Unit 2: Financial Literacy Part 2

These flashcards cover key concepts from Unit 2 on financial literacy, including the importance of saving, types of saving tools, retirement savings options, and investment fundamentals.

Importance of Saving Money

Saving money leads to financial freedom, long-term security, and the ability to handle emergencies.

High Yield Saving Accounts

Savings accounts that offer higher interest rates compared to regular savings accounts.

Certificate of Deposit (CD)

A savings tool where the money is locked in for a specified period in exchange for a higher interest rate.

Bond

A loan from an investor to a borrower, where the borrower pays interest to the investor on the loan.

Mutual Funds

A type of investment that pools money from multiple investors to buy stocks, bonds, and other securities.

401(k)

An employer-sponsored retirement plan where contributions may be matched by employers up to a certain limit.

Roth IRA

A retirement account where contributions are made with after-tax dollars and the earnings grow tax-free.

Traditional IRA

A retirement savings account that allows individuals to save for retirement with tax-deferred growth.

Financial Assets

Tangible assets that can be quickly converted to cash, such as stocks, bonds, and cash reserves.

Real Assets

Physical assets that generate value, like land, buildings, and machinery.

Shares

Investment vehicles that represent ownership in a company.

Stocks

A term synonymous with shares, typically representing ownership in multiple companies.

Risk and Reward Relationship

The principle that every investment carries risk, and strategies should be employed to minimize that risk.