FBLA Personal Finance Study Guide

Federal Deposit Insurance Corporation (FDIC)

A U.S. government agency that insures deposits at banks and savings institutions up to a certain amount (typically $250,000 per depositor).

National Credit Union Administration (NCUA)

Provides insurance to credit unions, similar to the FDIC.

Commercial Bank

A for-profit financial institution that provides services such as savings accounts, checking accounts, loans, and credit cards.

Credit Union

A nonprofit financial institution owned by its members, often offering lower interest rates on loans and higher interest rates on savings accounts.

Annual Percentage Rate (APR)

The total cost of borrowing money, including interest and fees, expressed as a yearly percentage.

Certificate of Deposit (CD)

A savings instrument with a fixed interest rate and a set maturity date, typically offering higher interest rates than regular savings accounts.

Money Market Account

A type of savings account that offers higher interest rates but may require higher minimum balances and limit withdrawals.

Overdraft Fee

A fee charged when an account holder withdraws more money than is available in their bank account.

Credit Score

A numerical representation of a person's creditworthiness, usually ranging from 300-850.

Credit Report

A detailed history of an individual’s credit usage, including loans, credit cards, and payment history.

Debt-to-Income Ratio (DTI)

A measure of a person’s debt obligations compared to their income; used by lenders to assess financial stability.

Secured Loan

A loan backed by collateral, which the lender can seize if the borrower fails to repay.

Unsecured Loan

A loan that does not require collateral; approval is based on creditworthiness.

Minimum Payment

The lowest amount a borrower can pay on a credit card bill without facing penalties or additional interest.

Predatory Lending

Unethical lending practices that exploit borrowers, often involving extremely high interest rates or hidden fees.

Credit Freeze

A security measure that restricts access to a person’s credit report, preventing identity thieves from opening new accounts.

Stock

A type of investment that represents ownership in a company.

Bond

A fixed-income investment where an investor loans money to a company or government for interest payments.

Mutual Fund

A pooled investment managed by professionals that spreads risk by investing in various securities.

Diversification

The practice of spreading investments across different asset types to reduce risk.

Roth IRA

A retirement savings account where contributions are made with after-tax dollars, and withdrawals are tax-free.

Traditional IRA

A retirement savings account where contributions may be tax-deductible, but withdrawals are taxed as income.

401(k) Plan

An employer-sponsored retirement savings plan with tax advantages and potential matching contributions.

Compound Interest

Interest earned on both the initial principal and accumulated interest.

Fixed Expense

A recurring expense that remains the same each month.

Variable Expense

An expense that changes from month to month.

Discretionary Expense

A non-essential expense that can be adjusted.

50/30/20 Rule

A budgeting guideline suggesting 50% of income for needs, 30% for wants, and 20% for savings.

Emergency Fund

A savings account set aside for unexpected expenses; recommended to cover 3-6 months’ worth of expenses.

Income Tax

A tax on earnings from wages, salaries, and investments.

Sales Tax

A tax on goods and services at the point of sale.

Property Tax

A tax levied on real estate by local governments.

Excise Tax

A tax on specific goods such as gasoline, tobacco, and alcohol.

Tax Deduction

An expense that reduces taxable income.

Tax Credit

A direct reduction of the amount of tax owed.

529 Plan

A tax-advantaged savings plan designed to encourage saving for future education costs.

Premium

The amount paid for an insurance policy, typically monthly or annually.

Deductible

The amount a policyholder must pay out of pocket before insurance covers the remaining costs.

Health Insurance

Coverage that pays for medical expenses, including HMOs and PPOs.

Auto Insurance

Protects against financial loss due to accidents, theft, or damage.

Disability Insurance

Provides income protection if an individual cannot work due to injury or illness.

Life Insurance

Provides a lump sum payment to beneficiaries upon the policyholder’s death.

Federal Trade Commission (FTC)

The U.S. agency responsible for consumer protection and preventing fraudulent business practices.

Equal Credit Opportunity Act (ECOA)

Prohibits discrimination in lending based on race, gender, and other factors.

Fair Credit Reporting Act (FCRA)

Ensures accuracy, fairness, and privacy of credit reports.

Identity Theft

When someone illegally uses another person’s financial information.

Phishing

A scam where fraudsters use fake emails or messages to trick individuals into revealing personal information.

Credit Monitoring

A service that alerts consumers of changes in their credit report to help prevent identity theft.

Tax audit

An examination of an individual's or business's financial information by tax authorities to ensure accuracy in tax reporting and compliance with tax laws.

Discretionary Income

The money is left over after you have paid for the essentials- food, clothing, shelter, transportation, and medication.

Direct Deposit

A method of electronically transferring funds into a bank account without the need for physical checks, often used for payroll.

Principal

The original sum of money borrowed or invested, excluding interest and other fees.

Outstanding Checks

Checks that have been written and sent but have not yet cleared the bank, meaning the funds have not yet been deducted from the payer's account.

Open Ended Credit

A type of credit that allows borrowers to access a revolving credit line up to a certain limit and repay it over time, commonly seen in credit cards and lines of credit.

Annual Percentage Rate

The total cost of borrowing money, including interest and fees, expressed as a yearly percentage.

C’s of Credit

Character, Capacity, Capital, Collateral, and Conditions.

Consumer Credit Protection Law

A law designed to educate consumers about their rights and responsibilities regarding credit and to protect them from unfair lending practices.

Zoning Laws

Regulations by local governments that determine how land can be used in specific areas.

Treasury Bills

Short-term government securities with one year or less maturities are sold at a discount to face value. (Standard is for $1000)

Municipal Bond

A debt security issued by local or state governments to fund public projects, with interest payments often exempt from federal, state, and local taxes.

W-2

tax document that employers provide to employees, detailing wages earned and taxes withheld during the year.

W-4

tax document that employees complete to inform their employer of their tax situation, determining how much federal income tax should be withheld from their paycheck.