| A | B |
|---|
| 401K | A retirement savings plan where money is deducted from gross salary (pre-tax) and placed in a special account where the money is invested |
| Certificate of Deposit | an account that pays interest on a sum of money that a person has deposited; to be left in the account for a specified period of time |
| Compound Interest | interest PAID periodically on the principal plus interest earned |
| Defined Benefit Plan | a pension plan where an employer guarantees it will pay a certain amount upon retirement based on a pre-determined formula |
| Defined Contribution Plan | a retirement plan where the employee/employer set aside a percentage or amount of money each pay period to be invested |
| Interest Rate | a rate which is charged or earned for the use of money; expressed as an annual percentage of the principal |
| Interest | a percentage of money paid to you by a financial institution for the use of your money |
| Investing | the act of purchasing assets (stocks, bonds, property) with expectation that they will increase in value over time |
| IRA (Individual Retirement Account) | retirement account that allows investors to make tax-deductible contributions - set up and managed by the individual |
| Liquidity | the speed at which an asset can be sold (or turned in to cash) without hurting its value |
| Money Market Account | bank account where the bank invests in securities in order to pay a higher interest rate; usually requires a high minimum balance |
| Pension | a sum of money paid to an employee upon retirement based on certain conditions of the organizations retirement plan |
| Return (rate of return) | how much an investment gains or loses in value over time |
| Risk | the liklihood that an investment will decrease in value; this could also yield a high rate of return |
| Roth IRA | retirement account that allows individuals to contribute to their retirement after taxes are deducted from their earnings |
| Saving | setting aside a portion of income for future needs |
| Savings Account | an account you set up at a depository institution where you put funds for future use |
| Time Value of Money | the increase of an amount of money (over time) due to earned interest or dividends |
| dividends | distribution of the after-tax earnings to a company's shareholders |
| savings bond | an investment offered by the U.S. Government, which pays annual interest and is payable in full on a certain date |
| portfolio | a collection of investments owned by the same person or organization |
| diversify | spreading investment dollars among different assets in order to balance and/or reduce the level of risk |
| annuity | a contract, where individuals pay a premium then receive fixed, continual amount upon retirement |
| tax deferred | delaying the payment of taxes a.k.a. "pre-tax" |
