| A | B |
|---|
| 401(k)/403(b) plans | Popular types of defined-contribution retirement plans. They allow employees to contribute into their accounts |
| Accreditation | An official recognition that a school or program meets a certain standard. |
| Adjustable rate mortgage | Mortgage with a rate that may go up or down. The rate change occurs at some preset time— for example |
| Adjusted gross income | Total income minus certain allowable amounts such as contributions to some retirement accounts |
| Annual fee | Charged by credit card companies for the privilege of using their card. |
| Annual percentage rate (APR) | The interest rate that shows what a borrower is actually paying with all the costs of financing factored in. |
| Annual percentage yield (APY) | The interest rate that shows what an account will earn annually with compounding factored in. |
| Annuity | A situation in which there are equal cash flows occurring at equal intervals for a fixed period of time. |
| Apprenticeship | On-the-job program in which a person may receive formal training. |
| Asset | Something owned. |
| Asset allocation | The process of spreading investments among asset classes—diversifying investments. |
| Asset classes | Investments |
| Automatic Teller Machine (ATM) | Provides banking customers with access to financial transactions in a public space without the need for a bank teller. |
| Baby boom | A period of very high birthrates that occurred between 1946 and 1964. |
| Bank draft | Used to authorize someone to withdraw money from a bank account automatically to satisfy some financial obligation. |
| Bankruptcy | A legal process in which a court takes over some of the finances of a person who is unable to pay his or her bills. |
| Beneficiary | A person who receives payment from a life insurance provider when the policyholder dies. |
| Bond | A promissory note to repay a certain amount of money at some future point. |
| Brokerage | A firm that provides access to the stock markets. |
| Budget | A list of planned expenses and revenues. |
| Budgeting | The process of forecasting future expenses and income. |
| Business cycle | The economic pattern of alternating periods of shrinking and expanding. |
| Capital gain | Taxable income that occurs when an asset is sold for more than it originally cost. |
| Cash advance | The ability to use a credit card to withdraw cash from a bank or ATM (rather than just purchasing a good or a service). |
| Cash inflow | Money received. |
| Cash outflow | Money spent. |
| Cashier’s check | A type of check that is written to a specific payee but charged against a bank instead of an individual account. |
| Certificate of deposit (CD) | A contract between an individual and a financial institution that specifies the time that the individual will leave a certain amount of money deposited in the account and the interest rate earned. |
| Certification | An official document or record that states that a person has met some standard for training or knowledge. |
| Check | A written order from an individual to a bank that instructs the bank to pay money to another party. |
| Check register | A small ledger provided by a bank for keeping track of an account balance. |
| Checking account | An account into which a person deposits money and from which a person withdraws money by writing checks or using a debit card. |
| COBRA | The Consolidated Omnibus Budget Reconcilation Act. It allows an individual temporarily to continue health insurance coverage at group rates. |
| Coinsurance | The share of costs for covered insurance services that an individual is required to pay out of pocket. Often called a co-pay. |
| Collateral | Assets that have been pledged against a loan repayment. |
| Commission | Fee charged by a brokerage firm for carrying out a transaction. |
| Compensation | Money earned and benefits given by employers |
| Compound interest | Interest earned on interest added to an account. |
| Compounding | The process of earning interest on interest previously added to an account. |
| Consumer price index (CPI) | The formal measure of prices used to calculate inflation that tells us whether things overall are more expensive now than in the past. |
| Corporate bonds | Bonds issued by a large company—they have all degrees of risk depending on the strength of the corporation. |
| Cosigner | A person |
| Coupon payment | Regular interest payments on bonds. |
| Coupon rate | A bond’s interest rate |
| Credit | Money that a lender makes available to a borrower with the understanding that the borrower will repay the money. |
| Credit bureau | Organization that collects credit information about individual consumers. |
| Credit card | Provides individuals with revolving open-end credit |
| Credit check | Performed by potential creditors to access a person’s credit report to examine the individual’s credit history and the ability to repay. |
| Credit history | Record of credit use and payments. |
| Credit limit | A person may borrow up to this amount based on his or her income level |
| Credit management | Decision making about getting and using credit. |
| Credit provider | An entity |
| Credit report | Summarizes an individual’s existing and past lines of credit. |
| Credit score | Created by credit bureaus to assess an individual’s creditworthiness |
| Credit union. | Functions similarly to a bank |
| Creditor | Someone who provides credit. |
| Current liability | Debt that is due within one year. |
| Debit card | Enables one to withdraw cash from an ATM or to pay directly for goods or services at stores and restaurants. |
| Debt consolidation | Combining several small accounts into one larger account that may be able to be financed at a lower rate. |
| Deductible | The amount of money that a policyholder must pay before an insurance policy will begin to cover a claim. |
| Default | When a person stops making payments on a loan. |
| Defined-benefit plan | An employer-sponsored retirement plan in which an employer guarantees an employee a specific amount of income at retirement. The benefit is often based on factors such as the number of years worked and the average salary earned during peak earning years. |
| Defined-contribution plan | An employer-sponsored retirement plan in which an employer contributes to an employee’s retirement account but does not guarantee a specific retirement benefit. |
| Demand deposit | Money put into a checkable account that can be withdrawn at any time. |
| Demographics | The study of human populations. |
| Depository institution | A financial institution |
| Depression | A severe recession. |
| Disability insurance | Insures the beneficiary’s earned income against the risk that sickness or injury will make working (and therefore earning) impossible. |
| Discount brokerage | Offers a reduced level of service |
| Discount rate | The interest rate the Fed charges to banks when it loans them money. |
| Diversification | The process of investing in multiple investments. |
| Dividend | The distribution of cash to shareholders. |
| Down payment | The initial upfront portion of the total amount due on a purchase. |
| Economics | The production |
| Economy | The system related to the production |
| Electronic funds transfer | Authorization for someone to access a bank account for payment or deposit. |
| Employer-sponsored retirement plan | Set up by an employer and designed to help employees save for retirement. The employer generally contributes to the plan. |
| Equal Credit Opportunity Act | Prohibits creditors from denying credit based on gender |
| Equity | Ownership in something. |
| Estate planning | The process of determining how wealth will be allocated on or before a person’s death. |
| Expense | Anything on which money is spent. |
| Face value | A bond’s maturity value |
| Fair Credit Reporting Act | A federal law that limits the sharing of an individual’s financial information to firms that have a legal purpose to evaluate it. |
| Fair Isaac Corporation | Created a model on which credit scores (FICO scores) are calculated. |
| Federal agency bonds | Issued by federal agencies whose proceeds are used to buy mortgages to encourage home ownership. |
| Federal Deposit Insurance Corporation (FDIC) | A major federal insurer that provides deposit insurance on the first $250 |
| Federal Perkins loan | Similar to a Stafford loan |
| Federal Reserve System | The central bank of the United States. |
| Federal Stafford loan | The most common type of federal education loan; it is available in two forms: subsidized and unsubsidized. |
| Fiat money | The money currently used in the United States. It has value because the government orders that it must be accepted as payment. |
| Finance | To pay a portion of the cost of a major purchase such as a house or a car by taking a loan. |
| Fixed annuity | A type of financial product that guarantees annual payments to the owner for a fixed period of time or for a person’s lifetime. The return and ultimate payment is a guaranteed amount. |
| Fixed expense | An expense that remains the same from period to period. |
| Fixed rate mortgage | A mortgage in which the interest rate remains the same for the life of the loan. |
| Forecast | A projection about future cash flows. |
| Forecast error | The difference between the actual value and the predicted value for the corresponding period. |
| Fraud | Occurs when someone submits false information to get a financial benefit. |
| Full-service brokerage | Provides advice and executes trades for a price; for example |
| Future value | What money is “worth” at a specified time in the future assuming a certain interest rate. |
| Global economy | The world in which economies of all countries interact and depend on each other. |
| Grace period | Time in which credit card companies do not charge interest on purchases. Typical grace periods are 20 days from the time the statement is “closed |
| Gross domestic product (GDP) | The total dollar amount of all final goods and services purchased domestically in a given year. |
| Gross income | The total amount of a person’s income. |
| Gross pay | Hourly wage multiplied by hours worked. |
| Group plan | Insurance plans that cover a large group of individuals |
| Health insurance | Provides payment to people who suffer a financial loss as a result of illness or injury. |
| HIPAA | The Health Insurance Portability and Accounting Act ensures that workers can continue their health insurance coverage if they switch jobs. The act prohibits insurance companies from denying new employees access to coverage based on their health or preexisting conditions. |
| Home equity loan | Allows a homeowner to borrow against the equity in his or her home—that is |
| Household asset | Tangible possessions owned by a household. Furniture is one example. |
| Identity theft | When someone uses an individual’s personal information without permission for personal gain. |
| Income | Money coming in through wages earned |
| Individual retirement account (IRA) | A type of savings account created by the government to encourage people to save for retirement. |
| Inflation | A sustained increase in the general level of prices. During a time of inflation |
| Initial public offering (IPO) | The first sale of stock issued by a company to raise money for business operations |
| Installment credit | Used for specific purchases; allows the borrower more time to repay. |
| Institutional investor | One who trades large volumes of stocks on behalf of large institutions; for example |
| Insurance | A financial product that when purchased provides reimbursement paid to a person in the event of certain types of financial loss. |
| Interest | Fee charged by a lender on money borrowed. |
| Internal Revenue Service | A branch of the United States Treasury Department that carries out the federal tax system. |
| Internship | A temporary |
| Intestate | When an individual dies without having a will. |
| Investment | Something acquired with the goal of making money. |
| Itemized deduction | A specific expense that |
| Junk bonds | Corporate bonds issued by companies with the highest risk. |
| Lease | A long-term rental agreement. |
| Liability | What is owed (debt). |
| Liability coverage | Auto insurance that covers damage to an individual’s car or damage caused to other people or their property. |
| Life insurance | Provides payment to a specific person or persons when the policyholder dies. |
| Line of credit | An agreement to allow borrowing as needed up to a certain amount of money. |
| Liquid asset | Something owned that can be rapidly converted to cash without a risk of significant loss. |
| Liquidity | Available cash on hand for meeting immediate wants and needs. |
| Long-term goal | A goal that will take more than five years to accomplish. |
| Long-term liability | Liabilities that will take more than one year to pay off. |
| Macroeconomics | The study of broad economic issues that impact the economy as a whole. |
| Market value | The current quoted price at which investors buy or sell a share of common stock or a bond at a given time. |
| Maturity date | The date at which a loan will be completely repaid. |
| Medicaid | A government-sponsored program that provides health insurance for low-income individuals. |
| Medicare | Funded by payroll taxes. Provides health care coverage to older Americans and some younger disabled people. |
| Microeconomics | The study of individual choices or decisions made by small units. |
| Middle-term goal | A goal an individual aims to meet within the next one to five years. |
| Monetary policy | The raising or lowering of the money supply to achieve some goal. |
| Money management | Making decisions about how much cash or liquid assets to keep in reserve and how much to invest. |
| Money market deposit account | Has some features of a checking account or a savings account. These accounts require an individual to maintain a minimum balance |
| Money order | Functions similarly to a cashier’s check. It is purchased for cash so that the recipient can trust its worth. |
| Mortgage | The common term for the type of loan people take to purchase a home. |
| Municipal bond | Issued by state and local governments to finance large public projects such as water and sewer systems. |
| Mutual fund | Sells shares to investors in order to collect a pool of money that is then used to buy various investments. |
| National Association of Security Dealers Automated Quotation (NASDAQ) | An organized stock exchange in the secondary market in which stock sales occur. |
| National Credit Union Savings Insurance Fund (NCUSIF) | A major federal insurer that provides deposit insurance on the first $250 |
| Negotiable order of withdrawal (NOW) | Functions like a checking account but pays a small amount of interest on money in the account. NOW accounts require the user to maintain a minimum balance in order to earn interest. |
| Net pay | Wages that remain after taxes are withheld (takehome pay). |
| Net worth | Assets minus liabilities. |
| New York Stock Exchange (NYSE) | An organized stock exchange in the secondary market in which stock sales occur. |
| Nondepository institutions | Insurance companies |
| Noninstallment credit | The simplest form of consumer credit. It is usually for a very short term |
| Opportunity cost | The opportunity lost to do something with money when an individual uses that money to do something else. |
| Overdraft protection | A feature that allows a person to “overdraw |
| Pawnbroker | Holds items in exchange for loans that run for 30 days to as much as three months. |
| Payday lending | A lender provides cash advances at a high cost to customers who provide a check dated for some time in the future. |
| Payment terms | Specific information about the interest rate and the time period for paying back a loan. |
| Payroll tax | Tax withheld from paychecks and sent to the government by employers. |
| Pension plan | A defined-benefit plan under which an employer makes contributions to the plan on the employee’s behalf. |
| Personal balance sheet | Lists current assets such as cash in checking accounts and savings accounts |
| Personal finance | Financial issues that can affect an individual. |
| Personal financial plan | Specifies financial goals and describes in detail the spending |
| Personal financial planning | The process of planning every aspect of personal finances. |
| Personal identification number (PIN) | Typically a four-digit number needed to access a bank account or debit card. |
| Personal income tax | A tax levied on the financial income of individuals. |
| Personal loan | A loan that is not backed by collateral. Also known as an unsecured loan |
| Pharming | Identity theft technique that uses e-mail viruses to redirect someone from a legitimate Web site to an official looking Web site designed to obtain personal information. |
| Phishing | Pretexting that occurs online. |
| Policy rider | Additional insurance coverage to cover things such as jewelry or valuable heirlooms that are often not fully covered by a typical insurance policy. |
| Policyholder | A person who buys a health insurance policy or subscribes to it through an employer. |
| Portfolio | An individual’s investments. |
| Preexisting condition | A health condition that existed before an individual’s policy was granted. |
| Premium | Regular payments paid to an insurance company in return for coverage. |
| Present value | The value of a cost or benefit computed in terms of cash today. |
| Pretexting | Occurs when someone improperly accesses an individual’s personal information by posing as someone seeking data. |
| Price level stability | A goal of the Fed to ensure that inflation or deflation does not occur. |
| Primary market | The initial sale of financial assets in which a company receives money during an IPO. |
| Principal | The total amount of money outstanding on a loan. |
| Publicly traded | When a company begins trading on one of the organized stock exchanges. |
| Real estate | Buildings and land. |
| Recession | A period of time in which the economy is shrinking. |
| Résumé | A snapshot of an individual’s qualifications including background |
| Revolving open-end credit | Allows consumers to borrow up to some preset maximum amount. |
| Risk | The possibility of a financial loss. |
| Roth IRA | Similar to a traditional IRA |
| Rule of 72 | Shows how long it would take to double an amount of money for a given interest rate. |
| Safety deposit boxes | Small containers located inside a bank vault used to store valuable documents such as wills and small objects such as jewelry |
| Sales tax | Tax collected by a merchant when a purchase is made and then sent to the government. |
| Savings account | Bank account that generally pays a low rate of interest on deposits. |
| Secondary market | Transactions that take place after an IPO. |
| Secured loan | Has an asset pledged against the loan. The lender is assured of ending up with some valuable asset if the borrower fails to pay off the loan. |
| Securities and Exchange Commission (SEC) | A government agency that regulates and monitors the stock market. |
| Security | Investment issued by a corporation or government in which the investor receives proof of ownership. |
| SEP-IRA | An IRA for self-employed people. |
| Shareholders | People who own stock in a company. |
| Short-term goal | A goal to be accomplished within the next year. |
| Shoulder surfing | An identity theft technique that involves someone in a public place accessing personal information by listening to a conversation or viewing personal information. |
| Simple interest | Interest earned only on the original amount or principal. |
| Skimming | Identity theft technique that involves copying credit card or debit card numbers from credit or debit cards. |
| Social Security | Funded by payroll taxes. It provides payments to eligible retirees and disabled people. |
| Standard deduction | A fixed amount individuals are allowed to deduct from their adjusted gross income to reduce their tax liability. |
| Stock | A fractional share of ownership in a company. |
| Subprime mortgage | High interest rate mortgage loan made to people with poor credit scores. |
| Take-home pay | Wages that remain after taxes are withheld (net pay). Tax Money collected by a government from its citizens and businesses in order to operate the government. |
| Tax deductible | A feature that allows people to reduce their income taxes by reducing taxable income for the year in which they make a contribution (for example |
| Tax deferred | When account earnings |
| Tax return | A report submitted to the IRS that includes all the information relative to an individual’s income taxes |
| Teaser rate | An extremely low interest rate for a short period of time that is used to entice a borrower into a deal. |
| Term insurance | Life insurance provided over a specific period of time. |
| Time value of money | Refers to the fact that money received today is worth more than money received next year or the year after. |
| Traditional IRA | An account in which people can make tax deductible contributions and all earnings are tax deferred. |
| Travelers checks | Checks paid for in advance and written by a large financial institution with no payee specified. |
| Treasury bond | Issued by the United States Treasury to finance the debt of the government. |
| Trust | Legal mechanism that helps to reduce tax liability when assets are transferred from one person to another. |
| Universal life insurance | Provides coverage for a specified term and builds savings for the policyholder. |
| Unsecured loan | A loan in which there is no collateral pledged. |
| Variable annuity | A type of financial product that guarantees annual payments to the owner for a fixed time or for a lifetime. The return and ultimate payment depend on the performance of the investments. |
| Variable expense | An expense that changes from one period to the next. |
| Vesting | The process of earning eligibility for an employer benefit. |
| Whole life insurance | Provides coverage for as long as the policyholder continues to pay the premium. |
| Will | A legal request for how an individual’s estate (everything accumulated during a lifetime) should be distributed upon death. |
