W!SE Financial Literacy Certification Test Review

A collection of flashcards covering essential terminology and concepts related to financial literacy based on lecture notes.

Sources of income

Wages, rentals, interest, capital, profits, investments, and entrepreneurship.

Exemption

An allowance used to reduce the amount of taxed income.

Liquidity

The degree of ease with which assets can be sold.

Discretionary income

Money not allocated for food or shelter.

Money order

A payment order for a pre-specified amount of money, used like a check.

Opportunity cost

The next best alternative given up when a choice is made.

Inflation

An economic condition where prices rise and decreases the purchasing power.

Pay Yourself First

Automatically routing money from paycheck to savings before paying bills.

Certificate of Deposit (CD)

A time deposit at a financial institution with penalties for early cash-out.

Credit union

A member-owned cooperative financial institution that typically offers lower loan interest rates.

Overdraft protection

A feature that prevents overdrafts on checking accounts by providing a loan.

Compound Interest

Interest added to the principal, calculated on the initial principal and accumulated interest.

Time value of money

The concept that money available now is worth more than the same amount in the future.

Rule of 72

A formula used to estimate the number of years required to double the investment at a fixed annual rate of return.

Truth in Lending Act

Legislation requiring lenders to disclose clear information about loan costs.

Credit Reports

A record of a borrower's credit history and current creditworthiness.

Debt-to-Credit Ratio

A measure of the amount of available credit relative to the debt held.

Collateral

An asset that a lender accepts as security for a loan.

Insurance deductible

The amount that the insured must pay out-of-pocket before the insurer covers the remaining costs.

Disability Insurance

Insurance that provides income replacement for those unable to work due to a disability.

Bonds

Debt securities issued by organizations to raise capital, paying the holder interest over time.

Mutual Funds

Investment vehicles that pool money from many investors to buy diversified portfolios of stocks and bonds.

Graduated Income Tax

A progressive tax where the rate increases with higher levels of taxable income.

Federal Reserve (Fed)

The central banking system of the U.S., which regulates monetary policy.

FDIC

Federal Deposit Insurance Corporation, which protects bank depositors up to a certain limit.

CFPB

Consumer Financial Protection Bureau, an agency that oversees financial products and consumer protection.