Chapter 3, Saving Money

Emergency Fund

a savings account set up specifically to be used to cover financial emergencies

Large Purchase

a purchase that requires a significant amount of money

Interest Rate

the percentage of principal charged by the lender for the use of its money

Accrued Interest

the amount of interest charged on a debt but not yet collected; interest accumulates from the date a loan is issued

Compound Growth

the average rate of growth for an investment over time; often expressed as an annual figure

Compound Interest

interest paid on interest previously earned

Principal

the initial amount of money invested or borrowed

Rate of Return

the measure of an investment’s profit or loss, usually expressed as a percentage of the initial investment

Inflation

the persistent rise in the cost of goods and services over time

Time Value of Money

concept that an amount of money is worth more today than in the future due to earning potential