What is the definition?
Savings Plan
a strategy for using money to reach important goals and to advance a person’s financial security
Annual Percentage Yield (APY)
the rate of yearly earnings from an account, including compound interest
High Yield Savings account
pays a higher interest rate than passbook and statement savings accounts
Future Value
the value of an amount of money invested with compound interest at the end of a specified time period
What is liquidity?
The ability to quickly turn an investment into cash
Financial Security
the ability for an individual to meet essential needs without taking on more debt than can be repaid
Interest Bearing Savings Account
a demand deposit account that pays interest and allows for regular deposits and withdrawals
Prinicipal
the amount originally deposited
Rule of 72
an equation that estimates how long it will take to double an investment with a fixed interest rate
What is income tax?
a cost of interest on savings
Payroll Saving Plan (PSP)
an employee authorizes the employer to take regular deductions from his or her paycheck to automatically deposit in a designated savings plan
Passbook Savings Account
pay interest and allow deposits and withdrawals
Time Value of Money
the idea that money decreases in value over time
Brokerage Firm
a financial institution that facilitates the purchase and sale of financial securities by buyers and sellers
Two types of traditional savings account?
passbook and statement
SMART Goal
something a person wants to achieve
Money Market Account
a type of savings account that typically pays a higher interest rate than regular savings accounts
Simple Interest
interest only earned only on the principal
Tax-exempt
means free of certain taxes
Three things that affect you interest.
loan period, rate, and principal
Savings Account
an account designed for accumulating money for future use
Certificate of Deposit (CD)
a savings account that requires a deposit of a fixed amount of money for a fixed period of time, known as a term
Compound Interest
an amount calculated using the principal plus the interest it earns
Tax-deferred
means that taxes on the principal and/or earnings are delayed until the funds are withdrawn
Factors that should be included when choosing a savings plan.
inflation, liquidity, safety, and fees