financial literacy

Trade-offs

When you do one thing at the expense of another.

Scarcity

Lack of resources that are needed (land, labor, capital).

Wants and Needs

Wants are things that we desire to have while needs are things that are necessary for living.

Entrepreneur

A person who organizes and operates a business or businesses, taking on greater than normal financial risks in order to do so.

Opportunity cost

Value placed on the next best alternative.

Factors of production

The factors or inputs needed to create a good or service (land, labor, capital (human and physical)).

Profit incentive

The motivation for businesses and individuals to earn profit, which is the money made above all expenses.

Rule of 72

A quick formula used in investing to estimate how long it will take for an investment to double in value, given a fixed annual rate of return.

Compound Interest

Interest accumulated from a principal sum and previously accumulated interest.

Ex-Dividend

The day when a stock starts trading without the upcoming dividend. To receive the dividend, you must own the stock before the ex-dividend date.

Volume (Stock Market)

How many shares of stocks have been traded that day.

Diversification

An investment strategy that spreads your money across different assets so that you
’re not relying on just one investment to perform well. The goal is to reduce risk and make your portfolio more stable over time.

Bonds

A loan you make to an entity, like a government or corporation, for a set period. In return, the issuer pays regular interest payments and eventually repays the original loan amount on a specific date.

Risk (Investing)

The possibility of an investment not performing as expected, including the potential loss of some or all of your money.

Reward (Investing)

The potential profit or return an investor can expect to gain from an investment, usually in the form of capital appreciation or dividends.

Mutual funds

A collection of money from investors that is used to buy stocks or bonds.

Volatility

Degree of trading prices over time which demonstrates how quick an asset's prices will change.

Health insurance premiums

The monthly amount you pay for your health insurance coverage.

Renters insurance

An affordable policy that provides financial protection for tenants, covering their personal belongings, liability claims, and additional living expenses if the rented property becomes uninhabitable.

Disability insurance

Provides lost wages if you are unable to work.

Emergency fund

Money you should put aside in case of emergencies, which should last you for about 3-6 months.

Liability (Auto Insurance)

A type of coverage under auto insurance that describes the damages that you cause.

Fixed expenses

The motivation for businesses and individuals to earn profit, which is the money made above all expenses (This definition appears to be a duplicate of 'Profit incentive' in the original note. For clarity, it typically refers to expenses that do not change based on activity level).

Auto insurance

Insurance for your automobile - 5 types: liability, collision, comprehensive, personal injury protection, uninsured/underinsured motorist coverage.

Balancing a checkbook

Making sure that your records match the statement issued by the bank.

Mortgages

The money a person owes on their house. 1.) fixed rate mortgage: locks in interest rate. 2.) Adjustable mortgage rate: when the mortgage's interest rate can fluctuate which is based on the economy.

FDIC (Federal Depository Insurance Corporation)

Insures banks up to 250,000.

P2P payment features

Sending and receiving money to and from trusted people rather than establishments, beneficial for paying someone back.

Interest

A charge placed on money you borrow.

Secured loan

A loan that has collateral attached to it, meaning that if you fail to pay back your loan, the bank can repossess that item.

Credit scores

A measure of how likely you are to pay a debt/loan.

Annual Percentage Rate (APR)

The yearly cost of borrowing money, a higher APR means the more expensive the loan is.

Certificate of Deposit (CD)

A savings account with a fixed interest rate.

Defaulting on a loan consequence

Damage your credit, bankruptcy declaration, being sued by your creditors.

Building a credit history

Start with a secured credit card or be a co-signer on someone else
’s card.

Secured credit card

A credit card that has collateral on it through cash deposits.

Subsidized loan

A loan that the government pays interest on while you are in school.

Unsubsidized loan

A loan where you have to pay the interest that your loan gained after college.

Discretionary spending

Money you can choose how to spend; the opposite of mandatory spending.

Earned income

Money you have earned from your job before taxes are taken out.

Form W-4

The form filled out when starting a new job, information about yourself and your family, determines how much money gets taken out of each paycheck.

Progressive Tax

A tax that takes a larger percentage of income from high-income earners than from low-income earners.

Regressive Tax

A tax that takes a larger percentage of income from low-income earners than from high-income earners.

Proportional tax

Everyone pays the same rate of taxation.

Ability to pay principle

Those who have money should pay more than those who don't.

Benefits received principle

If you benefit from it you shouldn
’t pay for it (This definition seems inverted from common understanding. Typically, it implies those who benefit from a government good or service should pay for it).

Net cost of college

The actual amount of money you have to pay for college after scholarships, FAFSA, grants, and any other aid given to you. Formula: Sticker price - grants and scholarships = Net price.