Financial Literacy and Personal Finance Flashcards

A comprehensive set of vocabulary flashcards covering savings, investing, credit, debt, and insurance terminology based on the provided lecture notes.

Savings

The excess portion of your income that you do not spend on consumption.

Investing

Using any money in ways that could potentially increase that money's value over time.

Certificate of Deposit

A product offered by banks and credit unions that offers an interest rate premium in exchange for the customer agreeing to leave a lump-sum deposit untouched for a predetermined period of time.

Instant Gratification

Getting immediate pleasure from the things you do and the things you buy.

Delayed Gratification

Resists the temptation of an immediate reward in preference for a later reward.

$529$ College Savings Plans

Used to save and invest for K-$12$ tuition in addition to college costs and offers tax and financial aid benefits.

Annual Percentage Rate (Savings Context)

The real rate of return earned on a savings deposit or investment taking into account the effect of compounding interest.

Principal

The amount you have deposited into an account or the sum of money lent or invested on which interest is paid.

Interest

The amount of return paid on the investment.

Simple Interest

Interest calculated only on the principal (the original amount invested), not on any accrued interest.

Compound Interest

Interest calculated on the principal that has been invested and on the interest that has previously accumulated.

Rule of $72$

A simple way to determine how long an investment will take to double given a fixed annual rate of interest.

Liquidity

Refers to how easily an investment can be converted into cash.

Money Market Account

An interest-bearing account at a bank or credit union.

Maturity (date)

The date on which a bond is to be repaid or an investment agreement ends and a payment is made.

Rate of Return

The amount (usually expressed as a percentage) that an investment increases in value.

Risk

The likelihood that an investment will have a lower return than expected, or that it perhaps might even lose money.

Diversified investment portfolio

A portfolio of different types of investments with different levels of risk.

Gig-Economy

A labor market characterized by the prevalence of short-term contracts or freelance work as opposed to permanent jobs.

Inflation

The rate at which the general level of prices for goods and services is rising and, consequently, the purchasing power of currency is falling.

Security

A tradable financial asset.

Debt Security

Refers to money borrowed that must be repaid, that has a fixed amount, a maturity date(s), and usually a specific rate of interest.

Face Value

The value or cost shown on the front of something.

Capital Gains

Profits made by selling possessions.

Municipal Bond

A bond issued by a state or local government authority, usually in the United States.

Corporate Bond

A bond issued by a corporation in order to raise financing for a variety of reasons.

Stock

A form of equity, or a share of ownership, in a company.

Dividend

A sum of money paid by a company to its shareholders out of its profits.

Mutual Fund

A variety of assets such as stocks, bonds, and other financial investments.

Futures

Contracts that obligate investors to buy commodities on a certain date in the future.

Commodities

Raw materials or primary agricultural products that can be bought and sold.

Cryptocurrency

Digital currency not backed by real assets or tangible securities.

Bull Market

Investments' values are rising and the public is confident about the future.

Bear Market

When the stock market performs poorly over a period of time and prices decline.

Nationalization

The transfer of a major branch of industry or commerce from private to state ownership or control.

Foreign Exchange Rate

The price of the domestic currency stated in terms of another currency.

Diversification

To put money into several different types of investment instead of only one or two.

Credit

An agreement whereby a financial institution agrees to lend a borrower a maximum amount of money over a given time period.

Debt

A sum of money that a person or organization owes.

Annual Percentage Rate (APR) (Credit Context)

The annual rate charged for borrowing money.

Fixed (Interest) Rate

An interest rate that does not fluctuate during the fixed-rate period of the loan.

Variable (Interest) Rate

An interest rate on a loan that fluctuates over time based on another interest rate.

Line of Credit

An amount of credit extended to a borrower.

Prime Rate (Federal Reserve)

Interest rate the banks charge to their most creditworthy customers.

Prime Rate (for credit cards)

Calculated based on the prime rates from the nation’s largest banks; the U.S. prime rate is usually about $3\%$ higher than the federal funds rate.

Secured Loan Debt

Tied to a specific asset that can be used as collateral and repossessed if the borrower doesn’t make payments.

Unsecured Loan Debt

Not tied to a specific asset; there is no collateral that can be repossessed if borrower defaults.

Mortgage

A loan in which property or real estate is used as collateral.

Foreclosure

The action of taking possession of a mortgaged property when the mortgagor fails to keep up their mortgage payments.

Rent

A tenant's regular payment to a landlord for the use of property or land.

Eviction

Removing a tenant from the rental property in the manner prescribed by law.

Lease

A written contract that states the amount of rent, the period of time a tenant will rent the property, and additional requirements and restrictions.

Leasor

A landlord or property owner.

Lessee

A renter or tenant.

Negative Equity

Owing more than the item (such as a car) is worth.

Cosigner

A person who signs a credit card or loan application agreeing to guarantee payment if the singer is unable to repay the loan.

Depreciation

A reduction in the value of an asset with the passage of time, due in particular to wear and tear.

Credit History

A borrower's reputation or track record for repaying debts.

Assets

Things you own that have value.

Liquidate

Convert assets into cash, usually by selling.

Liabilities

A debt or obligation.

Credit Score

A number assigned to a person that indicates to lenders their capacity to repay a loan.

Collateral

Something pledged as security for repayment of a loan, to be forfeited in the event of a default.

Zero Fraud Liability

Means that any fraudulent charges that are reported or detected by the issuer will be removed, and the holder will not have to pay for them.

Bankruptcy

Legal proceeding involving a person or business that is unable to repay outstanding debts.

Trustee (bankruptcy)

A representative of the court who receives and distributes the payments to creditors.

Bankruptcy Means Test

Determines who can file for debt forgiveness through Chapter $7$ bankruptcy.

Grace Period (student loans)

The time during which you don’t have to make a monthly payment on a student loan.

Insurance

An arrangement with a company in which you pay them money regularly, and they pay the costs if something bad happens.

Premium

The cost of insurance, especially the amount that you pay each year.

Deductible

An amount that an insured person has to pay each time they make a claim.

Limits (insurance)

The greatest amount, size, number, etc. that is possible or allowed.

Natural Disaster

A natural event such as a flood, earthquake, or hurricane that causes great damage or loss of life.

Claims Adjuster

A person that investigates insurance claims to determine the extent of the insuring company's liability.

Rider (insurance)

An extra part that is added to an official document, such as an insurance policy.

Plaintiff

Someone who brings a legal action against another person in a court of law.

Personal Umbrella Policy

Extra liability insurance coverage that goes beyond the limits of the insured's home, auto, or watercraft insurance.

Personal Risk

Includes illness, injury, disability, unemployment, loss of income, old age, or premature death.

Property Risk

Associated with the things you own—a home, vehicles, jewelry, boats, furniture, and other possessions.

Liability Risk

Involves injury or damage to another person or another person's property resulting from an accident or negligence.

Identity Thief

Any crime in which someone steals personal information about and belonging to another person.