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529 plan
A savings plan operated by a state or educational institution designed to help families set aside funds for future college costs
Bonds
A certificate issued by a government or private company which promises to pay back with interest the money (principal) borrowed from the buyer of the certificate. Example- The city issued bonds to raise money for putting in new sewers.
budget
A plan for making and spending money
Certificate of Deposit (CD)
An interest-earning deposit that requires the funds to remain deposited for a fixed term. Withdrawal of the funds before the term expires results in a financial penalty.
checking account
an account at a bank against which checks can be drawn by the account depositor.
Closing
in real estate, a meeting of the seller, the buyer, and the lender of funds, or representatives of each party, to complete the transaction
collision insurance
This covers the car of the insured person and pays for repairs after an accident or cash compensation if the car can't be repaired. This type of coverage is usually optional
compound interest
interest earned on both the principal amount and any interest already earned
comprehensive insurance
covers your car for reasons other than a collision, such as theft, fire, vandalism
Credit Report
a report on a person's creditworthiness that includes identifying information, credit cards, late payments, bankruptcies, and savings balances
Credit Score
a number assigned to a person that indicates to lenders their capacity to repay a loan. 300-900 (a higher score is better)
Deductible
Amount you must pay before you begin receiving any benefits from your insurance company
Diversification
Spreading out investments to reduce risk
financial risk
uncertainty about future outcomes that involve financial losses and gains
Foreclosure
The seizure of property from borrowers who are unable to repay their loans
Growth Funds
mutual funds that focus on stocks that have potential for above-average growth
Index Fund
A mutual fund that tries to match the performance of a particular index, like the S & P 500, by investing in the companies included in that index.
inflation risk
The danger that money won't be worth as much in the future as it is today
insurance
protection against possible financial loss
liability insurance
insurance that provides protection from claims arising from injuries or damage to other people or property
mortgage
a specific type of loan that is used to buy real estate
Mutual funds are:
An investment that holds a wide range of different investment instruments, providing diversification, including stocks and bonds
Premium
an amount to be paid for an insurance policy.
Roth 401(k)
an account setup at work where you make contributions with after-tax dollars, which is invested in mutual funds, and qualified distributions at retirement are received income-tax free
Roth IRA
A personal savings plan; contributions are not tax-deductible; earnings are tax-free
Rule of 72
The number of years it takes for a certain amount to double in value is equal to 72 divided by its annual rate of interest.
savings account
a bank account that earns interest
Stocks
shares of ownership in a company
Target Funds
mutual funds that automatically adjust the risk profile (from stocks to bonds) of the fund as the investor gets older
two income trap
Cost of living has doubled since 1970s. Relied on both parents working to support families.
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