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Financial Literacy
| budget | A plan estimating income and e |
|---|---|
| cost of living | The price people need to pay to get the goods and services they need |
| discretionary income | The amount of money that is left over for spending or saving from all income after accounting for taxes and necessities. |
| expenses | Money spent on bills and purchases. |
| financial literacy | The possession of skills and information that allow a person to make informed financial decisions. |
| fixed expense | An expense that is predictable and ongoing. |
| human rights | Rights that all humans have that can never be rightfully taken away. These include the right to life, freedom, and equality. |
| income | Money earned or received. |
| living wage | The minimum income necessary for a person to meet their basic needs. |
| minimum wage | The lowest hourly wage that can legally be paid to an employee. |
| mortgage | A legal agreement in which a financial institution lends money in exchange for taking the title of the borrower's property. After the borrower repays this loan over time, with interest, the borrower gains full legal ownership of the property. |
| need | Something that is necessary for survival, such as water, shelter, or food. |
| standard of living | The level of wealth, comfort, and goods and services available to someone at a given income level within a society. |
| time horizon | The period of time one expects to need to save enough money for a financial goal. Example: Saving for a new pair of shoes has a short time horizon, whereas saving for retirement has a long time horizon. |
| variable expense | An expense that is unexpected or changes over time. |
| want | Something that would be nice to have but is not needed for survival. |
| 1040 form | The standard tax form that individuals in the United States use to submit their taxes to the Internal Revenue Service. |
| 1099 form | A tax form that independent contractors receive from each company or client that pays them in a calendar year. |
| deductions | Expenses that reduce a person's tax liability by lowering that person's taxable income. |
| dependent | A person who relies on someone else for financial support. Dependents are claimed on tax returns in order to lower the amount of taxable income. Children are one example of dependents. |
| employee benefit | A non-wage form of compensation provided to employees, in addition to their wages or salaries. |
| estimated tax payments | A semiannual payment of taxes due based on a taxpayer's previous year's taxes, required of small business owners and independent contractors. |
| FICA | A mandatory federal payroll tax that funds Social Security and Medicare. It stands for the Federal Insurance Contributions Act and is deducted from each paycheck. |
| gig economy | A labor market consisting of a number of short-term contracts or freelance work. In a gig economy companies usually hire independent contractors and freelancers instead of permanent or full-time employees. |
| gross income | The amount of money a person earns before anything is taken out for taxes or other deductions. |
| income tax | A tax applied by the government on a person's income. This tax is applied annually. |
| independent contractor | A person or business that provides goods or services by contract or agreement. |
| interest | The fee paid for using other people's money — also called finance charge. |
| Internal Revenue Service | (IRS) A federal agency that is in charge of collecting taxes and enforcing tax laws. |
| labor market | The availability of labor and employment, as in the supply and demand for labor. |
| marginal tax rate | The tax rate that corresponds to an individual's or couple's income bracket. |
| net income | Total earnings minus all expenses, taxes, and interest. |
| payroll deduction | A mandatory or voluntary deduction that is subtracted from an employee's gross income. |
| progressive tax | A type of taxation in which the rate people pay is based on their income. The higher someone's income, the higher that person's tax rate. |
| property tax | A tax applied by the government to people who own property — usually real estate. This tax is applied annually. |
| regressive tax | A type of taxation that requires all people to pay the same amount, regardless of income. |
| salary | An agreed upon annual payment for a job, paid at set intervals. |
| sales tax | A tax applied by the government on the sale of goods and services. This tax is usually paid at the time of purchase. |
| tax credit | A credit that applies to the amount of tax owed. |
| tax refund | A reimbursement to a taxpayer of excess taxes paid to a tax entity. |
| taxable income | The income on which a taxpayer has to pay tax after deductions have been subtracted. |
| W-2 form | An employer-issued form listing an employee's total earnings and tax deductions in order for the employee to file a tax return. |
| W-4 form | A form an employee fills out to help an employer determine how much tax to withhold for that employee. |
| wage | The money you are paid that is based on the number of hours you work multiplied by the rate earned per hour. |
| withholdings | Deduction from income. |
| automated teller machine | (ATM) An electronic banking outlet that lets you complete basic transactions — like deposits or withdrawals — by inserting a plastic card the bank provides. |
| balance | The total amount of money in an account. |
| biometric authentication | A security process that captures a person's biological characteristics for identity verification. |
| blockchain | A database that stores data in blocks for use as cryptocurrency. |
| certificate of deposit | (CD) A certificate issued by a bank to a person who has deposited money for a specific amount of time. |
| checking account | A type of bank account that allows the account holder to write and use checks to make payments out of the account. |
| contractual institutions | Financial institutions where customers make deposits that have a guaranteed financial payout at some time in the future. |
| credit | An agreement between a lender and a borrower, in which the borrower repays the money over time with interest. |
| credit card | A card issued by a bank or credit union that allows users to purchase goods or services on credit. |
| cryptocurrency | Digital currency that can be used in some kinds of financial transactions. |
| debit card | A card issued by a bank that is connected to a person's checking or savings account. This card can be used to transfer or withdraw money and to make purchases. |
| debt | Any money owed. |
| depository institutions | Banks, credit unions, and other financial institutions where customers deposit their money. |
| digital asset | Something of value, stored digitally. |
| digital payment | Payment method in which both parties use digital modes to send and receive money. |
| economy | The way a society manages the distribution of goods and services that people buy and sell. |
| Federal Deposit Insurance Corporation | (FDIC) A federal agency that insures deposits in banks for accounts up to $250,000. |
| financial institution | An organization that works to carry out financial transactions, like investments, loans, and deposits. |
| interest rate | The amount of interest, or additional money, that borrowers pay for the money that they borrow. It is usually expressed as a percentage of the original loan. |
| investment institutions | Investment banks, underwriters, and brokerage firms, where customers make investments rather than guaranteed deposits. |
| loan | Money that is given to one party by another and must be repaid in the future along with interest and other charges. |
| medium of exchange | A good or object generally accepted in exchange for the sale, purchase, or trade of goods between groups of people. |
| money market account | A type of bank account that pays a higher interest rate than regular savings and checking accounts. |
| overdraft | A deficit in a bank account that is caused by withdrawing more money from the account than it holds. |
| overdraft protection | The ability to pay out more money from an account than is actually in the account. This amount must be repaid by the account holder, and usually results in a fee. |
| QR code | A type of bar code that is machine-readable. QR stands for "quick response code." |
| savings account | A bank account that earns interest. |
| diversify | To mix the types of one's investments in order to provide the highest possible return for the lowest risk. |
| ong-term goal | An objective or task that you wish to accomplish in the future. A long-term goal can be broken down into smaller goals and generally takes several years or months to achieve. |
| short-term goal | A task or objective that can be accomplished in a short period of time. |
| personal financial planning | Planning that involves setting long-term and short-term financial goals. |
| opportunity cost | The benefits that are lost when one option is chosen over another. |
| emergency funds | Funds available for use in emergency situations. |
| interest-bearing account | An account that pays you interest for the money you have deposited. |
| stock | A share of ownership in a company. Shares can be purchased by investors and rise or fall in value in relation to the company's performance and the economy. |
| bond | A fixed loan given by an investor to a borrower that is repaid by the borrower at a set time. Bonds are typically issued by corporations or governments. |
| U.S. Treasury bond | A government-issued bond offered to citizens to help fund federal spending. It provides investors with a small guaranteed return on their investment. |
| down payment | An amount paid by a buyer to a lender that reduces the remaining amount to be repaid. |
| equity | The value of ownership in something. |
| net worth | The value of wealth a person or business owns minus the amount owed. |
| inflation | An increase in prices combined with a fall in the value of money. |
| principal | The original amount that is borrowed or invested. |
| simple interest | Interest calculated on the principal amount of a loan or account. |
| compound interest | Interest calculated on the sum of a principal and accrued interest. |
| rate of return | A way of determining the potential profit on an investment. |
| nominal interest rate | Interest rate that has not been adjusted for inflation, usually the amount advertised for a loan. |
| annual percentage yield | (APY) The rate of return on an investment for one year. |
| inflation rates | inflation rate The rate at which prices are rising over a period of time. |
| real interest rate | Interest rate that is adjusted for inflation and reflects the rate of growth of purchasing power |
| capital formation | The process of investing money in order to grow wealth over time. |
| risk | The possibility of loss. |
| mutual fund | A professionally managed investment that pools the money of multiple investors to purchase a collection of stocks and bonds. |
| investment | The act of putting money to use to gain profitable returns. |
| liquid asset Something owned that that can be converted to cash quickly at no loss. | Something owned that that can be converted to cash quickly at no loss. |
| individual retirement account | (IRA) An investment tool with certain tax advantages that encourage long-term savings and investment, usually for retirement. |
| hedge fund | A limited partnership of investors that uses high-risk methods — like investing borrowed money — to achieve a large gain. |
| asset allocation | A strategy of balancing risk and return when making investments by determining which assets to invest in and how much money to invest in each type. |
| portfolio | A collection of assets that fit your goals, tolerance for risk, and future needs. |
| liquidity | Refers to how easily an asset can be converted into cash. |
Created by:
Aphla Blood-Witch