Behavioral Econ
The tendency to conform to the behaviors and beliefs of the people around you.
What is Herd Mentality?
A bank account used for everyday transactions, like paying for groceries or ATM withdrawals, that earns no interest.
What is a Checking Account?
A security that represents the ownership of a fraction of a corporation that provides income from the buying and selling of shares and/or through dividends
What are Stocks?
A number that estimates how likely you are to repay a loan and make the payments on time. The higher the number, the less interest a person pays and the more loans they are approved for. The lower the number, the less likely people are to obtain a loan, and their interest rates will be higher.
What is a Credit Score?
The emotional impact of a loss is felt more intensely than the joy of an equivalent gain.
What is Loss Aversion?
A non-profit financial institution that typically has better interest rates, lower fees, and less physical locations than a traditional retail bank.
What is a Credit Union?
A collection of many different investments that mirror the performance of benchmarks like the S&P 500.
What is a (Mutual/Index/Exchange Trade) Fund?
Typically the most expensive way to pay for a motor vehicle, where a consumer rents a car for 3 years instead of owning it.
What is Leasing?
The tendency to follow through with something that is already invested heavily in, even when giving up is clearly a better idea.
What is Sunk Cost Fallacy?
The agency the guarantees customers that up to $250,000 of their deposits are insured at certain financial institutions.
What is the FDIC?
Not "putting all your eggs in one basket" by investing in different asset classes with the goal to reduce risk.
What is Diversification?
A mortgage that for most of its term sees its interest rate rise and fall with market conditions, unlike a fixed mortgage that has interest unchanged for the life of the loan.
What is an Adjustable Rate Mortgage (ARM)
When the first piece of information you see influences your decision, like thinking $150 sneakers are a great deal because you first saw them priced at $200
What is Anchoring Bias?
A savings account that holds money for a set period of time, often having high interest rates.
What is a Certificate of Deposit (CD)?
A retirement plan that is set-up through for-profit corporations and is the most common vehicle for American retirement investments. Not only does it reduce taxes, but it also provides additional incentives through matching employer contributions.
What is a 401(k)?
The single most impactful thing when it comes to a person's credit score, making up 35% of the calculated total.
What are late/on-time payments?
Choosing immediate rewards over future benefits, such as spending your $50 birthday money on fast food now instead of saving up for concert tickets
What is Present Bias?
A savings account that has debit card and check writing privileges.
What is a Money Market Account?
An investment that is popular for retirement purposes due to it automatically adjusting the asset allocation based on the retirement year an investor has chosen. It typically begins with mostly stocks in the beginning years, and end with mostly bonds in the later years.
What is a Target Date Fund (TDF)?
When an installment loan has the same payment amount each month, but the amount that is put towards interest decreases over time and the amount that is put towards principal increases over time.
What is Amortization?