personal finance 3
a retirement plan available to employees of nonprofit organizations, such as schools and hospitals
401b
a retirement plan that some private corporations offer their employees
401k
a saving plan for education designed to help set aside funds to pay for future college costs
529 plan
certificate of deposit; an account where you leave your money for a set period of time and are unable to make deposits or withdrawals during this time unless you pay penalties
CD
Mutal funds, real estate, Retirement investment, stock
Common investment alternatives
the interest the bank gives on the interest that has been already earned compound annually: A=P(1+r)^n A=amount of money accumulated P=principal r=interest rate n=#of years in account
Compound interest
A real estate investment is as safe as putting your money in a savings account. T or F
False
Annual compounding pays more than daily compounding. T or F.
False
Mutual funds are the riskiest type of investment. True or False
False
Edmund would like to buy stock. What should he do?
He should choose a broker, open an account, deposit money, and communicate with the broker what stock he wants to buy.
individual development account; a matched savings accounts; an organization, such as a foundation, corporation, or government agrees to add money to the account to match the money you deposit
IDA
a retirement account that lets you save and invest money tax-free until you withdraw it when you retire
IRA
Types of retirement accounts
IRA, 401k, 401b
-If you receive cash as a gift, save at least part of it. -Pay your bills on time to avoid late fees and finance charges. -Use direct deposit or set up your account to automatically transfer money directly into savings. -Save any extra money you get as a raise or bonus from your employer. -When you get a tax refund, save it. -If your employer offers a retirement plan, join it. -If you pay off a loan, continue to make the monthly payments to yourself. -Avoid debt.
Identify tips that help you save
price to earnings ratio; the latest closing price divided by the earnings per share
P/E
the original amount of money deposited in a savings account or invested
Principal
easy to buy, matched deposits, great as gifts, good for the US gov
Reasons someone would purchase a savings bonds
Reach goals, manage money, prepare ICE, Improve living
Reasons to save
online statement ATMs online savings plan transfer money to other accounts direct deposit automatic transfer
Tools and services available with a savings account.
Before you select a savings account, you want to think about how long you will keep your money in the account. True or false
True
pay off credit card balances, save up an emergency fund, and learn the basics about investing.
What should one do to prepare.
an account used to save money for a special reason, such as a holiday, a vacation, or college
club account
investing in a variety of investments to limit losses in the event of a sharp decline in a particular type of investment
diversification
opportunity cost risk rate of return liquidity
factors you should consider when investing
Lilly would like to gather more information about investing in stock. What resources can she use to find out more information?
full-service stock broker, books, financial articles, and financial advisers
Reason someone would save their money in a CD
highest interest, safe, no fees
the minimum balances before the bank begins paying interest
interest threshold
using your money to try to make more money
investing
how easy it is to turn an investment into cash without losing its value
liquidity
a savings account that offers a higher rate of interest when you make large deposits
money market account
a collection of money from a group of investors used to buy different investments, like stocks, bonds, and real estate, managed by professionals
mutual funds
The difference between a chosen investment and one that is passed up is _____.
opportunity cost
the difference between a chosen investment and one that is passed up
opportunity costs
a percentage that shows how much gain or loss an investment makes
rate of return
a plan for setting aside money to be spent after retirement
retirement account
the profit or gain from saving or investing money
return
a formula that helps you calculate how long it will take for your savings to double in value 72/interest rate
rule of 72
a savings product; a certificate issued by the U.S. government with values ranging from $50 to $10,000
savings bond
a person who owns shares of a company's stock
shareholder
-Collect all the required information. -Go to the bank and sign the necessary bank forms. -Choose a director for the account. -Fill out a deposit slip and deposit at least the minimum amount of money.
steps to opening a savings account
a certificate representing a share of ownership in a company
stock
a person who owns shares of a company's stock
stock broker
an organized way for people to buy and sell stocks and for corporations to raise money, The New York Stock Exchange and NASDAQ are the biggest in the United States
stock market
the prices of a stock at a particular point during the day
stock quote
to buy or sell stock
trade
different interest rates are paid for different size balances, with higher balances earning higher rates
variable interest rates
52-week high, 52-week low, P/E ratio, dividend
what all should be considered when selecting a stock?
tax free until you withdraw, deposits may be matched by the company you work for, money is taken out of your paycheck before you pay taxes on it.
Advantages to retirement accounts
Offer higher interest rates b/c they dont have overhead that standard banks have
An online saving account
What is an incentive for a person to contribute to an IDA?
An organization matches the amount deposited.
(APY); the amount of interest you will earn in one year from a savings account
Annual percentage yield
