Economics Chapter 8: Section 8.3

A.K.A. Transaction Account

Checking Account

allows check or debit withdrawals to occur up the amount in the account

Transaction Account

written order that authorizes a bank to withdraw money from an account

Check

1. Only allows limited transactions 

2. Allows an account owner to earn interest

Savings Account

an account that guarantees a set interest rate and a specific maturity date

Certificate of Deposit (CD)

allows limited transactions and pays an interest rate that changes with the demand for the loan when there is a certain amount of money in the account

Money Market Account

insures bank accounts up to $250,000 

Federal Deposit Insurance Corp. (FDIC)

contract between two parties in which one party protects the other against certain types of loss in exchange for payments called premiums

Insurance

an arrangement provided by an individual’s employer for the intent of providing for the employee’s retirement from work

Pension Plan

promises to pay a certain amount per month after retirement based on salary and length of service

Defined Benefit Plan

both employer and employee contribute to retirement; not a promised amount (Ex. 401k)

Defined Contribution Plan

insurance for repairs or replacement of a certain item

Extended Warranty

something of value a lender can claim in the event of non-payment

Collateral

required if a person takes out a loan to buy a house; in the case of non-payment, the bank forecloses (sells home or property) to recover the balance of a mortgage

Homeowners Insurance

sells home or property

forecloses

the amount that one pays for a policy

Premium

the amount you pay each year before the insurance co. pays its share on a claim

Deductible

small portion paid for the cost of a doctor’s visit

Copay

1. Age

2. Driving Courses 

3. History 

4. Health Screenings 

5. Student Grades 

6. Healthy Lifestyles

Behaviors that Lower Premiums:

holding securities that have lost value

Unrealized loss

security sold at a loss

Realized loss

investing in different types of investments within an asset class

Diversification

reduces taxable income for the year it is invested 

Traditional IRA

contributions are taxable while interest earned on the contributions are not taxable

Roth IRA

parents saving for the education of their children

Educational Savings Account