Money received for work performed; may include

salary, wages, tips, professional fees, commissions, etc.

Earned income

A purposeful course of action or purpose in life that generally provides

income

Career

The health, education, experience, training, skills and values of people. Also

known as human resources

Human capital investment

Payments earned by households for selling or renting their productive resources. May include

salaries, wages, interest, and dividends

Income

A piece of work usually done on order at an

agreed-upon rate. Also a paid position of regular

employment.

Job

Legal allowances that reduce the amount of

income taxes subtracted from your gross income

Exemptions

Anything subtracted from your gross income

Deductions

Wages or salary before deductions for taxes and

other purposes

Gross income

Commonly called “take home pay”; it is your

income after all deductions and

exemptions

Net income

A federal government program that provides retirement, survivor’s and disability

benefits, funded by a tax on income, which appears on

workers’ pay stubs as a deduction labeled FICA (Federal Insurance Contributions Act, the

enabling legislation)

Social security

The belief that people should be taxed according

to their ability to pay, regardless of the benefits

they receive. The U.S. individual income tax is based on this principle.

Ability to pay

The belief that people should be taxed according

to the benefits they receive from the good or service the tax supports.

The gasoline tax is an example.

Benefits-received principle

One who enjoys the benefits of a good or

service without paying for it

Free rider

The quality and quantity of goods and services

available to people, and the way these goods and services are distributed

within a country.

Standard of living

A system that relies on individual citizens to report

their income freely and voluntarily, calculate their tax

liability correctly, and file a tax return on time, according

to the rules established by the Internal Revenue Service

Voluntary compliance

An electronic machine that bank customers and credit union members can use to withdraw cash and make

other financial transactions

ATM (automatic teller machine)

The deposit of wages or other income directly into

a customer’s bank account

Automatic deposit and payment

A state or federally chartered, for-profit business owned by

stockholders that provides savings accounts, checking

accounts and other financial services to its

customers

Bank

An institution that cashes checks immediately for a

fee

Check cashing services

A bank or credit union account that allows

withdrawals by writing a check

Checking account

A plastic card authorizing the delivery of goods and services in exchange for

future payment with interest

Credit card

A state or federally chartered, not-for-profit

financial cooperative that provides financial services to its member-owners who

have met specific requirements

Credit union

A plastic card used to deduct a purchase amount

directly from your checking account; also

called a check card

Debit card

The different kinds of services provided by

financial institutions such as banks, credit unions,

insurance companies, and other similar businesses

Financial services

Any business providing financial services

Financial institution

A company that guarantees compensation for specific forms of loss, damage, injury, or death

Insurance company

A business that participates in buying and selling stocks, corporate bonds and government

bonds

Investment bank

The process of moving money from one account

to another account

Money transfer

A company that makes loans for the purchase of a house or other real estate

Mortgage company

The process allowing customers to make

financial transactions on a secure web site operated

by their financial institution; also called

Internet banking

Online banking

A description of what happens when a

withdrawal (checks, ATM, etc.) is greater than the amount of money in a

checking account

Overdraft

A checking account feature that provides an

automatic loan from their financial institution to

cover overdrafts

Overdraft protection

A protected location in a secure bank vault where

individuals can store valuables for a small fee

Safety deposit box

An interest-bearing account at a financial

institution

Savings account

Individuals and companies who buy and sell stocks

for investors

Stock brokerage

A written order direction a bank or credit union to

pay a person or business a specific sum of money

Check

The process of comparing personal bank account records to the bank’s

records of that account balance in order to

uncover any possible discrepancies

Reconcile

The first set of numbers on the check that are read

by high speed check-processing machines to move your check from

place to place

Check routing numbers

A record of all of the transactions on your

account during the past month

Bank statement

Purchasing securities such as stocks, bonds, and mutual

funds with the goal of increasing wealth over time,

but with the risk of loss. Setting aside money for future income, benefit, or profit to meet long-term goals, using savings to

earn a financial return

Investing

The quality of an asset that permits it to be

converted quickly into cash without loss of value. For example, a checking account is more liquid

than real estate

Liquidity

The value of the second-best alternative that a person gives up when

making one choice instead of another

Opportunity cost

A measure of the likelihood of loss or profit

on an investment’s rate of return

Risk

The process of setting income aside for future

spending. Saving provides ready cash for

emergencies and short-term goals, and funds for

investing

Saving

Money set aside for a future use that is held in

easily accessed accounts, such as savings accounts and certificates of deposit

(CDs)

Savings

Interest earned not only on the principal but also on the interest already

earned

Compound interest

The original amount of money deposited or

invested

principal

The length of time, in years, it takes an amount of money saved to double

when it receives compound interest

Rule of 72

Interest calculated periodically on the loan principal or investment principal only, not on

previously earned interest

Simple interest

A certificate issued by a bank to a person depositing money in an account for a

specified period of time (often six months, one year, or two years); a penalty is

charged for early withdrawal

Certificates of deposit

A certificate representing the purchaser’s

agreement to lend money to a business on the

promise that the debit will be paid, with interest, at a

specific time

Corporate bonds

A fund restricted by law to investing in the short-term money market; provides low risk and low returns, but they maintain their

investment value

Money market mutual funds

An investment tool that pools the money of many

shareholders and invests it in a diversified portfolio of securities, such as stocks, bonds, and money market

assets

Mutual funds

How fast money in savings account or investment

grows

Rate of return

A measure of the likelihood of loss or profit

the uncertainty of an investment’s rate of return

Risk

A document representing a loan of more than one

year to the U.S. government, to be repaid,

with interest on a specified date

Savings bonds

Investing in a variety of stocks, bonds, money

market accounts, etc., in order to spread the risk

Diversification

A group of investments involving ownership of

assets

Equities

A rise in the general or average price level of all the goods and services

produced in an economy

Inflation

A measure of the likelihood of loss or profit

the uncertainty of an investment’s rate of return

Risk tolerance

A contract between an individual and an insurance

company where the individual makes a series of payments

that are invested by the company and repaid to the individual at a later date,

generally during retirement

Annuity

A retirement plan that allows employees in private

companies to make contributions of pre-tax

dollars to a company pool that is then invested in

stocks, bonds, or money markets

401(k)

An account in which an individual may set aside earned income in a tax-deferred savings plan for

his/her retirement

IRA

A federal system of old-age, survivors’, disability, and hospital care (Medicare) insurance which requires employers to withhold (or

transfer) wages from employee’s paychecks and

deposit that money in designated accounts

Social security

An agreement to provide goods, services, or money

in exchange for future payments with interest by a specific date or according to a specific schedule; the use of someone else’s money

for a fee

Credit

Something of value (often a house or a car) pledged by a borrower as security

for a loan

Collateral

Payment for the use of someone else’s money; usually expressed as an annual rate in terms of a percent of the principal

Interest

A type of contract between the borrower and the lender explaining the requirements of fulfilling

the loan

Loan agreement

Credit with collateral (i.e., a house or a car) for the

lender

Secured credit

An establishment that collects and distributes

credit history information of individuals and

businesses

Credit bureau

A record of borrowing and repayments

Credit history

A measure of creditworthiness based on an analysis of the

consumer’s financial history, often computed as a

numerical score, using the FICO or other scoring system

to analyze the consumer’s credit

Credit score/rating

A consumer line of credit that can be used up to a certain limit or paid down

at any time; example – credit cards

Revolving credit

A federal agency that enforces consumer

protection

Federal Trade Commission

Using a person’s name or personal information without the person’s

permission to steal money or get other benefit

Identity theft

A person who owns property and rents it to

another

Landlord

A written contract specifying the terms for the use of an asset and

the legal responsibilities of both parties to the agreement, such as

property owner and tenant

Lease

A person who pays rent; the legal name for a renter

Tenant

Costs paid when buying a house or real estate

Closing costs

The difference between how much a house is

worth and how much is owed on it

Equity

A written request submitted to your

insurance carrier to cover a loss

Claim

The dollar amount or percentage of a loss that

is not insured, as specified in an insurance policy

Deductible

The fee paid for insurance protection

Premium

The percentage of the costs of medical services

paid by the patient

Coinsurance

An amount of money that the member or insured

pays directly to a provider at the time services are

rendered

Copayment

Taking risks with personal finances or personal

assets

Gambling

Telling or forecasting about something in

advance of its occurrence by means of special

knowledge or inference

Predictability

The chance or likelihood that something will

happen

Probability

A person or company with insufficient assets to cover

their debt

Bankrupt

A state of being legally released from the obligation to repay some or all debt in exchange for the forced loss of certain assets. A court’s

determination of this remains in a consumer’s credit record for 10 years

Bankruptcy

A person or company to whom money is owed

Creditor

A single loan that replaces the debt owed by multiple loans, often with a lower monthly payment and a longer repayment period

Debt consolidation loan

A loan secured by a primary residence or second home at the

amount where the fair market value exceeds the over the debt owed on the

property

Home equity loan

To totally release you from all debt included in your

bankruptcy petition

Chapter 7

Debt adjustment; allows you to file a repayment

plan for your bills

Chapter 13

The act of giving to charitable organization or

to those in need

Charitable giving

A tool used to choose among alternatives

involves weighing the costs of a product or

service against the benefit is will provide

Cost/benefit analysis, risk/reward relationship

A non-cash contribution to a charitable organization

which can be given a cash value

Gifts in-kind

An expense that a taxpayer can subtract from taxable income;

examples home mortgage interest and charitable

giving

Tax deduction