Dave Ramsey Key Terms Chapters 3 & 8

Emergency Fund

a savings account set up specifically to be used to cover financial emergencies

Large Purchase

a purchase that requires a significant amount of money

Interest Rate

the percentage of principal charged by the lender for the use of its money

Accrued Interest

the amount of interest charged on a debt but not yet collected; interest accumulates from the date a loan is issued

Compound Growth

the average rate of growth for an investment over time; often expressed as an annual figure

Compound Interest

interest paid on interest previously earned

Principal

the initial amount of money invested or borrowed​​​​​​​

Rate of Return

the measure of an investment’s profit or loss, usually expressed as a percentage of the initial investment

Inflation

the persistent rise in the cost of goods and services over time

Time Value of Money

concept that an amount of money is worth more today than in the future due to earning potential

Bank

a financial institution licensed to receive deposits and provide financial services

Federal Deposit Insurance Corporation:independent federal agency that insures deposits in bank accounts up to $250,000​​​​​​​

National Credit Union Administration

independent federal agency that insures deposits in credit unions up to $250,000​​​​​​​

Unbanked

people who don‘t have bank accounts

Underbanked

people who have savings or checking accounts but still use alternative financial products and services

Retail Banks

for-profit financial institutions that accept deposits and offer a variety of deposit accounts and financial services

Credit Unions

nonprofit financial institutions that are owned and operated by their members; offer deposit accounts and lending services similar to a retail bank but at a lower cost​​​​​​​

Online Banks

also known as internet banking; all transactions done online; no physical location​​​​​​​

Overdraft Protection

an option offered by banks to cover overspending an account and then charge a fee for it​​​​​​​

Overdraft Fee

a penalty charged if the account holder spends more than their account balance, causing the available balance to go below zero

Liquidity

how quickly you can access the money in an account or the value of an asset without a penalty or fee

Checking Account Register

also called a ledger; a lined and divided journal to record checking account activity

Direct Deposit

option to allow automatic electronic deposit of your payroll checks​​​​​​​

Reconciling

the process of making sure you and the bank agree on how much money is in your checking account