Saving Basics
The intentional act of not spending income and setting it aside for the future.
What is saving?
This account earns interest and allows quick access to your money.
What is a savings account?
An account designed to help farmers save during high-income years for use during low-income years.
What is a Farm Savings Account (FSA)?
Purchasing an asset with the hope that it will produce income or profit.
What is investing?
The possibility of losing some or all of your original investment.
What is risk?
Money earned when you deposit money into a savings account.
What is interest?
A short-term investment with high liquidity, relatively low risk, and low returns.
What is a money market account?
This strategy spreads investment risk across many assets.
What is diversification?
The increase in prices over a period of time.
What is inflation?
Income earned above the original investment amount.
What is return?
Interest calculated only on the original principal amount.
What is simple interest?
A savings account with a fixed interest rate, fixed amount, and fixed period.
What is a Certificate of Deposit (CD)?
One example of a farm savings account that allows farmers to contribute up to 20% of annual net income.
What is FARRM (Farm & Ranch Risk Management Account)?
A financial investment representing ownership in a company.
What is stock?
The easier an asset can be converted into cash, the higher its ________.
What is liquidity?
Interest that accumulates on both the principal and previously earned interest.
What is compound interest?
The total rate of return on an investment, including the compounding effect of interest.
What is APY (Annual Percentage Yield)?
This type of account has government-matched farmer deposits and many rules and limitations.
What is a Counter-Cyclical Account (CC)?
A professionally managed pool containing stocks, bonds, and other assets.
What is a mutual fund?
Stocks traded on a public exchange are generally considered this type of asset.
What is a liquid asset?
Farmers may save additional profits from high-income years to help them survive these types of years.
What are low-income years?
These are the three traditional bank savings options discussed in the lesson.
What are a savings account, money market account, and CD?
Farmers can use savings and investments in financial assets other than land and the farm business to accomplish this.
What is diversification?
An investment security that provides diversification like an index mutual fund but trades like a stock.
What is an ETF (Exchange-Traded Fund)?
Generally, taking more of this creates the potential for a higher return.
What is risk?