Banking & Investing Unit Study Guide

Vocabulary flashcards covering key terms from the Banking & Investing Unit notes.

Checking account

A bank account used to pay bills and manage everyday spending; provides safe, liquid access to money.

FDIC insurance

Federal Deposit Insurance Corporation protection that covers deposits up to $250,000 per depositor per bank.

Monthly maintenance fee

A recurring bank fee; can be avoided by keeping a minimum balance or choosing a fee-free account.

Saving vs investing

Saving is low risk with easy access; investing involves higher risk but aims for long-term growth (stocks/bonds) to counter inflation.

Start investing for retirement early

Begin investing as soon as you have a job; more time and compounding growth increase retirement savings.

Inflation

A rise in prices leading to decreased purchasing power.

Deflation

A fall in prices, resulting in increased purchasing power.

Disinflation

A slowdown in the rate of inflation; prices still rise but more slowly.

Hyperinflation

Extremely high inflation where money loses value; example historically in Germany after WWI.

Purchasing power

The amount of goods/services money can buy; declines as inflation rises.

Emergency fund (3-6 months)

Savings set aside to cover 3–6 months of living expenses for unexpected events.

50-30-20 Rule

Budget guideline: 50% needs, 30% wants, 20% savings.

Traditional savings account

A basic savings account with easy access but typically lower interest.

High-yield savings account

A savings account offering higher interest rates, useful for countering rising inflation.

Certificate of Deposit (CD)

Time deposit with a fixed term; higher interest but limited access until maturity.

Net return (net of fees)

Investment return after subtracting management/fees from gross returns.

Compound interest

Interest earned on both the initial principal and previously earned interest.

Simple interest

Interest calculated only on the original principal, not on accumulated interest.

Diversification

Spreading investments across different assets to reduce overall risk.

401(k)

Employer-sponsored retirement plan with tax advantages; contributions grow tax-deferred.

IRA

Individual Retirement Account; tax-advantaged retirement savings not tied to an employer.

Stocks

Ownership shares in a company; higher risk with potential for growth and dividends.

Bonds

Loans to issuers that provide fixed income; generally lower risk than stocks.

Mutual funds

Pooled funds managed by professionals, providing diversification across many assets.

Dividend yield

Annual dividend per share divided by price, expressed as a percentage.

Market capitalization

Total market value of a company based on its outstanding shares (share price × shares outstanding).

52-week range

The lowest and highest price of a stock over the past 52 weeks.

Dow Jones Industrial Average

A price-weighted index of 30 large U.S. companies used as a gauge of market health.

S&P 500

A market-cap weighted index of 500 large U.S. companies representing overall market performance.

Nasdaq Composite

An index of many Nasdaq-listed stocks, with a tech-heavy orientation and broad market coverage.