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Financial Literacy Basics

Terms in this set (35)

Financial Literacy
The possession of a body of financial knowledge, a set of basic skills, and the ability to apply your knowledge and skills to making informed and responsible financial choices.
Personal Financial Planning
The process of setting financial goals and developing plans to reach them while meeting financial needs.
Financial Plan
A formalized report that summarizes your current financial situation, analyzes your financial needs, and recommends future financial activities.
Need
Something essential for survival
Want
An item that we desire but that is not essential to survival
Consumer
A person who purchases goods and services for personal use
Good
Tangible economic product that is useful, relatively scarce, transferable to others; used to satisfy wants and needs
Service
Any activity that fulfills a human want or need and returns money to those who provide it.
Values
The principles you live by and the beliefs that are important to you
Value system
Overall structure of values and goals that guides a person's behavior and provides a sense of direction in life.
Ethics
Moral principles that govern a person's behavior or the conducting of an activity.
Priority
Value or goal that is more important than others
Standard
Established or widely recognized as a model of authority or excellence
Resource
A substance in the environment that is useful to people, is economically and technologically feasible to access, and is socially acceptable to use.
Goal
Objective to be attained in a specific amount of time
Financial Competence
Ability to understand basic topics related to finance
Cost-Benefit Analysis
Method of weighing the costs against the benefits of an action, a purchase, or a financial decision
Marginal Benefit
The change in total benefit of using one additional unit
Marginal Cost
Change in total cost of using one additional unit
Law of Diminishing Marginal Utility
States that the marginal benefit of using each additional unit of something
Trade-off
Choice given up when making one choice over another
Opportunity Cost
Value of the option given up
Systematic Decision-Making
Process of choosing a course of action after evaluating available information and weighing the costs and benefits of alternative actions and their consequences
Management
Process of organizing and using resources to achieve predetermined objectives
Personal Information Management (PIM)
A system that individuals use to acquire, organize, maintain, retrieve, and use information
Economic Condition
The state of the economy at a given time
Recession
Period of slow or no economic growth
Inflation
Overall rise in prices
Interest
Amount that is paid for using money. Also, a feeling of wanting to learn more about a topic or to be involved in an activity
Demographics
The statistical characteristics of a population
Culture
Shared beliefs, behaviors, customs, practices, and other characteristics among members of a group or society
Technology
Application of science and research to human life and environment
Media
Forms of communication designed to reach a large number of people
Entitlements
Government program that provides financial benefits to eligible citizens based on their legal rights
Globalization
Worldwide spread and integration of production, markets, communications, and technology
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