5.1 Vocabulary
Savings Plan
A strategy for using money to reach important goals and to advance a person’s financial security.
Passbook Savings Account
A savings accounts that generally offers the lowest interest earnings of all savings options.
What is S
Specific
1%
1.0303
Time Value of Money
The idea that money decreases in value over time.
Financial Security
The ability for an individual to meet essential needs without taking on more debt than can be repaid.
Statement Savings Account
An account for which the bank sends a statement that summarizes the activity of the account for a specific period of time, usually a month.
What is M
Measurable
3%
1.0927
Principal
The amount of money originally deposited.
Payroll Savings Plan
A program in which an employee authorizes the employer to make regular deductions from each paycheck to automatically deposit in a designated savings plan.
High-Yield Savings Account
An account that pays a higher interest rate than passbook and statement savings accounts.
What is A
Achievable
5%
1.1576
Simple Interest
Interest earned only on the principal.
SMART Goal
Something a person wants to achieve stated in terms that are specific, measurable, achievable, realistic, and time related.
Money Market Accounts
A type of savings account that typically pays a higher interest rate than regular savings accounts.
What is R
Realistic
7%
1.2250
Compound Interest
An amount calculated using the principal plus the interest it earns.
Savings Account
An account designed for accumulating money for future use.
Reward Savings Account
The same as ordinary savings account, except the bank offers an extra reward for opening it.
What is T
Time Related
8%
1.2597
Rule of 72
An equation that estimates how long it will take to double an investment with a fixed interest rate.