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Q |
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T |
U |
V |
W |
X |
Y |
Z
A
| Add-On
Rate
|
A method of calculating
interest (see interest)
on a loan, based on the assumption that the borrower holds
the original principal for the entire loan period. |
| Adjusted
Balance
Method |
A method of calculating finance
charges (see finance
charge) by basing them on the opening balance
owed after subtracting the payments made during the month. |
Advertisements |
Public notices, displays, or presentations
intended to promote the sale of goods or services; often
based on celebrity endorsements, appeals to authority,
bandwagon effects, and attractive imagery. |
| Advertising |
Using advertisements to promote
the sale of goods or services. |
| Allowance |
A sum of money paid regularly
to a person, often by a parent to a child; sometimes paid
in compensation for services performed. |
| Alternative |
One or two or more possible choices
or courses of action in a given situation. |
| Amount
Past Due |
In a credit arrangement, the amount
of money owed and not repaid on time. |
| Annual
Fee |
The yearly charge for having a
credit card or credit account. |
| Annual
Percentage Rate (APR) |
The percentage of the principal
of a loan to be paid as interest in one year. Differs
from an add-on rate (see add-on
rate) in that an APR is calculated on the
declining balance of the loan. The Truth in Lending Act
(see Truth in Lending Act) requires lenders to disclose
APRs to prospective borrowers. |
| Annual
Percentage Yield |
Income earned on an investment
in a year, divided by the amount of the original investment.
(Also known as annual
rate of return). |
| Annual
Rate of Return |
Income earned on an investment
in a year, divided by the amount of the original investment.
(Also known as annual
percentage yield). |
| Asset |
Something of monetary value owned
by an individual or an organization. |
| Automated
Teller Machine |
A machine that provides cash and
performs banking services (for deposits and transfers
of funds between accounts, for example) automatically
when accessed by customers using plastic cards coded with
personal identification numbers (PINS). (see PIN). |
| Average
Daily Balance Method |
A method of calculating finance
charges (see finance
charge) based on the average amount owed
for each day of the billing cycle. |
Back to Index
B
| Bait
and Switch |
The action (generally illegal)
of advertising goods that are an apparent bargain (the
bait) with the intention of inducing customers to buy
more expensive items (the switch), on the pretext that
the advertised item is no longer available. As an
adjective: A bait-and-switch scheme. |
| Balanced
Budget |
A financial plan in which income
is equal to expenses. |
| Bank |
A financial
institution that provides various products and services
to its customers including checking and savings accounts,
loans, and currency exchange. |
| Bank
Account |
An arrangement by which a bank
holds funds on behalf of a depositor; also, the balance
of funds held under such an arrangement, credited to and
subject to withdrawal by the depositor. |
| Bank
Service Charges |
Fees paid by bank customers for
financial services--for example, check-cashing fees, fees
for overdrafts from accounts, fees for using the ATMs
of other banks, and fees for using bank-issued credit
cards. |
| Bank
Statement |
A monthly summary providing the
status of a depositor's financial accounts (checking and/or
savings). |
| Benefit |
Monetary or non-monetary gain
received because of an action taken or a decision made.
|
| Benefits
and Costs Analysis |
A process of examining the advantages
(benefits) and disadvantages (costs) of each available
alternative in arriving at a decision. (Also known as
cost/benefit analysis) |
| Blue
Chip Stocks |
Stocks in large, nationally known
companies that have been profitable for a long time and
are well-known and trusted.
|
| Bond |
A certificate of indebtedness
issued by a government or a publicly held corporation,
promising to repay borrowed money to the lender at a fixed
rate of interest and at a specified time. |
|
Borrow |
To receive and use something belonging
to somebody else, with the intention of returning or repaying
it--often with interest in the case of borrowed money. |
| Brand |
A trade name used to identify
a product produced by a particular company, distinguishing
it from similar products produced by competitors. |
| Budget |
A spending-and-savings plan, based
on estimated income and expenses for an individual or
an organization, covering a specific time period. |
| Business |
Any activity or organization that
produces o exchanges goods and services for a profit. |
| Business
Plan |
A description of an enterprise
including its name, its goals and objectives, the product(s)
sold and distributed, the work skills needed to produce
those products, and the marketing strategies used to promote
them. |
Back to Index
C
| Capacity
|
Used here in the context of credit
transactions, capacity is one of the Three Cs of Credit
(see three Cs of credit).
It is an indicator of how creditworthy a prospective borrower
is likely to be, as determined by the borrower's current
and future earnings relative to current debt. High
earnings and low debt, for example, indicate a strong
capacity to make payments on the loan in question.
(See creditworthiness) |
| Capital |
Used
here in the context of credit transactions, capital is
one of the Three Cs of Credit (see three
Cs of credit). It is an indicator of how creditworthy
a prospective borrower is likely to be, as determined
by the borrower's current financial assets and net worth.
(See creditworthiness) |
| Capital
Gain |
A profit realized from the sale
of property, stocks, or other investments. |
| Capital
Loss |
A loss suffered upon selling property,
stock, or another investment for less money than the purchase
price of the asset in question. |
| Capital
Resources |
Resources made and used to produce
and distribute goods and services; examples include tools,
machinery, and buildings. |
| Cash |
Money in the form of paper currency
or coins (as distinct from checks, money orders, or credit). |
| Cash
Advance |
In a credit arrangement, the amount
charged to a borrower's account for cash received; an
instant loan. |
| Cash
Available |
In a credit arrangement, the difference
between the cash-advance limit and withdrawals made (advances
issued); the remaining balance. |
| Cash-Advance
Limit |
In a credit arrangement, the maximum
amount that can be issued for a cash advance. |
| Certificate
of Deposit (CD) |
A certificate issued by a bank
to a person depositing money in an account for a specified
period of time (often six months, one year, or two years).
A penalty is charged for early withdrawals from CD accounts. |
| Character |
Used here in the context of credit
transactions, character is one of the Three Cs of Credit
(see three
Cs of credit). It is an indicator of how
creditworthy a prospective borrower is likely to be, as
determined by the borrower's handling of past debts and
his or her stability in jobs and residences. (see creditworthiness). |
| Charity |
The voluntary giving of aid, typically
in the form of money, to those in need. |
| Check |
A written order to a financial
institution directing the financial institution to pay
a stated amount of money, as instructed (see endorsement),
from the customer's account. |
| Check
Register |
A form (usually located in the
back of a checkbook) on which users of checking accounts
may record checks they have written and deposits they
have made. Information thus recorded helps people to keep
track of balances in their accounts. |
| Checking
Account |
A financial account into which
people deposit money and from which they withdraw money
(for purchases, paying bills, etc.) by writing checks
(see check). |
| Choice |
An act of selecting or making
a decision when faced with two or more alternatives (see
alternative). |
| Coins |
In the United States: flat, round
pieces of metal, issued by the government, used as money. |
| Collateral |
Something of value (often a house
or a car) pledged by a borrower as security for a loan.
If the borrower fails to make payments on the loan, the
collateral may be sold; proceeds from the sale may then
be used to pay down the unpaid debt. |
| Collision
Insurance Coverage |
Insurance that pays for repairs
to an automobile, or replacement of an automobile (minus
the deductible [see deductible]
in each case), if the automobile is hit by another car. |
| Comparison
Shopping |
Examining different brands or
models of a product (to learn about variations in quality,
size, etc.), or the prices charged by different sellers
(to learn about possible cost-savings), before deciding
what to buy. |
| Complements |
Goods and/or services that are
typically used together, such as hamburger and hamburger
buns. |
| Compound
Interest |
Interest paid on the principal
and on interest earned previously. (Compare simple
interest). |
| Compounding |
Paying interest on the principal
and on interest earned previously. For example, if someone
deposits $2,000 in an account that pays interest at 8
percent, he or she will earn $160 in interest after one
year, for a balance of $2,160. If the depositor leaves
the sum in the account for another year, however, he or
she will earn $172.80 in interest because the 8 percent
rate will apply to the new balance of $2,160, not the
original $2,000 deposit. The longer the money is left
in the account, the more dramatic the compounding effect. |
| Comprehensive
Insurance Coverage |
Insurance that pays for repairs
to an automobile, or replacement of an automobile (minus
the deductible [see deductible]
in each case), if the automobile is stolen or damaged
by something other than a collision (for example, by a
hail storm). |
| Consequence |
A result
or effect of an action or decision; may be positive or
negative. |
| Consume |
To buy and use a good or service. |
| Consumption |
The process of buying and using
goods and services. |
| Corporate
Bond |
A certificate of indebtedness
issued by a publicly held corporation, promising to repay
borrowed money to the lender at a fixed rate of interest
and at a specified time. Bonds provide corporations with
an alternative way to raise money (as distinct from selling
shares of stock or taking out bank loans) for expansion
or other business needs. |
| Corporation |
A company or group of people authorized
to act as a single entity (legally as a person), having
rights, privileges, and liabilities distinct from those
of the individuals within the entity. A corporation has
four major characteristics: limited liability, easy transfer
of ownership through the sale of stocks, continuity of
existence, and centralized management.Most large firms,
especially those engaged in manufacturing, are organized
as corporations. |
| Cost |
An amount that must be paid or
spent to buy or obtain something--as in How much do
these shoes cost? Also the effort, loss, or sacrifice
necessary to achieve or obtain something--as in Learning
to play that violin will cost you long hours of effort.
(See opportunity cost).
|
| Cost/Benefit
Analysis |
A process of examining the advantages
(benefits) and disadvantages (costs) of each available
alternative in arriving at a decision. (Also known as
benefits and costs analysis). |
| Costs
of Production |
Amounts paid for resources (land,
labor, capital, and entrepreneurship; see resources)
used to produce goods and services. |
| Credit |
The ability of a customer to obtain
goods or services before payment, based on an agreement
to pay later. |
| Credit
Agreement |
A written promise to repay borrowed
money. |
| Credit
Application |
A request for a loan, submitted
to a lender (for example, a bank or a credit union) by
a prospective borrower. The credit application provides
background information which the lender uses to assess
the prospective borrower's creditworthiness--his or her
ability to repay the loan. (See creditworthiness
and the three Cs of
credit). |
| Credit
Card |
A small, specially coded plastic
card issued by a bank, business, etc., authorizing the
cardholder to purchase goods or services on credit. |
| Credit-Card
Statement |
A monthly summary from a credit-card
company conveying information about a cardholder's purchases,
payments, balance due, and fees. |
| Credit
Costs |
Charges associated with the acceptance
of a loan, including the finance charge and transaction
fees (for example, loan fees, annual or monthly fees on
a credit account). |
| Credit
History |
A record of past borrowing and
repayments. |
| Credit
Limit |
The maximum amount of money that
will be extended to person by a financial institution
or credit-card issuer. |
| Credit
Rating |
An evaluation of a borrower's
ability to repay a loan based on his or her character,
capacity, and capital. (See creditworthiness
and the three Cs of
credit). |
| Credit
Record |
A report about a person's credit
history, including his or her ability and willingness
to repay debts, based on how reliably he or she has repaid
debts in the past. (Also known as a credit
report). |
| Credit
Report |
A report about a person's credit
history, including his or her ability and willingness
to repay debts, based on how reliably he or she has repaid
debts in the past. (Also known as a credit
record). |
| Credit
Union |
A nonprofit financial institution
owned by its members; offers various financial services
including accounts and loans; regulated by the National
Credit Union Association (NCUA). |
| Creditworthiness |
The extent to which a person is
deemed suitable to receive credit, especially as shown
by reliability in repaying loans in the past. (See the
three Cs of credit). |
| Creditor |
A person or company to whom money
is owed. |
Back to Index
D
| Debit
Card |
A small, specially coded plastic
card issued by a bank; allows the cardholder to transfer
funds electronically and immediately from his or her checking
account to another account (for example, a merchant's
account), as if the cardholder were writing a check to
pay for a purchase. |
| Debt |
Money owed to someone else--as
in I've got a debt of $900. Also the state
or condition of owing money--as in Jones is always
in debt. |
| Deceptive
Practices |
Misleading methods used by businesses
to sell goods or services. Examples include misleading
prices, bait-and-switch tactics, and false advertising. |
| Decision-Making
Grid |
A graph-like form into which people
may enter notations about the costs and benefits of various
alternatives; used for assistance in making decisions. |
| Deductible |
Regarding insurance policies:
A set amount an insured person must pay per loss before
the insurance company will pay a claim. |
| Demand |
The quantity of a good or service
that the consumers are willing and able to buy at given
prices during a period of time. |
| Deposit |
A sum of money placed into a financial
account, usually to gain interest. Also the act of placing
money into an account--as in I'd like to deposit this
check in my account. |
| Direct
Deposit |
The electronic transfer of a payment
(for a month's salary, for example) directly form the
payer's account to the recipient's account. |
| Disincentive |
A factor, often a monetary penalty
or disadvantage, that discourages people from
doing something--as in High prices for gasoline act
as a disincentive to people considering long automobile
trips. (Compare incentive).
|
| Disposable
Income |
The amount of money a person has
left to save or spend after income taxes, Social Security
taxes, and other required deductions have been taken out
of his or her gross pay. |
| Diversify |
To invest in a variety of stocks,
bonds, money market accounts, etc., in order to spread
risk. Sometimes referred to as "not putting all of
your eggs in one basket." |
| Dividend |
A share of a company's net profits
paid to stockholders. |
| Donation |
Something of value (often money)
given to a charity or some other organization--as in She
made a tax-deductible donation of $1,000 to the University
of Minnesota. |
Back to Index
E
| Earned
Income |
Money received for work performed;
may include salary, wages, tips, professional fees, commissions,
etc. |
| Economic
Way of Thinking |
A reasoning process that involves
considering costs as well as benefits in making decision. |
| Electronic
Funds Transfer Act |
A federal law providing consumer
protection for people who use ATMs and debit cards. The
law limits users' liability for unauthorized charges made
on cards that have been lost or stolen. |
| Endorsement |
A
signature on the back of a check instructing the bank
as to how the check may be cashed. There are three types
of endorsement.
Blank
endorsement: The
signature makes the check as good as cash to anybody
who holds it.
Restrictive
endorsement: The
signature tags the check for a specific purpose, such
as "for deposit only" to a checking or savings
account.
Special
endorsement: The
signature allows the holder to transfer the check to
another person. |
| Entrepreneur |
One who draws upon his or her
skills and initiative to launch a new business venture
with the aim of making a profit. Often a risk-taker, inclined
to see opportunity where others do not. |
| Equal
Credit Opportunity Act |
A federal law that prevents lenders
from denying credit on the basis of an applicant's sex,
marital status, race, national origin, religion, or age,
or because an applicant receives public assistance. |
| Equity |
Stock, both common and preferred--as
in I prefer to invest in equities rather than bonds.
Also the value of mortgaged property after accounting
for charges against it or money owed--as in Sarah
has built up $40,000 worth of equity in the home she bought
five years ago. |
| Expenses |
Payments for goods and services. |
Back to Index
F
| Fair
Credit Billing Act |
A federal law that requires creditors
to mail out bills at least 14 days before the payment
is due. The law also establishes procedures for correcting
billing errors on credit accounts. |
| Fair
Credit Reporting Act |
A federal law governing the activities
of credit bureaus and creditors. It requires creditors
to furnish accurate and complete information to borrowers;
it also establishes a process consumers may use to correct
inaccuracies in credit reports. |
| Fair
Debt Collection Practices Act |
A federal law that bars collection
agencies from using threats, harassment, or abuse in their
efforts to collect debts. |
| Federal
Deposit Insurance Corporation (FDIC) |
A federal agency that guarantees
depositors' savings up to $100,000 per account in most
commercial banks, savings banks, and savings associations.
The FDIC was established by the federal government in
1933 after the bank failures of the Great Depression. |
| Federal
Income Tax |
A tax paid by individuals and
businesses to the federal government to fund such services
as national defense, human services, and the monitoring
and regulation of trade. |
| Federal
Insurance Contributions Act (FICA) |
A federal system of old-age, survivors,
disability, and healthcare (Medicare) insurance which
requires employers to withhold (or transfer) wages from
employees' paychecks and deposit that money in designated
accounts. (Also known as Social
Security). |
| Finance
Charge |
The total cost of credit, including
interest and transaction fees. |
| Financial
Intermediaries |
Banks, credit unions, pension
funds, insurance companies, mutual fund companies, and
other financial institutions that bring together savers
and borrowers and buyers and sellers of stocks and bonds. |
|
Financial
Risk |
The chance that an individual,
business, or government will not be able to return money
invested. |
| Fixed
Expenses |
Expenditures that are the same
from week to week or month to month, such as mortgage
or rent payments and car payments. (Compare variable
expenses). |
| Fixed
Income |
Income that stays the same from
week to week or month to month. Usually refers to income
from pensions or bonds. (Compare
variable income). |
| Fraud |
Wrongful or criminal deception
intended to manipulate a person for the purpose of gain,
usually financial. |
| Fraud
Risk |
The chance that an investment
has been misrepresented. |
| Functions
of Money |
Practical uses or purposes served
by money; what it does for us. Money serves as a medium
of exchange (we can use it to pay for things we buy),
a standard of value (prices expressed in dollar amounts
tell us how much one thing is worth compared to another),
and a store of value (money retains its value over time;
we can save it now and use it later). (See money). |
Back to Index
G
| Goal |
Something a person or organization
plans to achieve in the future; an aim or desired result. |
| Goods |
Tangible objects that can be bought
and sold, such as cars, houses, computers, and cell phones.
Often distinguished from services. |
| Grace
Period |
A period of time allowed for payment
of money owed; after the grace period has elapsed, interest
may be charged. |
| Gross
Income |
A total amount of money earned
(from salaries, wages, etc.) before taxes and other deductions
are withheld. (Also known as gross
pay). |
| Gross
Pay |
A total amount of money earned
(from salaries, wages, etc.) before taxes and other deductions
are withheld. (Also known as gross
income). |
| Growth
Fund |
A mutual fund whose major objective
is long-term capital growth (as distinct, for example,
from providing current income for investors). Growth funds
offer the potential for substantial gains over time, but
shares fluctuate in value during ups and downs in financial
markets. |
Back to Index
H
|
Human Capital |
Intangible assets possessed by
individuals, including knowledge, talent, skills,
health, and values. (Also known as human
resources). |
| Human
Capital Investment |
Investment of time, effort, and
resources in education and training--to increase one's
own knowledge, skills, health, etc., or to develop those
assets in others. Examples include staying in school
or returning to school to learn new skills. |
| Human
Resources |
Intangible assets possessed by
individuals, including knowledge, talent, skills, health,
and values. (Also known as
human capital). |
Back to Index
I
|
Identity Theft |
Unauthorized, illegal use of
a person's legal and financial identification (for example,
his or her Social Security number or PIN). |
| Impulse
Buying |
Buying goods or services without
comparison shopping or forethought about costs and benefits. |
| Incentive |
A factor, often a monetary reward
or advantage, that encourages people to do something--as
in Tax provisions in the new forest management program
give landowners an incentive to take good care of
the trees on their property. (Compare disincentive). |
| Income |
Money received for work performed
or from investments; may include salaries, wages, interest,
dividends, etc. |
| Income
Taxes |
Payments made by individuals and
corporations to the federal government (and to some state
and local governments) based on income received (both
earned and unearned). |
| Individual
Retirement Account (IRA) |
An account in which an individual
may set aside earned income in a tax-deferred savings
plan for his or her retirement. There are two types of
IRA--traditional and Roth--each with its own qualifications
and rules governing contributions and withdrawals. |
| Inflation |
A general increase in the price
level. |
| Inflation
Risk |
The chance that the rate of inflation
will exceed the rate of return on an investment. |
| Initial
Public Offering |
A company's first sale of stock
to the public. When a company "goes public,"
it sells blocks for stock shares to an investment firm
that specializes in initial offerings of stocks and resells
them to the public. |
| Institutional
Investor |
A financial intermediary (see
financial intermediaries),
such as a pension fund or a mutual fund, that buys stock
and other investments for clients. |
| Insurance |
A
practice or arrangement whereby a company provides a
guarantee of compensation for specified forms of loss,
damage, injury, or death. People obtain such guarantees
by buying insurance policies, for which they pay premiums.
The process allows for the spreading out of risk over
a pool of insurance policyholders, with the expectation
that only a few policyholders will actually experience
losses for which claims must be paid.
Types
of insurance include the following:
Automobile:
For
losses incurred as a result of accidents, vandalism,
and other causes of damage to cars.
Health:
For
coverage of certain health-care costs.
Renter's:
For
losses (from theft, for example) of personal possessions
in a rental unit.
Homeowner's:
For
damage to a person's home or its contents, and to cover
costs arising from injury to others on the homeowner's
property.
Life:
For
compensation to dependents of a policyholder, to be
paid when a policyholder dies.
Disability:
To
provide income for a worker when she or he is ill or
injured and unable to work. |
| Interest |
Money paid regularly, at a particular
rate (see interest rate),
for the use of borrowed money. As an adjective: I'm
no longer making any interest payments. |
| Interest
Rate |
The price paid for using someone
else's money, expressed as a percentage of the amount
borrowed. |
| Interest
Rate Risk |
The chance that interest rates
may change (upward) while the saver is "locked in"
to a (lower) rate for a time deposit (a CD, for example)
or a bond. |
| Intermediate
Term Goal |
Something a person or organization
plans to achieve from one to five years in the future.
(Also known as medium-term
goal). |
| Internal
Revenue Service (IRS) |
The government agency that collects
federal income taxes. |
| Inventory |
An itemized list of goods held
by a person or business. Also a quantity of goods held
in stock--as in You'll find a large inventory of cell
phones at Unwired Emporium. |
| Investing |
Putting money someplace with the
intention of making a financial gain. Investment possibilities
include stocks, bonds, mutual funds, real estate, and
other financial instruments or ventures. |
| Investment |
The purchase of stocks, bonds,
mutual funds, real estate, and other financial instruments
or ventures with the intention of making a financial gain. |
| Investment
Return |
The additional income earned from
saving or investing money, often expressed as an annual
percentage of the amount invested. |
Back to Index
J
|
Job |
A piece of work usually
done on order at an agreed-upon rate--for example, roofing
a house, extracting wisdom teeth. Also a paid position
of regular employment--as in Brenda has a new job
designing circuits at Amalgamated Widgets. |
Back to Index
K
|
Keogh Plan |
A federally approved, tax-deferred
savings program for self-employed people, allowing them
to set money aside (in CDs and mutual funds, for example)
for their retirement. |
Back to Index
L
| Late
Fee |
In a credit arrangement, a fee
charged when payment is received after the due date. |
| Lend |
To grant someone the use of something
(a car, for example, or a sum of money), on condition
that the object borrowed or its equivalent will be
returned (often with interest, in the case of money). |
| Lender |
One who lends; may be an individual
or a business. |
| Letter
of Application |
A letter written by a job-seeker
to a prospective employer in which the job-seeker may
introduce himself or herself, express interest in a particular
job, describe his or her qualifications for that job,
request an interview, and generally seek to convince the
employer that he or she would make a great employee. |
| Liability |
Legal responsibility to pay for
damages or losses one has caused. |
| Liability
Insurance Coverage |
Automobile insurance that pays
for costs of bodily injury and property damage when the
insured person damages someone or something with his or
her car. |
| Liquid
Investments |
Investments or savings (such as
savings accounts and money market mutual funds) from which
money can be accessed immediately. |
| Liquidate |
To wind up the affairs of a company
by identifying liabilities and selling off assets in order
to make payments to creditors. |
| Liquidity |
The ease with which savings or
investments can be turned into cash. |
| Liquidity
Risk |
The chance that an investor will
find it difficult to turn an investment into cash (by
trying to sell a house, for example, in a down market
for real estate). |
| Loan
Scam |
An
illegal scheme in which somebody runs an advertisement,
targeted to people who have run up large debts, offering
a personal-debt consolidation loan on terms that seem
to be very attractive. The consumer is instructed to
send in a fee in order to obtain the loan. The loan
never arrives. |
| Long-Term
Goal |
Something
a person or organization plans to achieve at least five
years in the future. |
Back to Index
M
|
Marginal Benefit |
The additional gain obtained
from producing or consuming one more unit of a good or
service. |
| Marginal
Cost |
The change in a producer's total
cost when output is increased by one unit. |
| Market
Price Risk |
The chance that the value of an
investment will go down because of a change in supply
and demand. |
| Median |
The middle value or midpoint of
a group of numbers where half of the numbers are above
the middle value and half of the numbers are below it. |
| Medicare |
A federal health-care program
that pays for certain medical and hospital costs for people
aged 65 and older (and for some people who are under the
age of 65 and disabled). Part of Social
Security. |
| Medium-Term
Goal |
Something a person or organization
plans to achieve from one to five years in the future.
(Also known as intermediate-term
goal). |
| Minimum
Payment |
In a credit arrangement, the lowest
amount that a borrower must pay toward a credit balance
each month in order to avoid a penalty. |
| Monetary
Incentives |
Factors (see
incentive) related to money, income, and/or economic
wealth that encourage people to do something--as in Salespeople
who work on commission have a monetary incentive to work
hard at making sales. |
| Money |
Anything that serves as
a medium of exchange, a standard of value, and a store
of value. (See functions
of money). |
| Money
Market Account |
An interest-bearing account similar
to a checking account. Deposits may be added at any time;
some money market accounts limit the withdrawals depositors
may make without paying a penalty. (Also known as money
market deposit account). |
| Money
Market Deposit Account |
An interest-bearing account similar
to a checking account. Deposits may be added at any time;
some money market accounts limit the withdrawals depositors
may make without paying a penalty. (Also known as money
market account). |
| Money
Market Mutual Fund (MMMF) |
A fund restricted by law to investing
in the short-term money market. MMMFs provide low risk
and low returns, but they maintain their investment value.
(See mutual fund). |
| Money
Order |
A certificate purchased for a
specific amount of money and signed over by the purchaser
to the person or business named on the certificate. |
| Mutual
Fund |
A pool of money used by a company
to purchase a variety of stocks, bonds, or money market
instruments. Provides diversification and professional
management for investors. (Compare stock
mutual fund). |
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N
|
NASDAQ |
An electronic marketplace enabling
buyers and sellers to get together via computer and hundreds
of miles of high-speed data lines to trade stocks. NASDAQ
is an acronym for National Association of Securities Dealers
Automated Quotation System. |
| Natural
Resources |
"Gifts of nature" used
to produce goods and services; examples include land,
oceans, air, trees, mineral deposits, soil fertility,
and climatic conditions. |
| Net
Pay |
The amount of money a person receives
within a pay period after taxes and other deductions
are taken out of his or her paycheck. (Also known as take-home
pay. Compare gross pay). |
| Net
Worth |
The current value of a person's
assets minus liabilities. |
| New
Balance |
On a credit card account, the
amount currently owed. |
| New
York Stock Exchange (NYSE) |
The oldest stock exchange in the
United States, founded in 1792. |
| Nominal
Rate of Return |
The rate of return from an investment
before adjusting for inflation. |
| Non-Monetary
Incentives |
Factors other than money that
encourage people to do something. (See monetary
incentives). |
| Non-Sufficient
Funds |
A term or notation used by banks
in reference to checks written for more than the balance
in a bank customer's checking account. An NSF is, in colloquial
terms, a check that bounces. Banks charge penalty fees
for NSF checks. (See overdraft). |
Back to Index
O
|
Occupation |
A job or profession; also a category
of work, sometimes identified by the degree of skill required--as
in skilled, semi-skilled, and unskilled work. |
| Operating
Costs |
The expenses of doing business. |
| Opportunity
Cost |
The next-best alternative a person
gives up in making a choice. (See cost). |
| Opportunity
Cost of Saving for the Future |
When people hold off on spending
in order to save money for use in the future, their opportunity
cost is certain goods and services they could have obtained
today had they chosen to spend rather than save. |
| Overdraft |
A check written for more than
the balance in one's checking account; in colloquial terms,
a check that bounces. The bank will mark such a check
NSF (see non-sufficient
funds), for "non-sufficient funds," and
will charge a penalty fee for the nuisance involved in
handling a bounced check. |
Back to Index
P
|
Paper Money |
Certificates of various denominations
generally recognized and accepted as a medium of exchange
within a nation and elsewhere. Paper money is issued and
backed by national governments (the Japanese yen, the
English pound, etc.) or, in the case of the euro, by a
group of governments. |
| PACED
Decision-Making Process |
A
decision-making process designed to help people solve
problems in a rational, systematic way. It includes
the following steps:
State
the Problem
List
Alternatives
Identify
Criteria
Evaluate
Alternatives
Make
a Decision |
| Passbook
Savings Account |
A
savings account offering high liquidity (see liquidity)
but usually a low rate of interest. Deposits and withdrawals
are recorded in the saver's passbook. |
| Payday
Loan |
A
loan issued to a borrower who writes a post-dated check
made out to a lender (usually a company specializing
in payday loans and other financial services targeted
to low-income customers) for the amount he or she wishes
to borrow plus a fee. The lender then gives the borrower
cash in the amount stated on the check, minus the fee,
and holds the check until the borrower's next payday,
when the lender cashes it. No credit background check
is required. The cost (in fees and interest) to those
who use payday loans is often high, however, when calculated
as an APR; this fact has drawn criticism from lawmakers
and others who see payday loans as a form of "predatory
lending." |
| Payment |
In
a credit arrangement, the amount paid by the consumer
and received by the issuer of credit in the last billing
period. |
| Payment
Due Date |
In
a credit arrangement, the date by which the minimum
payment must be made. |
| Payroll
Deduction |
An
amount of money automatically subtracted from an employee's
gross pay (see gross pay)
for taxes, insurance, retirement benefits, etc. (See
net pay and take-home
pay). |
| Pension
Fund |
An
account established by a business to fund retirement
benefits for its workers. Pension funds invest in stocks,
bonds, mutual funds, and real estate. |
| Periodic
Income |
Money
received but not earned on a regular schedule--for example,
from occasional baby-sitting jobs, summer jobs, and
gifts from relatives. |
| Periodic
Expenses |
Expenditures
that occur occasionally and for which people budget
money. |
| PIN
(Personal Identification Number) |
A
confidential code used to access private financial information
or to make transactions (at an ATM, for example). |
| Personal
Resources |
The
time, money, and skills that a person has. |
| Planned
Spending |
Thoughtful,
deliberate spending, reflecting a consumer's judgment
that the benefits to be obtained warrant the costs to
be paid. (Compare impulse
buying). |
| Portfolio |
A
person's or an institution's collection of savings and
investments. |
| Premium |
The
fee paid for insurance protection. |
| Previous
Balance |
In
a credit arrangement, last month's balance. |
| Price |
The
amount people pay when buying a good or service. |
| Primary
Market |
The
market where new securities are offered for sale for
the first time. Investment banks buy shares of stock
directly from corporations that issue them and sell
these shares to others. |
| Principal |
An
original amount of money invested or lent. |
| Product |
Something
manufactured or refined for sale. |
| Productive
Resources |
Natural
resources, human resources, capital resources, and entrepreneurship
used to make goods and services. (Also known as resources). |
| Productivity |
A
measure of output per unit of input. |
| Profit |
The
money a business has left over after selling its goods
and services and paying its costs of production. Not
to be confused with revenue. |
| Property
Tax |
A
tax on land and structures built on it (houses, factories,
etc.). Payments go to state and/or local governments
to pay for police protection, public schools, libraries,
etc. (Also known as real
estate tax). |
| Purchases |
In
a credit arrangement, the total amount spent during
the billing cycle. |
| Pyramid
Scam |
An
illegal scheme of selling goods. Participants are recruited
by advertisements offering big profits to those who
pay a fee for agency rights--that is, rights to sell
goods as a representative of the pyramid company. Each
recruited agent then recruits others to join, with each
new participant paying a fee to join. The key is that
each person is promised commissions not only on is or
her sales gut on the sales of other people they recruit
as distributors Pyramid schemes can be disguised as
games, buying clubs, chain letters, mail-order operations,
or multi-leveled business opportunities. A pyramid scheme
is illegal. |
Back to Index
Q
|
Quality Comparison
|
Examining products to learn whether
one is better than others. (See comparison
shopping). |
Back to Index
R
|
Rate of Return |
Earnings from an investment,
stated as a percentage of the amount invested; usually
calculated on an annual basis. |
| Real
Estate |
Property such as land, houses,
and office buildings. |
| Real
Estate Tax |
A tax on land and structures built
on it (houses, factories, etc.). Payments go to state
and/or local governments to pay for police protection,
public schools, libraries, etc. (Also known as property
tax). |
| Rent
to Own |
An arrangement whereby consumers
rent something (often furniture), making regular rental
payments, and become owners of the rented object(s) after
a specified period of time--sometimes automatically and
sometimes with an additional payment. A legal business
but very costly to consumers. As as adjective: Ralph
got his furniture at a rent-to-own store. |
| Resources |
Natural resources, human resources,
capital resources, and entrepreneurship used to make goods
and services. (Also known as productive
resources). |
| Resume |
A document describing a job-seeker
to prospective employers. Usually includes the job-seeker's
name, telephone number, address, e-mail address, career
objective, education, work experience, abilities, awards,
offices held in organizations, and special interests. |
| Retirement
Accounts |
Accounts such as IRAs (see Individual
Retirement Account), SEPs (see Simplified
Employee Pension Plan), and Keogh Plans
(see Keogh Plan) that allow
individuals to save money toward retirement on a tax-deferred
basis. |
| Return |
Earnings from an investment, usually
expressed as an annual percentage. |
| Revenue |
The money a business receives
from customers who buy its goods and services. Not to
be confused with profit. |
| Risk |
The chance of losing money. |
| Risk
of Financial Loss |
The chance that the value of an
investment (the principal) will decrease. |
| Risk/Reward
Ratio |
As applied to investments: the
greater the risk, the greater the potential reward. For
example: passbook savings accounts offer depositors very
low risk but also low rates of interest; growth stocks
are much riskier, but they offer a potential for big gains. |
| Rule
of 72 |
A mathematical rule for determining
the number of years it will take for an investment to
double in value. The number of years is determined by
dividing 72 by the annual rate of return. Thus, an investment
expected to earn interest at a rate of 8 percent will
double an investor's funds in 72/8, or nine years. Dividing
72 by the number of years in which an investor wishes
to double his or her return will yield the necessary rate. |
Back to Index
S
|
Salary |
A regular payment, often at monthly
or biweekly intervals, made by an employer to an employee,
especially in the case of professional or white-collar
employees. Salaries are paid for services rendered and
are not based on hours worked. (Compare wages). |
| Sale |
An exchange of goods or services
for money. |
| Sales
Revenue |
The money a business receives
from customers who buy its goods and services. Not to
be confused with profit. |
| Sales
Tax |
Tax in the form of a percent of
the cost of a good or service; paid to local and state
governments when goods and services are purchased. |
| Save |
To keep money for future use;
to divert money from current spending to a savings account
or another form of investment. (See also investing
and the opportunity cost
of saving for the future). |
| Savings
Plan |
A plan for setting aside money
for future use. |
| Savings |
Money held in easily-accessed
accounts, such as savings accounts and certificates of
deposit (CDs). |
| Savings
Account |
An interest-bearing account (passbook
or statement) at a financial institution. |
| Savings
Bonds |
Securities issued by the U.S.
Treasury in relatively small denominations for individual
investors. Investors who buy savings bonds in effect make
a loan to the government, in return for the government's
promise (represented by the bond, a nontransferable certificate)
to repay the loan with interest. The interest is free
from state and local taxation. Savings bonds are considered
to be risk-free investments, since they are backed by
the U.S. government. (Also known as U.S.
Savings Bonds). |
| Savings
Instruments |
Arrangements by means of which
people save money, including savings accounts, certificates
of deposit (CDs), money market deposit accounts, and U.S.
Savings Bonds. |
| SCANS
Skills |
Guidelines for workplace success
developed by the U.S. Department of Labor Secretary's
Commission on Achieving
Necessary Skills
in 1992. The Commission determined that success in any
occupation requires basic skills (reading, writing, and
math), thinking skills, personal qualities, interpersonal
skills, and the ability to acquire and use resources,
information systems, and technology. |
| Scarcity |
The condition that exists (for
rich countries, poor countries, individuals, and organizations)
because human wants exceed the capacity of available resources
to satisfy those wants. |
| Secondary
Market |
A market in which stocks can be
bought and sold once they are approved for public sale;
for example, the New York Stock Exchange. |
| Services |
Work or activity that provides
economic value to another person in satisfying wants,
such as medical or other professional assistance, power,
heat, or transportation. (Compare goods). |
| Service
Charge |
A
fee charged by a financial institution for certain financial
services provided to customers. |
| Short-Term
Goal |
Something
a person or organization plans to achieve within a one-year
time period. |
| Signature
Card |
A
document bearing a person's signature, held on file
in a financial institution. In cases of suspected forgery,
signatures of doubtful origin can be checked against
those recorded on signature cards. |
| Simple
Interest |
Interest
paid on the initial investment (the principal) only.
Calculated by multiplying the investment principal times
the annual rate of return times the number of years
involved. (Compare compound
interest). |
| Simplified
Employee Pension (SEP) Plan |
A
qualified, tax-deferred retirement plan for an individual
with a small business. |
| Social
Security |
A federal system of old-age, survivors,
disability, and health-care (Medicare) insurance which
requires employers to withhold (or transfer) wages from
employees' paychecks and deposit money in designated accounts.
(See FICA). |
| Social
Security Tax |
A tax levied on employers and
employees to finance public Social Security benefits. |
| Spend |
Use money now to buy goods and
services |
| Spending
Diary |
A record of spending over a period
of time. |
| State
Income Tax |
A percentage of income paid by
individuals and businesses to a state government to fund
services such as roads, safety, and health. Not all states
levy an income tax. |
| Statement
Closing Date |
In a credit arrangement, the date
of the last purchase billed on the statement. |
| Statement
Savings Account |
A savings account for which the
bank sends a statement detailing deposits, withdrawals,
and interest earned once a month or once a quarter. Interest
rates for statement accounts are usually lower than rates
for other savings instruments, but a depositor can open
a statement account with very little money and can also
withdraw money from a statement account at any time. |
| Stock |
An ownership share or shares of
ownership in a corporation. |
| Stock
Market |
A market in which the public trades
stock that someone already owns. Often called the secondary
stock market. |
| Stock
Mutual Fund |
A mutual fund that buys stocks
in order to make profits for the investors. (Compare mutual
fund). |
| Substitute
Goods and Services |
Goods and services that can replace
one another in consumers' patterns of usage--butter and
margarine, for example, or movies and concerts. |
| Supply |
The quantity of a good or service
that producers are willing and able to sell at given
prices during a period of time. |
Back to Index
T
|
Take-Home Pay |
The amount of money
a person receives within a pay period after taxes and
other deductions are taken out of his or her paycheck.
(Also known as net pay. Compare
gross pay). |
| Taxes |
Payments that individuals and
businesses are required to make to local, state, or national
governments. |
| Three
Cs of Credit |
Three
characteristics that determine a person's qualifications
for obtaining a loan:
Capital:
Assets owned.
Character:
A person's past history in repaying debts.
Capacity:
A person's current and future earnings
relative to current debt.
(See
creditworthiness). |
| Total
Available Credit |
In
a credit arrangement, the total credit line minus the
new balance. |
| Total
Credit Line |
In
a credit arrangement, the maximum amount that
can be charged on the credit account. |
| Transfer
Payments |
Money
collected by the government from one group and given
to others. Examples include Social Security benefits,
unemployment compensation, and agricultural subsidies.
|
| Truth
in Lending Act |
A
federal law that requires creditors to disclose finance
charges and interest rates in a standard, uniform manner. |
Back to Index
U
|
U.S. Savings Bonds |
Securities issued by the
U.S. Treasury in relatively small denominations for individual
investors. Investors who buy U.S. savings bonds in effect
make a loan to the government, in return for the government's
promise (represented by the bond, a nontransferable debt
certificate) to repay the loan with interest. The interest
is free from state and local taxation. U.S. savings bonds
are considered to be risk-free investments, since they
are backed by the U.S. government. (Also known as savings
bonds). |
| Unplanned
Spending |
Impulsive use of money with little
or no consideration of alternatives and resulting in unplanned
consequences. |
| Unit
Pricing |
The cost per unit of measurement.
A way for consumers to compare the costs of different
sizes of the same item. |
Back to Index
V
|
Variable
Expenses |
Expenditures
that change from week to week or month to month--for food,
clothing, recreation, and entertainment, for example.
(Compare fixed expenses). |
| Variable
Income
|
Income that varies from week to
week or month to month. (Compare fixed
income). |
Back to Index
W
|
W-4 Form |
A federal income tax document
that instructs an employer about how much money to withhold
from an employee's paycheck for tax purposes. |
| Wages |
Payments for labor services that
are directly tied to time worked or pieces produced. (Compare
salary). |
| Want |
A desire that can be satisfied
by consuming or using a good or service. |
| Withdrawal |
The removal of money by a depositor
from a financial account. |
| Withholding |
Money taken out of an employee's
paycheck and sent to the government and credited to the
employee's tax bill. |
| Work |
Effort applied to achieve a purpose
or result, often for pay; skills and knowledge put to
use to get something done--as in The doctor was exhausted
after a long day's work in the emergency room. |
| Workers |
People employed to do work, producing
goods and services. |
| Work
Ethic |
A sense of responsibility for
doing a job well. Involves reliability, punctuality, friendliness,
honesty, and ability to work independently or in cooperation
with others. |
| Work
Skills |
Ability to do things demanded
in particular jobs--to explain things clearly (for teachers),
to interview witnesses (for police officers), to design
valves (for engineers), and so on. |
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