Economics - Unit 4 Vocabulary

Irondale HS Unit 4 economics vcabulary - personal finance

Budget

A budget is a plan for managing income, spending, and saving during a given period of time.

Checking account

Accounts at a bank or credit union which allows you to deposit and withdraw money safely and conveniently.

Debit card

A card issued by a bank that allows money to be withdrawn or payments made directly from the holder's bank account.

Direct deposit

An electronic transaction in which money is deposited directly into a payee's bank account. Most often, this is used by employers to directly deposit paychecks into your bank account.

Compound interest

Compound interest is the interest on a loan or deposit calculated based on both the initial principal and the accumulated interest from previous periods.

FICO/Credit Score

A loan and bill payment history kept by a credit bureau and used by financial institutions and other potential creditors to determine the likelihood that a future debt will be repaid.

Investment

Investment is the act of redirecting resources from being consumed today so that they may create benefits in the future.

Return (on investment)

A performance measure of the effectiveness of an investment. Returns are money an investor receives above and beyond the amount that was invested.

Stock exchange

A market for buying and selling shares/stocks in companies.

Dow Jones

An index consisting of stock prices of 30 companies in various industries reflecting U.S. economic activity.

S&P 500

An index that tracks the price changes of 500 different stocks as a measure of overall stock market performance.

Bonds

A certificate of indebtedness issued by a government or corporation with a guaranteed payout at some later date.

Mutual fund

A company that pools investors' money and then buys and sells stocks and bonds in other companies.

IRA

A retirement account that allows individuals to direct pretax or after

Credit

A contractual agreement in which a borrower receives something of value now and agrees to pay the lender back later, usually with interest

Interest rate

Sometimes called the “price of money,” it is the amount, usually a percentage, that a borrower agrees to pay a lender for borrowing

Capacity

The individual’s ability to repay the loan (ex. Length of employment, sources, types and amounts of income)

Character

The individual’s reliability to repay the loan (ex. Credit scores, references)

Collateral

The assets the individual owns that could be sold to repay the loan (savings, investments, real property)

Savings Accounts

a basic interest earning account. You deposit money and generally expect not to use it for day to day expenses

Certificate of Deposit (CD)

an type of investment issued by banks that guarantees a rate of interest for a fixed term

Life insurance

provides financial protection for the family or other named as beneficiaries in case of death

Auto insurance

Protects drivers and others in case of an accident that results in damage or an injury

Property insurance

protects a home, apartment (renter’s insurance) or other personal property against damage

Health insurance

protects the policyholder in case of illness or injury

Risk/return tradeoff

In general, the higher the risk of an investment, the greater the return or loss

Bull Market

stock prices are expected to go up

Bear Market

stock prices are expected to down

Lending Circle

a group of people who come together to lend money to each other. This method of lending provides an opportunity for people to borrow money without having to worry about interest rates, fees, and loan approval.