Interest
An amount paid to use someone's money, usually a percentage of the amount deposited.
Principal
The money deposited.
Saving
Depositing your money into a financial institution for safekeeping and to earn interest.
Investing
Buying something with the expectation that it will make money for you.
Windfalls
Things like work bonuses, inheritances, tax refunds, or other unexpected chunks of money.
Compounding
When an interest is added to the original balance in a savings account, along with any other previously earned interest.
Inflation
As it costs more to provide goods and services, the price of those goods and services also increases.
Time Value of Money
A dollar today is worth more than a dollar tomorrow.
Asset
An item of value that can be converted into cash.
Liability
Something owed to another person.
Rate of Return
The degree to which an asset gains (or loses) vale over a given period of time.
Income Investments
Provide regular earnings, such as monthly interest, quarterly dividends, or, in the case of real estate, rent payments.
Growth Investments
Are about delayed gratification. The goal is to buy an asset that you believe has the potential to increase in value over time.
Bond
You lend money to a government or company.
Maturity Date
The borrower promises to repay you in full on your bond on a specific date.
Broker
Whom you purchase stocks and bonds through.
Investment Advisor
Whom you refer to when making investment decisions.
Stock
You are providing money to a corporation or business to help run that business.
Shareholder
Owning stock. (When you own a bit of the company through stocks)
Dividend
An amount paid in cash or shares of stock, based on the amount of stock shares owned.
Stock Exchange
Systems established to trade shares of stock.
Bid
Your offer of purchase.
Ask
A seller's offer to sell.
Mutual Fund
Each mutual fund invests in a variety of stocks and/or bonds to meet a specific investment objective.
Risk
Uncertainty of achieving a desired result.
Risk Tolerance
How comfortable you are with the ups and downs of investing.
Diversification
Having a variety of diverse investments.
Custodial Account
The assets in the account belong to you, but you won't have legal control of them until you're no longer a minor.
Dollar Cost Averaging
Investing a set amount of money each month or at other regular intervals.
401 (K) Plans
You own your own account. You decide the amount to contribute and how it's invested. (Sometimes called an employer-sponsored plan)
Individual Retirement Account (IRA)
You can invest for long-term goals while getting the benefit of tax-free growth and compounding within IRA accounts.