Appendix A
Glossary
 
allowance philosophy Schools of thought concerning allowance, such as whether it should be given and on what merit it should be given.
 
American Stock Exchange One of the major exchanges of the U.S. stock market.
 
annual fee A fee you pay each year for the privilege of having the use of a credit card or other membership.
 
assets Everything on the positive side of your balance sheet such as savings, property, stocks, cars, IRAs, and so forth.
 
automated teller machine A machine introduced in about 1980 at which individuals can conduct banking transactions such as transferring funds or accessing cash from their accounts.
 
balanced funds Mutual funds that hold about equal parts stocks and bonds and present a lower risk than some other types of mutual funds.
 
bankrupt The condition of having been legally declared insolvent, or having no money to meet liabilities.
 
bankruptcy The legal act or process of applying for relief from debts under the bankruptcy law.
 
bartering is simply the exchange of goods or services between two people or groups of people. Historians agree that bartering is the oldest form of exchange and probably was used practically from the beginning of humankind.
 
bond A debt instrument. The issuer promises to pay the investor a specified amount of interest for a period of time and to repay the principal at maturity.
 
bond fund A mutual fund that invests heavily in bonds.
 
broker A person who earns a commission or fee for acting as an agent in making contracts or sales.
 
budget A schedule of income and expenses commonly broken into monthly intervals and typically covering a one-year period.
 
business plan A detailed description of your business and your plans for running it. A business plan is intended to serve as a guide, and also serves as a marketing tool.
 
certificate of deposit (CD) A receipt for a deposit of funds in a financial institution that permits the holder to receive interest, plus the deposit, after a specified amount of time.
 
commercial bank A financial institution, chartered by either the federal or state government, that takes deposits, loans money, and provides other services to individuals or corporations.
 
compound interest Interest paid on interest from previous periods in addition to principal. Basically, compounding interest involves adding interest to principal and any previous interest to calculate interest in the next period. Compound interest can be figured daily, monthly, quarterly, semi-annually, or annually.
 
corporate bond A bond issued by a corporation as opposed to one issued by the government.
 
cowrie shell The shell of a snail-like creature that was used as a common form of currency, starting in about 1200 B.C. in China.
 
credit agency An agency that processes and stores information concerning the credit histories of individuals. The information is used to assess a person’s credit worthiness. The three big credit agencies in the United States are Equifax Credit Services, Trans Union Credit Information Services, and Experian.
 
credit card A plastic card used to purchase goods or services with the agreement that, although no money is exchanged at the time, you’ll be billed, and will pay for, your purchase.
 
credit history A record of an individual’s past events that pertain to credit previously given or applied for.
 
credit union A nonprofit, cooperative financial institution providing credit to its members who share a common bond such as a place of employment. Credit unions often pay slightly higher rates of interest on savings accounts and charge lower rates on consumer loans.
 
currency A medium of trade or exchange.
 
day trading The practice of closely following the stock market and buying and selling stock often with the intent of realizing high profits.
 
debit card A plastic card used for purchasing goods and services or obtaining cash advances in which payment is made from existing funds in a bank account.
 
discretionary expenses An expense that’s not necessary such as vacations, memberships, and entertainment.
 
Dow Jones Industrial Average (DJIA) One of the measures of the stock market that includes averages for utilities, industrial, and transportation stocks, as well as the composite averages.
 
educational IRA An individual retirement account set up especially to fund education expenses.
 
emerging market funds Mutual funds that invest in companies located in countries where the markets aren’t yet developed, but are thought by analysts to be about to do so.
 
entrepreneur A person who organizes and directs a business undertaking, assuming the risk for the sake of the profit.
 
expenses Any and all charges for goods and services that you use, whether necessary or unnecessary.
 
Fair Labor Standards Act (FLSA) There are certain jobs that are prohibited under the FLSA for all youth under the age of 18.
 
Federal Deposit Insurance Corporation (FDIC) An independent deposit insurance corporation established by Congress as part of the Banking Act of 1933. Banks pay the FDIC to insure individual deposits within them, thereby protecting their customers from possible loss.
 
financing When you agree to pay for something you buy over a certain amount of time, usually with the understanding that you’ll pay interest on the amount of money you owe.
 
fixed expenses Expenses that don’t vary much in amount from month to month such as rent, car payments, or membership dues.
 
401(k) plan An employer-sponsored retirement plan that lets you contribute a portion of your current salary into a tax-deferred fund. You get back the money, plus the interest you earn on it, when you retire, at which time taxes are due.
 
front-end installment loan A loan that requires you to pay interest on the entire loan, even after you’ve paid some of it back.
 
global fund A mutual fund that includes at least 25 percent foreign securities. The value of the fund depends on the health of foreign economies and exchange rate movements.
 
gold standard A monetary standard that links a nation’s money supply to its stock of monetary gold. Under the gold standard, all currency used within a country had to be backed by gold that the country possessed. It was adopted in the U.S. in 1900 and was discontinued in the 1930s.
 
government bond A bond issued by the government, as opposed to one issued by a corporation.
 
grant Money or other aid given for a specific use, usually as a gift, without the requirement of payback.
 
high-yield bond A high-risk, high-yield debt security issued by corporations or municipalities that are considered to be of low quality.
 
hybrid funds Mutual funds that are spread fairly evenly around stocks and bonds.
 
individual retirement account (IRA) A retirement savings plan in which you can contribute up to $2,000 per year. Funds can grow tax-deferred until they are withdrawn at retirement. Contributions may or may not be tax-deductible, depending on how much money you make and if you’re participating in any other retirement savings plans.
 
interest The cost for the use of borrowed money. You receive interest when you allow a bank or other form of investment to use your money. You pay interest when you borrow money from a bank or other source.
 
interest-bearing account An account that pays you interest for having your money invested there.
 
international fund A mutual fund that invests only outside the country in which the fund is located.
 
Internet bank A type of bank that is operated electronically, with all transactions conducted by computer.
 
investment The process of purchasing securities or property for which stability of value and level of expected returns are somewhat predictable.
 
investment club A group of people who form a club for the purpose of investing money in mutually agreed-upon securities.
 
investment personalities Categories assigned to investors based on their attitudes and philosophies concerning factors such as risk tolerance, perspective on change and the future, and control issues.
 
leasing When you agree to pay a specified amount of money for a specified period of time in exchange for the use of a product such as a car.
 
liability Anything that falls on the negative side of your net worth, such as a mortgage or debt.
 
load fund A mutual fund with shares sold at a price that includes a sales charge.
 
minimum wage The least amount a worker can be paid by a company or firm. Minimum wage is established by the federal government but can vary from state to state, depending on state law.
 
modern barter A method of barter that connects people or groups of people electronically and allows them to trade a variety of goods and services. The practice also is gaining in popularity among companies, which trade commodities ranging from advertising to hotel rooms.
 
money market account Accounts held with banks and insured by the FDIC.
 
money market fund A mutual fund with a non-fluctuating $1 investment value per share. Held within mutual fund companies, they are not insured but generally are considered to be safe investments.
 
municipal bond A bond issued by a city, county, state, or other political entity.
 
mutual fund An open-ended investment company that invests its shareholders’ money in a diversified group of securities. Mutual funds usually are diverse and professionally managed.
 
National Association of Securities Dealers Automated Quotation System (NASDAQ) One of the major exchanges of the U.S. stock market.
 
net worth The amount of wealth you own, calculated by taking the total value of assets owned and subtracting all liabilities.
 
New York Stock Exchange One of the major exchanges of the U.S. stock market.
 
no-load fund A mutual fund sold without a sales charge. No-load funds sell directly to customers at net asset value with no intermediate salesperson charging a fee.
 
non-discretionary expenses Necessary expenses such as housing, food, utilities, and taxes.
 
non-routine expenses Expenses that don’t occur regularly, such as repair bills, medical bills, or wedding gifts.
 
personal identification number (PIN) A number assigned to an individual to be used with a debit card or automated teller machine. The number allows the individual to access his or her accounts.
 
portfolio manager A person who is paid a fee to supervise the investments of others. A person who manages a mutual fund is called a portfolio manager, or fund manager.
 
principal The capital sum, as distinguished from interest or profit.
 
public transportation Transportation other than one’s own vehicle including buses, trains, and subways. Public transportation is the most efficient way to transport the greatest number of people in a largely populated area.
 
Roth IRA An individual retirement account in which the funds placed into the account are non-tax-deductible. If held for more than five years, all funds withdrawn are received tax-free. The Roth IRA was first introduced in 1998.
 
routine expenses Expenses that remain relatively the same, week after week or month after month, such as rent, insurance, food, and entertainment.
 
salary scale The system by which an employer pays employees. A salary scale includes an explanation of how raises are given, how salaries are established, and so forth.
 
savings bond See treasury bond.
 
scholarship A specific gift of money or other aid to help a student continue in his or her studies.
 
sector funds Mutual funds that invest in only one kind of investment such as technology or health care.
 
securities Investments that represent evidence of debt, ownership of a business, or the legal right to sell an ownership interest in a business. For general purposes, securities are stocks and bonds.
 
SEP-IRA A type of individual retirement account designed for people who are self-employed.
 
simple interest Interest paid on an initial investment only. Simple interest is calculated by multiplying the principal times the annual rate of interest times the number of years involved.
 
simple interest loan A loan that lets you pay interest only on the money you still owe on your loan, not on the original amount of the loan.
 
Small Business Association (SBA) One of the U.S. government agencies that assists entrepreneurs by offering information, funding, and other resources.
 
spending categories General areas within which you spend money such as entertainment, clothing, housing, education, or transportation.
 
social responsibility A sense of understanding your place in the world, and your responsibility to contribute to the greater good of society.
 
stock Shares of ownership in a company.
 
stock fund A mutual fund that invests heavily in stock.
 
stock market The organized securities exchanges for stock and bond transactions. Major exchanges are the New York Stock Exchange, the American Stock Exchange, and the National Association of Securities Dealers Automated Quotation System (NASDAQ).
 
tax-deductible An expense that can be used to offset gross income when calculating your taxable gross income.
 
tax-deferred Income that is earned, but is not received or taxed until a later date.
 
thrift A financial institution that derives its funds primarily from consumer savings accounts set up to provide personal mortgages. “Thrift” usually refers to savings and loan associations, but other financial institutions also can be thrifts.
 
treasury bond A longer-term bond of the U.S. Treasury, available through a bank or brokerage firm, or directly from the Federal Reserve. Commonly called a savings bond.
 
trust A legal document that holds money, property, or other assets for the beneficiary to receive at a designated time in the future.
 
variable expenses Expenses that change from month to month such as vacations, food, or entertainment.
 
wampum Strings of beads made from clam shells that North American Indians, and later colonists, used as money.
 
will A legal document that instructs how a person’s assets are to be divided at the time of his or her death. It also might contain special instructions about how the assets are to be treated, or information concerning disposal of the person’s body, funeral services, and so forth.
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