Basic Financial Terms
This is a plan to manage income and expenses
What is a budget?
This term refers to the practice of setting aside money regularly to prepare for future expenses, helping to avoid financial stress.
What is saving?
This term refers to the ability to borrow money or access goods and services with the promise to pay later, often based on a borrower’s creditworthiness.
What is credit?
This type of account is designed to assist individuals in saving and investing for their future, ensuring financial security during their retirement years.
What is the purpose of a retirement savings account?
This financial mechanism is intended to mitigate/lower the risk by offering compensation for losses or damages, ensuring that individuals and businesses can recover from unforeseen events such as accidents, theft, or natural disasters.
What is insurance?
This is a sum of money that is borrowed and is expected to be paid back with interest
What is a loan?
This practice involves creating a plan for how to spend and save your money, helping to manage expenses and achieve financial goals
What is budgeting?
This numerical figure reflects an individual's creditworthiness and is crucial for obtaining loans and credit.
What is a credit score?
This federal program provides financial assistance to retired workers, typically funded through payroll taxes, and is a primary source of income for many retirees
What is Social Security?
This type of insurance is designed to help individuals pay for medical expenses, including doctor visits, hospital stays, and prescription medications.
What is health insurance?
The letters APR stands for
What is Annual Percentage Rate?
A fund to cover unexpected expenses/emergencies
What is an emergency fund/saving?
This type of card allows you to spend money you already have in your account, while the other type of card lets you borrow money up to a specified limit.
What is the difference between a debit card and a credit card?
This benefit occurs when an employer adds funds to an employee's retirement savings account, matching the employee's contributions, often considered "free money" for retirement.
What are employer matching contributions?
This type of insurance protects individuals’ personal belongings in a rented residence from risks such as theft, fire, or damage, providing financial coverage for unexpected losses.
What is renter’s insurance?
The cost of borrowing money, typically expressed as a percentage of the loan amount. It can also be explained as the price you pay to borrow money.
What is interest?
This is the recommended amount to have in an emergency fund, expressed as a duration of living expenses
What is three to six months' worth of living expenses?
This type of interest is calculated on both the initial principal and the interest that has been added over time, allowing your savings to grow faster.
What is compound interest?
This acronym stands for a type of investment account that provides tax benefits for retirement savings, allowing individuals to make contributions that can grow tax-deferred or tax-free, depending on the type.
What is an Individual Retirement Account (IRA)?
This term refers to the specific amount a policyholder must pay out-of-pocket for covered expenses before their insurance begins to contribute to the claim.
What is a deductible?
The original sum of money borrowed or invested, excluding any interest or fees. It can also be explained as the total amount of money being borrowed from the lender before interest and fees are applied.
What is the principal of a loan?
These two types of savings serve different purposes, with one aimed at immediate needs like vacations and the other focused on future goals like retirement.
What is the difference between short-term savings and long-term savings?
This type of interest rate stays constant throughout the life of a loan, while this other type can fluctuate based on market conditions, impacting monthly payments.
What is the difference between a fixed interest rate and a variable interest rate?
As a student, you can open this type of retirement account, allowing you to contribute after-tax income, with tax-free withdrawals in retirement, provided certain conditions are met. You typically need earned income, like from part-time jobs or internships, to open it.
What is a Roth IRA?
Various elements can affect the cost of this type of insurance premium, including the driver's age, driving history, vehicle type, geographical location, and academic status, particularly for students with good grades.
What factors can influence the cost of auto insurance premiums?