Study sets, textbooks, questions
Upgrade to remove ads
F-W Personal Finance Glossary Terms
Terms in this set (65)
The value printed on the bond.
A payroll tax. FICA stands for Federal Insurance Contributions Act (FICA) tax. This tax is used to fund Medicare and Social Security.
Established as part of the Banking Act of 1933, the Federal Deposit Insurance Corporation (FDIC) protects bank customers from possible losses by insuring various kinds of savings accounts up to $100,000 per account.
The fee you pay when you do not pay off the entire credit card debt within a single payment period, usually about 25-28 days.
Not changing. Fixed interest rates never change during the time of the investment or loan.
Expenses which stay basically the same from month to month, such as housing and transportation.
The time, usually about 25-28 days, which you have to pay a bill or a loan in full. If you pay within the grace period, you do not have to pay a finance charge.
The entire amount of your income or paycheck before any deductions - like taxes or insurance payments - are subtracted.
People buy health insurance to help them pay for medical expenses like going to the doctor, prescription drugs or surgery.
People have homeowner's insurance so they will have the money to fix or replace their home and its contents. Damage can be done by fire or storms, or even by a burglar.
An index fund is designed to track the performance of a specific group of stocks or bonds. An example is an index fund that tracks the performance of the S&P 500 by holding all the in this index.
Money that wage earners pay the government to run the country. The amount of the tax depends upon how much you earn.
A phrase that means you did not have enough money to cover an expense. Usually checks that bounce are returned stamped with the phrase, "insufficient funds." The amount of the check was larger than the balance in the checking account.
Insurance is a type of plan that can help protect you from an event in life that costs a large amount of money. A policy will pay you money to cover the cost of these events. See auto insurance, disability income insurance, renter's insurance, homeowner's insurance and health insurance.
To protect yourself from loss. You pay premiums (payments) to an insurance company who, in turn, agrees to pay for losses to your property (house, car, jewelry, etc.) or your person (in case of injury). You can buy insurance that protects you even when you cause a loss to other people. For example, you cause a car accident.
Accounts that are insured up to $100,000 by the Federal Deposit Insurance Corporation (FDIC). Banks are insured by the FDIC, so your money in bank accounts is insured.
The amount paid by a borrower to a lender for the privilege of borrowing the money.
Using your money to try to make more money - for example, by depositing money in a bank or by buying a bond or stock in a company.
The price paid for the use of someone else's money expressed as an annual percentage rate, such as 6.5%.
To put your money into CDs, money accounts, mutual friends, savings accounts, bonds, stocks or objects that you hope will grow in value and earn you more money.
A fee charged to you for missing a payment date. If your payment date. If your payment arrives "late" or not at all, the charge is added to your debt. Late fees are strong penalties. Credit companies routinely charge $30 or more if you miss your payment date. Get organized!
A right given to a lender over a borrower's property or money when the borrower cannot pay a debt.
People buy life insurance so if they die, their family will receive money that can help them go on living the way they are living today.
An investment that can be easily turned into cash.
How quickly an asset (any item of value that you own) can be turned into cash. In other words, you don't have to wait until a certain date or pay a penalty to withdraw your money.
Money or an object that is lent, usually with the understanding that the loan will be paid back, usually with interest.
An example of Long-term savings might be saving to buy a car or pay for college. You need months or years to save this amount of money. People invest long-term for many, many years, for retirement, for example.
The smallest amount you are required to pay a lender each month on a debt.
Money Market Account
A savings account offered by a bank (or a mutual fund). The account typically requires 1) a minimum deposit and 2) that you maintain a minimum balance. The account invests in certificates of deposit and treasury bills and pays a rate of interest that rises and falls with the economy.
Usually refers to the money borrowed from a lender to buy a house; the borrower makes payments on the loan each month until the entire loan, along with interest, is paid in full.
A savings fund that uses cash from a pool of savers to buy a wide range of securities, like stocks, bonds, and real estate. This is a way to diversify your investments because you own small units of each of the fund's investments. The fund is managed by professionals end permits small amounts of money to be invested.
The amount of your income or paycheck after any deductions - like taxes or insurance payments - are subtracted. This is your take-home pay.
The next best alternative that is given up when a choice is made. For example, when you spend your money, you lose your "opportunity" to use it in other ways.
To take more money out of an account than is available in the account.
you write a check for $25.00, but your account contains only $20. You will have to pay the bank a penalty charge for going over the limit.
A nickname for extremely low priced stock, usually only a few dollars a share. These stocks are considered highly speculative, which is another way of saying highly risky. They are priced low because they have not yet proven themselves in the market
A way of measuring. The number 100 (which stands for the whole amount) is usually divided into 100 smaller, but equal, parts called a percent. So a percentage usually refers to a certain number of parts within the whole. Therefore, 6% is 6 units out of 100% (the whole). If you have invested $100, and you earn 8% interest on the money, you will earn 8 parts of the whole, or $8. A percentage explains a number in relation to the whole.
Is a listing of stocks that is used to track the value of the stocks that make up the list. For example, the S&P 500 is an index containing the stocks of 500 corporations, most of which are American. This is the economy is doing overall.
Premium is another word for payments on an insurance policy.
This is the amount of money you borrow in a loan. You pay this back plus interest.
The money you've earned after you subtract a) any money you had to spend to make the product or perform the service. B) any taxes that had to be paid on your earnings.
Rate of Compounding
When an account compounds interest (figuring interest on interest already earned) it does so regularly. Compounding can take place annually, semi-annually, quarterly, monthly, or daily. The more often interest is compounded the faster your money will grow.
A type of home insurance that protects against damage and losses that occur in an apartment or a rented residence. This insurance also protects belongings and helps you pay for an accidents that may occur to other people while they are in your apartment or rented home.
Property in the form of land or buildings.
The amount of money a saver receives from a savings account or fund. The return is usually talked about as a percentage, such as 'This account returns 7.37%.
The likelihood that you will lose money on an investment.
Rule of. 72
Math formula that determines the number of years needed to double your money at a given interest rate. Here's how it works: you divide 72 by the interest rate. Therefore, money invested at 10% interest rate will double in 7.2 years.
Hanging onto your money for a future use instead of spending it. Saving is the opposite of spending.
A bank account that pays you interest for keeping your savings in it. Banks use your money to make loans, so they pay you interest for the use of your money. Your savings is insured up to $100,000 by the FDIC, so you don't have to worry about borrowers taking your money and not paying it back.
Secured Credit Card
This credit card is "secured"with a cash balance, a savings account, for example. You cannot touch this balance, or the card will be deactivated (turned off). If you charge over your limit, the bank will take the balance from your account.
A lack of something, like money, natural resources, etc.
Scarcity forces you to make choices about how you use or treat whatever is scarce.
A unit of ownership in an investment or a company.
Someone who owns stock in a company.
Short-Term savings is for something you know you will need to pay for soon, lake a new MP3 player. Short term investing usually means choosing an investment that is liquid, meaning you can pull your money out easily.
Social Security Tax
A tax used to fund a program of the US government that gives money to elderly people. The elderly receive funds because the federal government has deducted money from each of their paychecks during the course of their working lives. The money taken out of their paychecks has been deposited into the Social Security fund. Employers, too, deposited money to this fund on behalf of each employee. When people reach a certain age, they become eligible to receive Social Security payments. The government mails checks each month. These payments help the elderly live, now that they are no longer working full-time. The money they receive is drawn out of the Social Security fund, where it has been earning interest for many years.
A business owned by a single person.
To divide stock in order to lower its price so that more people will invest in it. In a two-to-one split, 100 shares of $70 per-share stock become 200 shares of $35 per-share stock. In a three-to-one split, 90 shares at $60 a share become 270 shares at $20 a share.
Standard & Poor's 500
The S&P 500 is an index containing the stocks of 500 corporations, most of which are American. This is the most watched index, because many investors think that the performance of this index indicates how well the economy is doing overall.
Standard of Living
The level of material well-being of an individual or group.
A certificate representing a share of ownership in a company.
An organized way for 1) people to but and sell stocks and 2) corporations to raise money. There are three widely known stock exchanges: The New York Stock Exchange, the American Stock Exchange, and the National Association of Securities Dealers Automated Quotation System (you hear it called NASDAQ on the news).
Money you make that is not the result of your labor, such as interest from a savings account or other kind of investment.
A kind of investment in which you lend money to the government for a certain amount of time and at a certain interest rate. You are paid interest according to the terms of your bond. At the end of the agreed-on time, the borrower (the government) returns to you the amount you originally lent.
Kinds of spending that can be controlled and typically change from month to month. For example, groceries can be a variable expense. You can choose to buy expensive food, (steak, lobster, lamb chops, or shrimp) or inexpensive food (chicken legs, turkey, hamburger). With variable expenses, you have choices.
Take money out of an account.
The act of taking money out of an account.
Recommended textbook explanations
Principles of Economics
N. Gregory Mankiw
Economics: New Ways of Thinking
Roger A. Arnold
Economics: Principles in Action (California)
Arthur O'Sullivan, Steven M. Sheffrin
N. Gregory Mankiw
Other sets by this creator
Rinks Sponge Quiz 5/12/21
Rinks Sponge Quiz 4/28/21
Rinks Sponge Quiz 4/21/21
Personal Finance Vocabulary