Glossary Terms:

Climbing the Savings Mountain

Glossary terms from:
http://www.econedlink.org/e515


Allowance

A sum of money paid regularly to a person, often by a parent to a child; sometimes paid in compensation for services rendered.

Bank

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

Bank Account

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

Banking

The industry involved with conducting financial transactions. Also, conducting business with a bank, e.g., maintaining a checking or savings account or obtaining a loan.

Bond

A certificate of indebtedness issued by a government or a publicly held corporation, promising to repay borrowed money to the lender at a fixed rate of interest and at a specified time.

Check

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

Choice

Decision made or course of action taken when faced with a set of alternatives.

Compound Interest

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

Compounding

Paying interest on the principal and on interest already earned. For example, if someone deposits $2,000 in an account that pays interest at 8 percent, he or she will earn $160 in interest after one year, for a balance of $2,160. If the depositor leaves this sum in the account for another year, however, he or she will earn $172.80 in interest because the 8 percent rate will apply to the new balance of $2,160, not the original $2,000 deposit. The longer the money is left in the account, the more dramatic the compounding effect.

Costs

An amount that must be paid or spent to buy or obtain something. The effort, loss or sacrifice necessary to achieve or obtain something.

Deflation

A sustained decrease in the average price level of all the goods and services produced in the economy.

Deposit

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

Goal

Something a person or organization plans to achieve in the future; an aim or desired result.

Goods

Tangible objects that satisfy economic wants.

Inflation

A rise in the general or average price level of all the goods and services produced in an economy. Can be caused by pressure from the demand side of the market (demand-pull inflation) or pressure from the supply side of the market (cost-push inflation).

Interest

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

Long-Term Goal

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

Money

Anything that is generally accepted as final payment for goods and services; serves as a medium of exchange, a store of value and a standard of value. Characteristics of money are portability, stability in value, uniformity, durability and acceptance.

Return

Earnings from an investment, usually expressed as an annual percentage.

Save

To keep money for future use; to divert money from current spending to a savings account or another form of investment.

Saving

Disposable income (income after taxes) minus consumption spending.

Savings

Money set aside for a future use that is held in easily-accessed accounts, such as savings accounts and certificates of deposit (CDs).

Savings Account

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

Savings Bond

Securities issued by the U.S. Treasury in relatively small denominations for individual investors. Investors who buy savings bonds in effect make a loan to the government, in return for the government's promise (represented by the bond, a nontransferable debt certificate) to repay the loan with interest. The interest is free from state and local taxation. Savings bonds are considered to be risk-free investments, since they are backed by the U.S. government.

Services

Activities performed by people, firms or government agencies to satisfy economic wants.

Simple Interest

Interest paid on the initial investment (the principal) only. Calculated by multiplying the investment principal times the annual rate of return times the number of years involved.

Spend

Use money now to buy goods and services.

U.S. Savings Bonds

Securities issued by the U.S. Treasury in relatively small denominations for individual investors. Investors who buy U.S. Savings Bonds in effect make a loan to the government, in return for the government's promise (represented by the bond, a nontransferable debt certificate) to repay the loan with interest. The interest is free from state and local taxation. U.S. Savings Bonds are considered to be risk-free investments, since they are backed by the U.S. government.

Work

Effort applied to achieve a purpose or result, often for pay; skills and knowledge put to use to get something done; employment at a job or in a position; occupation, profession, business, trade, craft, etc.