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Savings & Investing
Savings & Investing Vocabulary
| Question | Answer |
|---|---|
| Savings | The excess of income over consumption expenditures |
| Investment | The outlay of money usually for income or profit. |
| Return on Investment | A profitability metric that shows how much profit or loss an investment generates relative to its cost. |
| Compound Interest | The interest calculated on the initial principal plus any accumulated interest from previous periods. |
| Stock | The ownership element in a corporation usually divided into shares and represented by transferable certificates. |
| Bond | A bond is a debt instrument where an investor loans money to an entity (like a corporation or government) that is repaid with interest over a set period. |
| Diversification | The act or practice of spreading investments among a variety of securities or classes of securities. |
| Retirement Account | A savings plan for setting aside money to be spent after retirement. |
| Stock Market | A stock exchange. |
| Dividend | A distribution of a portion of a company's earnings, as decided by its board of directors, to a class of its shareholders. |
| Mutual Fund | An investment vehicle that pools money from many investors to buy a diversified portfolio of stocks, bonds, or other securities. |
| Common Stock | A unit of ownership in a corporation and gives shareholders a claim on the company's assets and earnings. |
| Preferred Stock | An equity security that represents a hybrid investment, offering features of both stocks and bonds. |
| Corporate Bond | A debt security issued by a company to raise capital, which functions like a loan from investors to the corporation. |
| Government Bond | A debt security issued by a government to borrow money from investors. |
| Beneficiary | A person, entity, or trust legally designated to receive assets, benefits, or proceeds from an account, policy, or will upon the owner's death. |
| Executor | An individual or institution nominated in a will and appointed by a court to manage a deceased person's estate after their death. |
| Trust | A legally binding arrangement where one party (the grantor or settlor) gives assets to a second party (the trustee) to hold and manage for the benefit of a third party (the beneficiary). |
| Estate | An estate is the total value of a person's assets and liabilities at a specific point in time, most commonly upon their death. |
| Will | A legal document that outlines how a person's assets should be distributed after their death, including naming an executor to manage the estate and a guardian for minor children. |
| Power of Attorney | A legal document that designates an agent to act on another person's behalf in financial matters. |
| Investment Liquidity | How easily and quickly an asset can be converted into cash without significantly affecting its price. |
| Probate | The legal and financial process of validating a will and administering an estate after a person's death. |
| Personal Financial Planning | The comprehensive and ongoing process of managing an individual's or family's monetary affairs—including income, expenses, savings, and investments—to achieve specific life goals and long-term financial security. |
| Estate Planning | The financial and legal process of arranging for your assets to be managed and distributed after your death or incapacitation. |
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