term of the CD generally ranges from one month to 5 years. There is a penalty if the cash is withdrawn before the term is up.
determining retirement goals and income. Determining how those goals will be achieved.
Includes: income, estimating expenses, implementing a a savings program and managing assets.
an account on the asset side of a company's balance sheet that represents investments the company plans to hold to for a year or longer. Might not ever be sold.
Examples of Long-term investments
stocks, bonds, real-estate, cash etc.
Examples of short-term investments
stocks, bonds, cash, CD, Money Market etc.
an account in the current assets section of a company's balance sheet. Investments may expire with in one year. They can be liquidated fairly quickly.
a dividend re-investment plan (DRIP) where the dividends are directly re-invested in the equity rather than the investor receiving a dividend check.
an individual may set aside earned income in a tax-deferred saving plan for retirement.
Two Types: Traditional IRA and Roth IRA
Taxed money is used for contributions
Roth IRA is not tax deductible
Qualified distributions are tax free.
Non-qualified distributions from a Roth IRA may be subject to penalty on with drawl.
A qualified plan used by employers so employees can make contributions on a post or pre-tax basis.
Employers often match the employees contribution up to a certain percentage. Earning accrue on a tax free basis. Taxes must be paid at the current tax rate when money is withdrawn.
a US tax advantaged retirement saving plan available for public education organizations, non-profit employers (Internal revenue code 501(c)(3), cooperative hospital service organizations and self employed ministers.
Time Value of Money
the idea that money now is worth more than the same amount in the future because of earning capacity.
Money can earn interest.
Any amount of money is worth more the sooner it is received.
Rule of 72
a method used in finance to quickly estimate the doubling or halving time through compound interest or inflation.
Rule of 72 Formula: Time needed for money to double.
Divide 72 by the interest rate. This equals the number of years it will take for your money to double.
72 ÷ 6% = 12 years
Rule of 72 Formula: Interest Rate needed for money to double.
Divide 72 by the number of years and that will give you the rate you need for your money to double in a certain amount of time.
72÷8 = 9% interest
Rule of 72 example
if an investor invests $1,000 at an interest rate of 4%/year, the money will double in 18 years.
A risk management technique that mixes a wide variety of investments within a portfolio.
"Don't put all your eggs in one basket."
Diversification allows for higher returns and less risk because you are investing in many companies rather than just one or two.
a ratio used by investors to compare the expected returns of an investment to the amount of risk under taken to capture those returns.
Risk/Reward Ratio formula
risk amount /Reward amount
in 2001 Dalbar, a financial-services research firm, released a study entitled "Quantitative Analysis of Investor Behavior", which concluded that average investors fail to achieve market-index returns.
A rise in the general or average price level of all the goods and services produced in an economy.
Something that must be planned for in retirement planning.
Inflation caused by pressure from the demand side of the market.
Inflation caused by pressure from the supply side of the market.
A sustained decrease in the average price level of all the goods and service produced in an economy.
A decline in the rate of national economic activity usually measured by a decline in real GDP for at least two consecutive quarters ( six months).
One of two basic business cycle phases.
A period when business activity surges and gross domestic product expands until it reaches a peak.
The transition from EXPANSION to contraction is termed a PEAK.
The changeover from CONTRACTION to Expansion is a TROUGH.
A contract by which someone guarantees, for a fee, to pay someone else for the value of property when it is lost or damaged or to pay a specified amount for injury or death.
Home Owner Insurance
A form of property insurance designed to protect an individual's home against damages to the house itself, or to possessions in the home. also provides liability coverage against accidents in the home or on the property.
Insurance that you purchase to protects the structure of the home and the contents
a type of insurance that covers the loss of the tenant's personal property as a result of damage or theft
Provides payments for both liability and property insurance on a vehicle.
Covers motor vehicles, including automobiles, trucks, motorcycles and trailers also the injuries to the driver and passengers
Insurance that covers your health.
a contract between an insurer and policyholder specifying a sum to be paid to named beneficiaries when the insured person dies
Whole Life Insurance
A life insurance contract with level premiums that has both insurance and an investment component. The insurance component pays a stated amount upon death of the insured. The investment component accumulates a cash value that the policyholder can withdraw or borrow against.
Term Life Insurance
life insurance that pays a death benefit if the policy holder dies within a specific time period but has no remaining value at the end of this time. You must die for the beneficiary to receive the money.
Long Term Care Insurance
Insurance coverage that provides a daily monetary benefit to people who are chronically ill and who require living assistance either at home or in a residential facility
offers coverage for nursing home and assisted living facilities
A type of insurance paid to an individual if he/she is injured and is unable to work due to illness or injury for a specified length of time.
Workers Compensation Insurance
A type of insurance required by law in most states that provides coverage for employees injured on the job and assists in paying for medical bills and lost wages. In return, workers cannot sue the employer for negligence.
Limits of Coverage
The largest total amount the insurance company will pay for covered losses. Many policies have multiple limits.
Limits of coverage examples
certain $$ amount per person, certain $$ amount per accident, certain $$ amount for catastrophes (health, home, fire, flood, cancer, death etc.)
the amount paid for a contract of insurance
Insurance: Grace Period
A provision in most loan and insurance contracts which allows payment to be received for a certain period of time after the actual due date.
No late fees are charged and the late payment will not result in default or cancellation of the loan.
Insurance: lifetime Limit/maximum
the maximum total amount that the health insurance is willing to pay on behalf of the insured for their lifetime.
ie: One million dollars in health care over a lifetime.
The amount of money an insured person pays before the insurance company makes payments.
A person who benefits or is expected to benefit from something; the person who receives the insurance money when the policy funds are dispersed.
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