Unit 3 Key Terms | Money Management P1 - Banking & Budgeting

Bank - A financial institution licensed as a receiver of deposits usually regulated by the national government of most countries. Typically there are two types: commercial/retail and investment.

Budget - A financial plan used to forecast and track income and expenses.

Certificate of Deposit (CD) - A savings certificate entitling the bearer to receive interest at a set time in the future called the maturity date, and at the specified fixed interest rate. Generally, these are issued by commercial banks for terms ranging from one month to five years, and are insured by the FDIC.

Compound Interest - Interest paid on interest previously earned (or paid!)

Credit Union - Member-owned financial institution in which account holder deposits are insured by the NCUA up to $250,000, and offer a wide range of banking services.

Debit Card - A bank card that automatically deducts the amount of a purchase from the checking account of the cardholder.

Delayed Gratification - Refers to the ability to put off something mildly fun or pleasurable now in order to wait for something that is more fun, pleasurable, or rewarding later.

Depreciation - A decrease or loss in value

Discretionary Expense - Money spent for a "want" rather than a "need" in your budget.

Emergency Fund - An account that is used to set aside funds to be used for unplanned costs due to unexpected loss of a job, an illness, accident, or other major expense.

Expense - Money spent for goods and or services.

Federal Deposit Insurance Corporation (FDIC) - A government entity that provides deposit insurance guaranteeing the safety of a depositor's accounts in member banks up to $250,000 for each account in each insured bank.

Financial Institutions - Businesses that provide banking services to consumers and businesses.

Fixed Expense - A cost of goods or services that is paid regularly (monthly).

Impulse Purchase - an item that is bought without previous planning or consideration of the long-term effect

Interest - The cost of money that is borrowed or loaned, which is usually a percentage of the borrowed/loaned amount.

Interest Rate - The percentage paid to a lender for the use of borrowed money; percentage earned on invested principal, usually represented as an annual rate.

Liquidity - Quality of an asset that permits it to be converted quickly into cash without loss of value; a measure of the availability of your money.

Mobile Payments - sending or receiving payment through apps such as Apple Pay, Softcard, Google Wallet.

National Credit Union Administration (NCUA) - An independent federal agency that regulates, charters, insures, and supervises federal credit unions, just as the FDIC insures traditional banks.

Opportunity Cost - Cost of the next best alternative use of money, time, or resources when one choice is made rather than another.

Overdraft - Occurs when money is withdrawn from a bank account and the available balance goes below zero. Usually results in a fee to be paid.

Pay Yourself First (PYF) - A phrase commonly used in personal finance and retirement planning literature that means to automatically route your specified savings contribution from each paycheck at the time it is received, to prioritize savings over all other expenses each month.

Payday Lending - A type of short-term loan where an individual borrows a small amount at a very high rate of interest. The borrower typically writes a post-dated personal check in the amount they wish to borrow plus a fee in exchange for cash.

Periodic/Intermittent Expense - Costs which occur on an irregular basis, rather than monthly. Examples include quarterly insurance premiums, school taxes, or automobile maintenance costs.

Person to Person Payment (P2P) - Payments through services such as PayPal, Popmoney, Square Cash, Venmo.

Predatory Lending - Any lending practice that imposes unfair or abusive loan terms on a borrower. It is also any practice that convinces a borrower to accept unfair terms through deceptive, coercive, exploitative or unscrupulous actions for a loan that a borrower doesn't need, doesn't want or can't afford.

Savings Account - A bank [or credit union] account in which you deposit money for future spending.

Scarcity - The basic economic problem that arises because people have unlimited wants but resources are limited. Because of this principle, economic decisions must be made to allocate resources efficiently.

Simple Interest - Interest paid or figured on the original amount of a loan or on the amount of an account.

Transaction Fee - An extra charge for various credit activities such as using an ATM or receiving a cash advance.

Variable Expense - A cost of goods or services that changes in amount from week to week or month to month. Examples include utilities, groceries, clothing.

Zero-Based Budget - a spending plan that assigns an expense to every dollar of your income.

50/30/20 Budget - a spending plan that allocates 50% of your net income to needs, 30% to wants and 20% to savings (and/or debt repayment).