19 terms

PF 5.02 Savings Tools

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certificate of deposit
an account at a depository institution that is used for a fixed period of time and allows restricted access to the funds deposited
compound interest
interest that is computed on the amount saved and interest earned.
savings bonds
series EE Bonds; original cost of the bond is half the face value: after a specified number of years the bond becomes worth the face value. Ex: Buy $1,000 Bond for $500.
emergency savings fund
saves money for a rainy day or unexpected expenses, $1,000
savings account
an account at a depository institution that is designed to hold money not spent on current consumption
pay yourself first
taking out a portion of a paycheck for saving or investing before using any of the check for spending
rule of 72
divide 72 by the rate of interest earned on an investment to find the number of years needed to double an amount of money invested
simple interest
interest earned on the principal investment
time value of money
money paid out or received in the future is not equivalent to money paid out or received today, looks at amount of money, length of time, interest rate
trade-off
decision to give up one thing for the next best alternative
opportunity cost
value of giving up one thing for the next best alternative
liquidity
how quickly and easily an asset can be converted into cash
level of living
the amount of money needed to pay for the necessities and comforts currently enjoyed
standard of living
a higher level of living that an individual or household sets to reach through income increases and wealth accumulation
checking account
an account that allows quick access to funds for transactions
depository institution
businesses that provide financial services
money market deposit account
an account at a depository institution that usually has minimum balance requirements and tiered interest rates
savings tools
accounts offered by depository institutions whose main purpose is to help people manage their money
tiered interest rate
the amount of interest earned depends on the account balance