Savings Quiz Flashcards
The amount of an individual’s take‐home pay after taxes and other deductions have been taken out
Net income
Giving up one thing for another
Trade-off
The portion of current income not spent on consumption
Savings
A saving strategy that states to set aside a predetermined portion of money for saving each time a person is paid before using any of the money for spending
Pay yourself first
Debts or what is owed to others
Liabilities
A business that offers banking and finance services
Depository Institution
How quickly and easily an asset can be converted into cash
Liquidity
The purchase of assets with the goal of increasing future income
Investing
The profit or income generated by savings and investing
Return
The price of money
Interest
Everything an individual or household owns with monetary value
Assets
The percentage rate paid on money invested or saved
Interest Rate
A paper or electronic document used to record both planned and actual income through expenditures over a period of time
Spending plan
The amount of money needed to pay for the necessities and comforts currently enjoyed
Level of living
Describes an individual or family’s financial condition on a specified date
Net Worth Statement
Amount of money left when liabilities are subtracted from assets
Net Worth
The value of the next best alternative that must be forgone
Opportunity Cost
The end result of something a person intends to acquire, achieve, do, reach, or accomplish
Goal
The original amount of money saved or invested
Principal
Higher level of living that a person wishes to reach
Standard of Living
Earning interest on interest
Compounding interest
A measurement of how much a person or household owns once all debts have been paid
Wealth
Money earned over time.
Time Value of Money
What are three characteristics of saving?
- More liquidity. 2. Low risk and low return. 3. Provides the foundation for financial security
What are three characteristics of investing?
- Less liquidity. 2. More risk, but higher potential return. 3. helps build wealth
