CDs, Money Market Accounts, Regular Savings Accounts

FDIC insured saving and investing tools

Pay Yourself First

Setting aside money for savings and investing each pay period or month before any other spending.

Savings

Setting aside money for emergencies or short term goals such as a vacation.

Compound interest

Earning interest on interest

3-6 months of living expenses

The standard used to determine how much should be held in an emergency fund.

Buy & hold

Investment strategy of putting money into an investment and leaving it there for a long period of time to gain in value, earn interest or dividends.

Banks & Credit Unions

Where consumers can go to get both savings accounts and investment services in one location.

Stock

Investment that represents ownership in a corporation/company. Pays dividends (Income) and increases in market value (Capital Gains) to benefit the investor.

Mutual Fund

The investments of many investors are pooled in a fund that is diversified by its nature, professionally managed, and does not take a large investment to start and can be added to monthly.

401K

Employer sponsored retirement plan that deducts contributions from the employee's pay before taxes are calculated, and may include at least a partial match of contributions by the employer.

Risk/Return relationship

As we move up the investment pyramid, the potential return on an investment increases, and so does the risk of the investment losing value.

Asset allocation

Investing strategy that balances risk tolerance, investor's goals and current investment outlook to maximize profits for the investor.

Liquidity

How quickly easily assets can be accessed and converted into cash

Volatility

Fluctuation in the value of an investment from one period of time to another.

Portfolio

An individual's collection of investments.

$250,000

Amount of deposits covered by FDIC or NCUA depositor insurance.

Tax deferred

Earnings and principal of an investment are not taxed until they are withdrawn.

Tax exempt

Earnings from an investment are not taxed. Roth IRA earnings, and interest on a municipal bonds are 2 examples of tax exempt investment income.

Annuity

Contract with an insurance company that guarantees future income for a certain number of years or life.

Traditional IRA

Tax deductible contributions and tax deferred earnings that can be withdrawn when the investor reaches age 59 1/2.

Securities and Exchange Commission (SEC)

Fed government agency that oversees the trade of stocks, bonds, mutual funds etc. and licenses brokers as well as regulating stock exchanges.

Risk

The possibility that an investment may lose value in the market.

Compounding & Time

Two factors that help investors grow wealth over a lifetime of saving and investing.

Rule of 72

Mathematical function that tells an investor how long it will take them to double their money, how often an investment will double between when investing starts and when it stops, and the interest rate needed to reach a goal. 72 divided by rate of return.

Interest

Price paid for using someone else's money

Principal

The original amount of money saved or invested

Investing

Setting aside money to make more money, build wealth and reach long term financial goals.

Keogh plan

A plan similar to a 401K for a self-employed person that is approved by the IRS

Community

A group of people working together for a common good

Family

Related or unrelated individuals sharing resources (especially time and money) who also show concern about each other's well-being

In-kind Income

The provision of a product or service in lieu of money

Non-profit organization

An organization that exists to benefit others through human service, conservation, religious, or other charitable causes

Social capital

The access a person has to social relationships that can provide resources

Taxpayer

People who pay taxes to federal, state, county or municipal (city/town) governments

Government

The system of governance that provides structure, protection, and services to people residing in a nation, state, county, or municipal (city/town) governments

Time value of money

Money available at the present time (today) is worth more than the same amount if received in the future

Consumption

The purchase of goods or services

Do it yourself

When you complete a task yourself rather than paying someone else

Emergency savings

Cash set aside to cover the cost of unexpected events

Interest rate

Percentage rate used to calculate interest

Certificate of Deposit

An account at a depository institution that is used for a fixed period of time and allows restricted access to the funds deposited

Checking account

An account that allows quick access to funds for transactions

Depository institution

Businesses that provide financial services

Money market deposit account

An account at a depository institution that usually has minimum balance requirements and tiered interest rates

Savings tools

Accounts offered by depository institutions whose main purpose is to help people manage their money

Tiered interest rate

The amount of interest earned depends on the account balance

Bond

A form of lending to a company or the government (city, state, or federal)

Brokerage firm

Facilitates the buying and selling of investments from a stock exchange

Capital gain

unearned income received from the sale of an asset above its purchase price

Discount brokerage firm

Only completes orders to buy and sell investments

Dividend

The share of profits distributed in cash

Financial advisor

A trained professional that helps people make investing decisions

Full-service brokerage firm

Offer investment transactions as well as investment advice and a financial advisor

Index

A group of similar stocks and bonds

Index fund

A mutual fund that was designed to reduce fees by investing in the stocks and bonds that make up an index

Inflation

The rise in the general level of prices

Inflation risk

The danger that money won't be worth as much in the future as it is today

Investment

Assets purchased with the goal of providing additional income from the asset itself but with the risk of loss

Investment philosophy

An individual's general approach to investment risk

Investment risk

The possibility that an investment will fail to pay the expected return or fail to pay a return at all

Market price

The current price that a buyer is willing to pay

Maturity date

The specified time in the future when the principal (or initial investment) amount of the bond is repaid to the bondholder

Mutual Fund

Created when a company combines the funds of many different and then invests that money in a diversified portfolio of investments

Portfolio Diversification

Reduces risk by spreading money among a wide array of investments

Rate of return

The total return on an investment expressed as a percentage of the amount of money saved

Rent

A fee charged for use of property or land

Return

The profit or income generated by saving and investing

Risk

The chance of loss from an event that cannot be entirely controlled

Speculative investments

Have the potential for significant fluctuations in return over a short period of time

Stockholder or Shareholder

The owner of stock

Stock exchange

An organized, central service to buy and sell stocks, bonds and other investments that are traded

Tax-advantaged investments

Reduce, defer, or adjust the current year tax liability