Chapter 10 Flashcards
Advantages/Disadvantages of Regular Savings Acct.
Adv... -higher liquidity -very safe Disadv... -lower interest rate
Advantages/Disadvantages of Certificate of Deposit (CD’s)
Adv... -higher interest rate (than savings) -safe Disadv... -penalty for withdrawal -maturity date
Advantages/Disadvantages of Money Market FUND
Adv... -low risk, very liquid -interest rate usually higher than savings Disadv... -not insured by the FDIC
a deposit that is set aside for a specified length of time at a specified rate
CD (certificate of deposit)
a regular account at a credit union
share account
money that is paid for the use of money
interest
deposits kept in credit unions are insured by the ________
NCUA
federal insurance for depositors in commercial banks and savings and loans is provided by the _____
FDIC
interest drawn on the sum of the original principal plus interest
compound interest
occurs when student loans are combined into one large loan
loan consolidation
a form of educational funding that does not have to be repaid, is often funded by the government, and is in addition to scholarships and loans
grant
Why should you save? (3 things)
1) short term needs
2) long-term needs
3) financial security
list some examples of short-term needs
vacations, emergencies
list some examples of long-term needs
more than 5 yrs away
why do you need financial security
peace of mind knowing that you can pay your bills
you should have __ months of income in a savings account always!!!!!
6
How does your money grow? (4 ways)
1) principal
2) interest
3) compound interest
4) APY (annual percentage yield)
the capability of financial resources being readily converted to cash
liquidity
the amount of money you place in a savings (the $$ YOU deposit)
principal
money paid to YOU
interest
interest on your interest
compound interest
amount of interest you yield in a year
APY
a type of savings plan that offers a more competitive interest rate than a savings account
money market fund (account)
the greater the ____ you are willing to take, the higher rate of interest you will receive
risk
involves an employer or financial institution electronically depositing your paycheck into a bank account
direct deposit
needs you expect to have in the next few months or years are called ________
short-term needs
money borrowed for education, can be subsidized or unsubsidized
student loans
the day on which a certificate must be renewed or cashed in
maturity date
when a CD is cashed before its maturity date, the depositor must pay a _____ penalty
early withdrawal
the FDIC insures a depositor’s money up to $_______
$250,000
Where can you save? (5 places)
1) commercial banks
2) savings banks
3) savings & loan associations
4) credit unions
5) brokerage firms
What are the 3 savings options?
1) regular savings account
2) certificate of deposit (CD)
3) money market account
this place sells securities/stocks & bonds
brokerage firms
these are more prevalent in the south (more than savings banks)
savings and loan associations
similar to commercial banks, non-profit
credit unions
2 ways to save regularly…
1) direct deposits
2) automatic payroll deductions (ATM)
