1. Goals, Saving, Interest, & Banking. Flashcards Preview

Personal Finance Terms > 1. Goals, Saving, Interest, & Banking. > Flashcards

Flashcards in 1. Goals, Saving, Interest, & Banking. Deck (49)
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1
Q

When choosing, people must choose things and…

A

Give up others

2
Q

The consequences of your choice will…

A

Lie and take effect in the future.

2
Q

The consequences of your choice will…

A

Lie and take effect in the future.

3
Q

Long-term Goal

A

Something a person or organization plans to achieve at least five years in the future.

4
Q

Short-term Goal

A

Something a person or organization plans to achieve within one-year time period.

5
Q

Key principles that influences financial planning

A
  • People must make choices due to scarcity.
    • Every choice incurs an opportunity cost.
    • All choices have consequences, that lie in the future.
6
Q

Applying key principles to financial planning should include:

A

• A budget that details how one plans to use limited income satisfy wants.
• Save more rather than spend more.
* Financial plans and financial products should be taken into account when achieving goals.

7
Q

It’s common knowledge that failing to plan means…

A

Planning to fail.

8
Q

Every goal should…

A

Be listed in priority order.
Have an estimated cost.
Have an approximate time period needed to achieve the goal.

9
Q

What can you do now that will put you on a path to achieving your financial goals?

A
  1. Develop your human capital.
  2. Put your savings to work to earn money.
  3. Stay away from conspicuous consumption.
10
Q

How can you guard against spending that keeps you from attaining savings goals?

A
  • Have a plan that you must revisit regularly
  • Use social support (friends and family) to remind yourself not to spend unnecessarily.
  • Keep money where you don’t have immediate access to it. (in the bank)
11
Q

Putting money to work, that has been set aside, is crucial to achieving…

A

Long-term Goals

12
Q

Interest is a payment in…

A

compensation of opportunity cost for a saver/lender.

13
Q

Interest

A

Money paid regularly, at a particular rate for the use of borrowed money.

14
Q

Maturity

A

The length of time money is borrowed or invested.

15
Q

Principal

A

An original amount of money invested or lent.

16
Q

Calculating simple interest is based on the equation:

A

INTEREST = PRINCIPAL x RATE x TIME(MATURITY)

17
Q

Compound Interest.

A

Interest that is earned not only on the principal but also on the interest already earned.

18
Q

The Rule of 72

A

A mathematical rule for determining the number of years it will take for an investment to double in value. The number of years is determined by dividing 72 by the annual rate of return. Thus, an investment expected to earn interest at a rate of 8% will double an investor’s funds in 72/8, or 9 years. Dividing 72 by the number of years in which an investor wishes to double his or her return will yield the necessary rate.

19
Q

Time Value of Money

A
This is the value of a sum of money at a different period of time.
     - the amount of 
 money one would 
 need to receive 
 today to equal a 
 certain sum in the 
 future.
20
Q

Bank

A

A financial institution that provides various products and services to its customers, including checking and savings accounts, loans and currency exchange.

21
Q

Credit Union

A

A non profit financial institution owned by its members’ offers various financial services including accounts and loans; regulated by the National Credit Union Association. (NCUA)

22
Q

Savings and Loan Association

A

A type of financial institution that specializes in but it is not restricted to lending money to consumers for mortgages (home loans). A savings and loan association is also called a thrift.

23
Q

FDIC

A

Federal Deposit Insurance Corporation; the federal agency that guarantees depositors’ savings up to $250,000 per account in most commercial banks, savings banks and savings association

24
Q

NCUA

A

National Credit Union Association; the federal agency that regulates credit unions and administers the insurance fund that insures member credit unions’ deposits. Depositors’ accounts with members credit unions are insured up to $250,000

25
Q

Savings account

A

An interest-bearing account (passbook or statement) at a financial institution.

26
Q

Checking account

A

A financial account into which people deposit money and from which they withdraw money by writing checks.

27
Q

Check

A

A written order to a financial institution directing the financial institution to pay a stated amount of money, as instructed, from the costumer’s account.

28
Q

Deposit

A

Money put into a financial account. Also, to place money in a financial account.

29
Q

Certificate of Deposit (CD)

A

A certificate by a bank to a person depositing money in an account for a specified period of time (often six months , one year or 2 years). A penalty is charged for early withdrawal from CD accounts.

30
Q

Consumer Loan

A

A loan made to an individual or household for purpose of buying or paying for a consumer good (car, appliance, etc.)

31
Q

Broker

A

An individual who provides investment services to other individuals, assisting in the buying and selling of stocks, bonds and other investment instruments.

32
Q

Payday loans

A

A loan issued to a borrower who writes a post-dated check made out to a lender (usually a company specializing in payday loans and other financial services targeted to low-income customers) for the amount he or she wishes to borrow plus a fee.

The lender gives the borrower cash in the amount stated on the check, minus the fee, and holds the check until the borrower’s next payday, when the lender cashes it. No credit background check is required.

The cost (in fees and interest) to those who use payday loans is often very high, however, when calculated as an APR.

33
Q

Debit Card

A

A small, specially coded plastic card issued by a bank; allows the cardholder to transfer funds electronically and immediately from his or her checking account, as if the cardholder were writing a check to pay for purchase.

34
Q

Credit Cards

A

A small, specially coded plastic card issued by a bank, business etc., authorizing the card holder to purchase goods and services on credit.

35
Q

Automated Teller Machine (ATM)

A

A machine that provides cash and performs banking services (for deposits and transfers of funds between accounts, for example) automatically when accessed by customers using plastic cards coded with personal identification numbers (PINs).

36
Q

Direct Deposit

A

he electronic transfer of a payment (for month’s salary, for example) directly from the payer’s account to the recipient’s account.

37
Q

Remote Deposit

A

This is the process of depositing funds from a home or office without visiting a financial institution. The customer scans an image of the check and then transmits it to the financial institution where the transaction is completed.

38
Q

Loans

A

An amount of money provide by one party to another with the understanding that the money will be returned, in full, often with interest.

39
Q

Automated Bill Payment

A

a process that allows consumers to make regular bill payments from their banking accounts using electronic methods.

40
Q

Automated Clearing House (ACH)

A

An electronic network for financial transactions in the U.S. the network processes batches of debits and credits to various financial institutions allowing for fast, safe and efficient transfer of funds.
• The Automated Clearing House (ACH) is the system used to process electronic monetary transactions.

41
Q

Check Clearing for the 21st Century Act (Check 21)

A

An act of Congress that allows banks to use and transmit digital images of checks rather than transport paper checks for return.
• This allows for services like remote deposits of checks and facilities bill-paying.
• The Check clearing for the 21st Century Act, or Check 21, makes check processing easier and less expensive for financial institutions by creating substitute checks that can be exchanged electronically.

42
Q

Bank Account

A

An arrangement by which a bank funds on behalf of a depositor. Also, balance of funds held under such an arrangement, credited to and subject to withdrawal by the depositor.

43
Q

Signature Card

A

A document bearing a person’s signature, held on file in a financial institution. In cases of suspected forgery, signatures of doubtful origin can be checked against those recorded on signature cards.

44
Q

Check Register

A

A form (usually located in the back of a checkbook) on which users of checking accounts may record checks they have written and deposits they have made. Information thus recorded helps people keep track of balances in their accounts.

45
Q

Bank Statement

A

A monthly summary providing the status of depositor’s financial accounts (checking and/or savings).

46
Q

Opening and maintaining a checking or savings account involves:

A
  • Completing an application
    • Completing a signature card
    • Presenting approved identification document
    • Writing/maintaining checks, stubs, and check register.
    • Endorsing checks (signing the back of the check, which transfers ownership)
    • Completing deposit & withdrawal documents.
47
Q

What are some steps to take to correct errors on a bank statement?

A
  1. Verify the mistake.
  2. Contact your bank.
  3. Adjust your records.
48
Q

Reconciliation

A

The process of comparing one’s financial records (checkbook or passbook) to the records of the financial institutions (bank statement) to find the errors.