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
