Savings And Investing Flashcards
A type of retirement savings account allowed in the United States. This account is funded a variety of
ways involving contributions from the employee and employer. In some circumstances, funds are contributed
pre-tax and the proceeds are taxed upon withdrawal.
401(k)
A financial contract where an individual makes a series of payments over time. At an agreed-upon
time, the individual stops making payments and begins to receive payments, either for the rest of their life or for
a defined period of time.
Annuity
Monetary payments paid to workers who have contributed to the system when they are retired or
disabled or to their survivors in case of death.
Benefits
A certificate of indebtedness issued by a government or a publicly held corporation, promising to repay
borrowed money to the lender a fixed rate of interest and at a specified time. (Optional: Bonds are rated
according to their perceived risk. AAA is the highest rating. B- or B3 is the lowest for a bond of a firm or
government that is not in default.)
Bonds
A (interest bearing) certificate issued by a bank to a person depositing money in
an account for a specified period of time (often six months, one year or two years). A penalty is charged for
early withdrawal from CD accounts.
Certificate of Deposit (CD)
Interest that is generated, not only from the money you put into an account, but also on
the interest you make on that money.
Compound Interest
This is a sense of the relative ease with which a financial instrument or institution can be
accessed in terms of time and location.
Convenience
A federal system of old-age, survivors, disability and health-
care insurance (Medicare) which requires employers to withhold (or transfer) wages from employees’ paychecks
and deposit that money in designated accounts.
Federal Insurance Contributions Acts (FICA)
The total cost of credit, including interest and transaction fees.
Finance Charges/Fees
A voluntary present of money or some other valuable asset.
Gifts
An account in which an individual may set aside earned income in a
tax-deferred savings plan for his or her retirement. There are two types of IRAs, traditional and Roth, each with
its own qualifications and rules governing contributions and withdrawals.
Individual Retirement Account (IRA)
Money or other assets given to a party upon one’s death, also known as a bequest.
Inheritance
The chance that interest rates may change (upward) while the saver is “locked in” to a
(lower) rate for a time deposit (a CD, for example) or a bond. Also the chance that interest rates may change
(downward) while a borrower is “locked in” to a (higher rate) on a loan.
Interest Rate Risk
A federally approved, tax-deferred savings program for self-employed people, allowing them to
set money aside for their retirement.
Keogh Plan
This is a measure of how quickly a financial instrument can be converted to cash.
Liquidity
A fee charged for purchasing (front-end) or selling (back-end) shares of a mutual fund. Loads are
usually calculated as a percentage of the amount of the transaction. Some mutual funds are no-load funds.
Load
Proceeds from previous investments in the form of interest payments, dividends (regular
distribution of profits) or capital gains (realized income from selling an investment at a higher price than was
paid for it).
Market Gains
The loss of value of an investment due to market conditions.
Market Gains/Losses
An interest-bearing account similar to a checking account. Deposits may be added at
any time; some money market accounts limit the withdrawals depositors may make without paying a penalty.
Also known as money market deposit account.
Money Market Account
A pool of money used by a company to purchase a variety of stocks, bonds or money market
instruments. Provides diversification and professional management for investors.
Mutual Funds
An account established by a business to fund retirement benefits for its workers. Pension funds
invest in stocks, bonds, mutual funds and real estate. Funds can either be defined benefit (the amount withdrawn
upon retirement is set in advance - frequently as a percentage of salary); or defined contribution - where the
amount contributed is defined and the amount withdrawn is dependent upon market performance and
investment choices.
Pension Funds
A portion of the wage or salary that has not had taxes withheld prior to being allocated to a
retirement plan or other approved benefit.
Pre-Tax
The sum of money you put into an account or the amount of money (minus interest) you owe on a
debt.
Principal
Property such as land, houses and office buildings.
Real Estate
The benefit or return gained from an investment.
Reward
A method for estimating how long it will take compound interest to cause a principal to double by
dividing the interest rate by 72.
Rule of 72
Money set aside for a future use that is held in easily-accessed accounts, such as savings accounts and
certificates of deposit (CDs).
Savings
A federal system of old-age, survivors’, disability and hospital care (Medicare)
insurance which requires employers to withhold (or transfer) wages from employees’ paychecks and deposit that
money in designated accounts.
Social Security System
An ownership share or shares of ownership in a corporation.
Stocks
Bonds issued by the United States Treasury to investors when the federal government
borrows money. (Treasury bills have maturity of one year or less. Treasury notes have maturity of one to ten
years. Treasury bonds have maturity of more than 10 years.)
Treasure Securities
