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Investments 101
Types of Investments
Investment Terms
Types of Accounts
Financial Terms on Fleek
100
Any use of your assets to create additional assets. You can invest in stocks, mutual funds, CDs, interest-bearing bank accounts, bonds, or real estate. These offer an opportunity to earn money through interest or dividend payments or a rise in the value of the asset.
What is an investment?
100
A special savings plan set up by an employer that allows you to avoid paying taxes on your savings until after retirement. Typically, a portion of your untaxed earnings is automatically deducted each pay period and invested in the plan. Some companies try to encourage participation by offering to match some or all of your contributions with contributions of their own. Money in this plan typically can be invested in some combination of stocks, bonds and mutual funds.
What is a 401 K?
100
This is the original amount of money that you invest or borrow, before interest payments or earnings are calculated.
What is principal?
100
Money deposited in a banking institution. It is where many people put their money. It may be a checking account or a savings account, or a combination.
What is a bank account?
100
Any amount you owe to someone else. These can include credit card debt, student loans, mortgages and car loans. (This is the opposite of an asset.)
What is a liability?
200
The cost of borrowing money. It can also be the amount earned from investing in a bond, savings account or CD. (By investing in these instruments, you are loaning money to a bank or other institution.) It is also the amount paid to obtain a loan or use a credit card. It is expressed as a percent of the principal. It can be simple or compound.
What is interest?
200
An education savings plan operated by a state or educational institution designed to help families set aside funds for future college costs. It is named after Section 529 of the Internal Revenue Code which created these types of savings plans in 1998.
What is a 529 plan?
200
These are the financial vehicles that make up the top portion of a financial pyramid. These products help you grow your money over time. These investment products include stocks, bonds and mutual funds.
What is accumulation?
200
A deposit account in a bank or credit union that pays interest on your balance. It is insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000. It doesn't earn a lot of interest, but people put their money in this type of account at the bank for their money to be saved.
What is a savings account?
200
When you add the value of all the assets you own, subtract your liabilities (what you owe) and that is your _______.
What is net worth?
300
Anything you own that has monetary value, such as money you have in bank accounts, stocks, bonds, mutual funds, real estate, the value of your life insurance policy, and any personal property that you could sell for money (a car, jewelry, artwork, etc).
What is an asset?
300
This is a savings account that allows you to save for retirement without paying taxes until you withdraw the money anytime after age 59 ½. Like a 401(k) account, it holds money that has not yet been taxed. But it is maintained by an individual rather than an employer.
What is an IRA (individual retirement account)?
300
A share of ownership in a company. Some of these pay dividends.
What is a stock?
300
BONUS! Which account does your paycheck usually go to? (not on the worksheet)
What is a checking account?
300
A rise in price of the things you buy. Over long periods of time, inflation averages about 2% to 3% a year. When investing, you should take inflation into account. An investment that pays a low rate of return, such as a bank savings account, will not amount to very much over time after this is taken into account.
What is inflation?
400
Interest computed only on the principal and (unlike compound interest) not on principal plus interest earned or incurred in the previous period(s). It grows more slowly because you earn interest only on the original amount of money.
What is simple interest? (not on list but we discussed this)
400
A special type of Individual Retirement Account for saving money that has already been taxed. After five years, any amount that you invested in a Roth IRA can be withdrawn tax-free if you are 59 ½ or older.
What is Roth IRA?
400
A long-term loan an investor makes to a government (Treasury or municipal bond) or a company (corporate bond). The investor earns interest on the loan.
What is a bond?
400
A savings account that usually offers check-writing privileges and interest rates that are higher than ordinary savings accounts. These accounts usually require a minimum balance of around $500.
What is money market account?
400
This type of rate represents the annual cost of borrowing money, expressed as a percentage of the loan amount. It includes interest payments and fees. This represents the annual rate of return you earn on an investment, expressed as a percentage of the amount you invested. It takes into the account the effect of compounded interest.
What is an annual percentage rate (APR)? What is annual percentage yield (APY)?
500
A method of calculating interest that adds accumulated interest back to the principal amount, resulting in a larger principal amount. It allows you to earn interest on a progressively larger amount of money.
What is compound interest?
500
Time deposits that earn a set amount of interest (usually compound interest) over a set period of time, usually between 3 months and 5 years. Up to $250,000 is insured by the Federal Deposit Insurance Corporation (FDIC). There is generally a penalty for early withdrawal.
What is certificate of deposit (CD)?
500
A portion of a company’s profits that is distributed to its owners. Many corporations are owned by stockholders, and many stocks pay these to people.
What is a dividend?
500
A transaction account that allows you to transfer your money to another person or company by writing a check or making an electronic funds transfer. Money is insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per depositor.
What is a checking account?
500
An investment that allows you to own shares in a group of stocks or bonds with a single purchase.
What is mutual fund?