Financial Literacy - Semester Exam

Federal Form W-4

Employee’s Federal Withholding Allowance Certificate

Who pays Social Security Tax

employee and matched by employer

Who needs a work permit

minors under 18

Social Security Act

provides federal aid for retired workers an disabled workers

Medicare

provides medical and hospital insurance for retired workers

Worker’s Compensation

insurance that pays benefits to workers of families if injury or death occurs on the job

Family Medical Leave Act

may take up to 12 weeks off for certain situations (birth or adoption of a child, care of a family member, serious health condition) *employers do not have to pay the worker*

Gross Pay

the total amount of money earned before any deductions are taken out

Net Pay

the amount of money an employee takes home after all deductions have been subtracted from their gross pay

Overtime Rate

the time an employee works beyond their normal working hours, typically resulting in a higher rate of pay

Salary vs Hourly Wage

fixed amount of money paid regularly, regardless of hours worked vs. payment based on the number of hours worked

Required Deductions

federal tax, state tax, city tax, FICA

Progressive Tax

larger % of income as income grows

Exemption

an amount you subtract from income for each person who depends on your income to live

Taxable Income

the amount of an individual’s or a business’s earnings that is subject to income tax after all eligible deductions and adjustments have been applied

Tax Credit

a direct reduction of the tax owed

W-2 Form

shows earnings and contributions for current tax year (received by employer

Form 1040

standard form now used for single and married tax payers

Savings Account

a bank account that lets you store money safely while earning interest, with easy access for deposits and withdrawals

Checking Account

a bank account used for everyday transactions, such as deposits, withdrawals, bill payments, and debit card purchases

Check Endorsement

the act of signing the back of a check to authorize its deposit or transfer

Compound Interest

interest calculated on both the original amount of money and the interest already earned

Credit Unions

a member-owned financial institution that provides banking services, often with lower fees and better interest rates than banks

Certificate of Deposit (CD)

a savings account that locks in money for fixed time in exchange for a higher interest rate

Creditor

person or company that lends money for credit

Capital

property ($) you possess

Finance Charge

interest and fees you pay to use credit

Open-ended Credit

set credit line, borrow up to that amount over & over (credit card)

Closed-end Credit

specific amount, pay back in monthly payments over time (car loans, home loans, etc.)

Service Credit

take advantage of service now, pay later (cell phone, doctor, utilities ie. electric, gas, water for your home

APR

interest expressed as an annual rate

Credit Bureau

a company that collects and maintains information about consumers’ credit history and provides credit reports to lenders

Three C’s of Credit

character (credit history), capacity (ability to pay), and capital (assets or money invested)

FICO Score

a three-digit number that represents a person’s creditworthiness, based on their credit history

Biggest factor that affects your credit score

payment history (whether you pay your bills on time)

Credit Report

a detailed record of your borrowing and repayment history, including loans, credit cards, and payment behavior

Identity Theft

the illegal use of someone else’s personal information (social security number, credit card) to commit fraud or theft

Other costs associated with ownership

maintenance, fuel, auto insurance (required regardless of whether you buy, lease, own, or finance your vehicle

VIN

an alphanumeric number that identifies each vehicle manufactured or sold in the United States

Liability Insurance

pays for injuries and/or property damage in an accident

Comprehensive Insurance

required if you have a lien on your vehicle (covers theft and damage that is caused by something other than an accident)

Collision Insurance

required if you have a lien on your vehicle; covers your vehicle if you are in an auto accident *most expensive insurance to buy*

At-fault State

the driver at fault is responsible for damages (Ohio is an at-fault state)

Premium

amount you pay for insurance for a period of time, typically six months or year

Deductible

amount you must pay if you have a claim, before insurance takes effect

Landlord

the owner, or owner’s representative of rental property

Tenant

a person who rents property

Security Deposit

money paid upfront, usually when renting, to cover protectional damages or unpaid rent

Lease

a written agreement that allows a tenant to use property for a set period of time at a set rent payment

Eviction

the legal process of removing a tenant from rental property

Mortgage

loan used to buy a home, where the property serves as collateral until the loan is repaid

Equity

the portion of property you truly own, calculated as its value minus any outstanding debts or loans

Escrow

account set up to pay your taxes and insurance through your mortgage company, included in payment

Until what age can you stay on your parents insurance

26

Affordable Care Act

the law mandates that everyone have health insurance or face a penalty for failing to do so

Medicare

government-sponsored health insurance for people age 65 or older

Term life insurance vs. whole life insurance

lasts for a specified period, such as 20 years vs. remains in effect for the insured’s lifetime and builds a cash value

Public Corporation

a company whose shares are traded on a stock exchange and can be bought by the general public

Dividends

payments made by a corporation to its shareholders, usually from profits, as a reward for owning stock

Volume

the total number of shares or contracts traded for a security or market during a specific period

FAFSA

is the Free Application for Federal Student Aid. Schools use your FAFSA to evaluate your financial need and determine how much federal student aid you are eligible to receive

Scholarships

are usually merit-based. They can also be based on your academic performance, athletic performance, or your choice of major

Grants

are usually based on a student’s financial needS

Subsidized vs. Unsubsidized Loans

the federal government pays the interest while you are in school vs. interest accrues while you are in school and gets added to your loan balance when you start making payments