6e Personal Finance Chapter 10

Short-term needs Expenses beyond your regular monthly items; sometimes they are predictable and sometimes they can’t be foreseen; examples include emergencies, vacations, social events, repairs, major purchases
Long-term needs Expenses that are costly and require years of planning and saving; these are usually predictable and may include home ownership, education, retirement, and investing
Down payment At the time of purchase, you will likely have to pay a large sum of cash often 10-29% of the purchase price; balance is usually paid with a mortgage for which you will make monthly payments
Scholarships Cash allowances awarded to students to help pay education costs; generally paid directly to the educational institution
Student loans Money that may be borrowed for your education
Loan consolidation Means all the loans combined into one large loan, which results in one monthly payment, rather than many payments
Subsidized Means you pay no interest or payments on your student loan until after you graduation from college
Unsubsidized Means interest accrues as the load goes along
Grants Forms of educational funding that do not have to be repaid and usually do not require students to maintain certain standards
Work-study Programs whereby students can work at the campus or other college location to earn money
Principal Amount of money you deposit into a savings account; base on which your savings will grow
Interest Represents earnings on principal; as principal grows the interest grows
Compound interest Interest paid on the original principal plus accumulated interest
Annual Percentage Yield (APY) Actual interest rate an account pays, stated on a yearly basis with the compounding included
Full-Service Banks Provide the widest variety of banking services of any of the financial institutions
Yield Percentage of increase in the value of savings due to earned interest
Federal Deposit Insurance Corporation (FDIC) All commercial banks are insured to protect depositors from loss due to bank failure, up to $250,000 per account
Mutual Savings Banks Financial institutions also called savings banks they are few in number mostly in the New England and Northeast areas are often substantial in size
Savings and Loan Association (S&Ls) Organized primarily to lend money for home mortgages
Credit Unions Are not-for-profit organizations established by groups of people who pool their money; insured by the National Credit Union Administration (NCUA)
National Credit Union Administration (NCUA) Provides insurance for credit union depositors’ accounts, up to $250,000
Share accounts Credit union savings and checking accounts; have low (or no) average daily balance requirements and no service fees
Brokerage Firms Buy and sell different types of securities
Securities Are stocks and bonds issued by corporations or by the government
Stock Represents equity, or ownership in a business
Bonds Represents debt, or a loan
Stockbroker Person who works for the brokerage firm
Discount Brokerage Firms Offer broker services for reduced fees
Liquidity A measure of how quickly you can get your cash without loss of value
Certificate of Deposit (CD) Time deposit, is a deposit that earns a fixed interest rate for a specified length of time; requires a minimum deposit
Maturity Date Date on which an investment becomes due for payment; within a stated number of days after the maturity date CDs will renew automatically
Renews Date at which the account rolls over for another investment interval
Money Market Account Type of savings account that offers a more competitive interest rate than a regular savings account
Money Market Deposit Account Similar to a regular savings account, but it offers a higher rate of interest in exchange for larger than normal deposits
Money Market Fund Type of mutual fund that invests in low-risk securities; not FDIC insured, generally considered safe because they invest in short-term government securities
Safety of Principal Means that you are guaranteed not to lose your savings deposit, even if the bank or other financial institution fails and goes out of business; most financial institutions are insured by FDIC or NCUA up to $250,000 per depositor
Direct deposit Money being deposited electronically directly into your bank account
Automatic deductions Represent money you have authorized your bank or other organization to move from one account to another at regular intervals
Payroll Savings Plan You authorize your employer to make automatic deductions from your paycheck each pay period and deposit the funds electronically into your savings/retirement account or to buy government savings bonds for you

Leave a Reply

Your email address will not be published. Required fields are marked *