Personal Finance Saving & Investing
Terms in this set (36)
CDs, Money Market Accounts, Regular Savings Accounts
FDIC insured saving and investing tools
Pay Yourself First
Setting aside money for savings and investing each pay period or month before any other spending.
Setting aside money for emergencies or short term goals such as a vacation.
Interest earned is added to the principal so it earns interest also.
3-6 months of living expenses
The standard used to determine how much should be held in an emergency fund.
The minimum amount of income that should be saved based on the advice of experts.
Buy & hold
Investment strategy of putting money into an investment and leaving it there for a long period of time to gain in value, earn interest or dividends.
Banks & Credit Unions
Where consumers can go to get both savings accounts and investment services in one location.
Investment that represents ownership in a corporation. Pays dividends (Income) and increases in market value (Capital Gains) to benefit the investor.
An IOU issued by federal, state and local government, and corporations when they need to borrow large amounts of money. Federal, Corporate and Municipal bonds are available.
The investments of many investors are pooled in a fund that is diversified by its nature, professionally managed, and does not take a large investment to start and can be added to monthly.
Employer sponsored retirement plan that deducts contributions from the employee's pay before taxes are calculated, and may include at least a partial match of contributions by the employer.
As we move up the investment pyramid, the potential return on an investment increases, and so does the risk of the investment losing value.
Investing strategy that balances risk tolerance, investor's goals and current investment outlook to maximize profits for the investor.
How easily an investment can be turned into cash without losing value.
Fluctuation in the value of an investment from one period of time to another.
An individual's collection of investments.
Reducing exposure to investment risk by spreading your money over several different investment with varying degree of risk and potential growth.
Type of stock that gives shareholders voting rights withing the corporation. Each share of stock equals one vote.
A stock that gives owners the right to dividends before common stock holders, no voting rights.
Amount of deposits covered by FDIC or NCUA depositor insurance.
The market value of an asset increasing over time.
Profits from a stock or mutual fund that is paid to shareholders.
Earnings and principal of an investment are not taxed until they are withdrawn.
Earnings from an investment are not taxed. Roth IRA earnings, and interest on a municipal bonds are 2 examples of tax exempt investment income.
Contract with an insurance company that guarantees future income for a certain number of years or life.
Tax deductible contributions and tax deferred earnings that can be withdrawn when the investor reaches age 59 1/2.
Securities and Exchange Commission (SEC)
Fed government agency that oversees the trade of stocks, bonds, mutual funds etc. and licenses brokers as well as regulating stock exchanges.
The possibility that an investment may lose value in the market.
Compounding & Time
Two factors that help investors grow wealth over a lifetime of saving and investing.
Rule of 72
Mathematical function that tells an investor how long it will take them to double their money, how often an investment will double between when investing starts and when it stops, and the interest rate needed to reach a goal. 72 divided by rate of return.
Income earned by savings accounts and bonds.
The amount of money an investor puts into an investment or savings account to earn income or make capital gains.
Setting aside money to make more money, build wealth and reach long term financial goals.
Dividend Reinvestment Plan (DRIP)
Income earned from an investment(dividends) is used to buy more shares in the investment thus growing the value of the investment.
A plan similar to a 401K for a self-employed person that is approved by the IRS