Financial Literacy - Savings

Saving

Setting money aside for future use

Savings plan

A strategy for using money to reach important goals

Emergency fund

An amount of money you can access in case of an emergency; about 3-6 months of earnings

SMART goals

Specific, Measurable, Attainable, Realistic, and Timely goals

Savings account

Used to accumulate money for future use

Annual percentage yield (APY)

The rate of yearly earnings from an account, including compound interest

Interest-bearing savings account

A type of demand deposit that allows for regular deposits and withdrawals with no set maturity date

High-yield savings account

Pays higher interest rates than regular savings accounts and requires a higher initial deposit and higher minimum balance

Money market account (MMA)

A type of savings account that pays a higher interest rate than regular savings accounts; requires a minimum balance of $500-10,000, most are limited to a specified number of checks per month

Certificate of deposit (CD)

A savings account that requires a deposit of a fixed amount of money for a fixed term; interest rates may be fixed or variable, higher interest rates than MMAs and other savings accounts

Simple interest

Calculated only on the principal or the amount of money originally deposited

Compound interest

Calculated on the money deposited, plus the interest it earns

Rule of 72

The equation used to estimate how long it will take to double on investment with a fixed interest rate

Tax exempt

Earnings are free of certain taxes, such as certain savings accounts for education

Tax deferred

Taxes on the principal or earnings are delayed until the funds are withdrawn

Online-only banks

Lower operating costs which can mean low-cost services or higher interest rates, be sure to verify FDIC membership

Share account

Savings accounts (Credit Union), insured by NCUA

Brokerage firm

Allows you to purchase a variety of investment products in addition to savings accounts; accounts may not be insured by the FDIC