Personal Financial Personal Financial LiteracyLiteracy

Mrs. VanWartMrs. VanWart

1. CD = certificate of deposit

• lock in a guaranteed interest rate for specific period of time

• usually slightly higher than savings account

• incur penalty for early withdrawal

2. credit cards:

• charge a purchase• bill comes once a month• can pay minimum balance or more• interest charged on unpaid balance• merchant typically pays 3% of

transaction

3. IRA = individual retirement account

• must have earned income• can contribute up to $5500 per year

(+$1K “catch-up” if over age 50)• may be income limitations• can use either:

-pre-tax money (traditional IRA) or-after-tax money (Roth IRA)

4. stock:

• publicly-owned company sells shares for capital

• shareholder owns part of the company• prices can be volatile

5. mutual fund:

• group of stocks (by sector, type, etc)• actively or passively managed• allows investor to buy more types of

stock for less money

6. bond:

• similar to an IOU• bondholder gets interest from issuer

• types of bonds:-corporate-treasury-savings (EE or I)-municipal

7. mortgage:

• loan on a home or other real estate• secured by that property

• “under water” mortgage:-more is owed on the mortgage than the property is worth

8. formula to calculate simple interest:

I = prt

(interest = principal x rate x time)

9. FICO score:

• credit score that lenders use to determine interest rate of loan approval

• ranges from 350-850

• Fair Isaac Corporation

• request one free credit report each year:www.annualcreditreport.com

10. FAFSA = Free Application for Federal Student Aid:

• parents usually complete the form

• colleges use it to determine financial aid and expected family contribution (“EFC”)

11. 529 plan:

• tuition savings plan

• earnings are tax-exempt if used for qualified expenses

• different states have different rules

12. 401(k) plan:

• company sponsored retirement savings plan

• often company will match contributions

• current limit = $17,500 per year(+ $5500 if over age 50)

• withdrawal at age 59 ½ or later-or incur a penalty

13. Income tax filing deadline:

• April 15 (usually)

14. New Jersey unemployment rate:

• 9.8% (July 2012)• 7.8% (Dec 2013)

• U.S.: 6.7%

• Rate dropped “for wrong reasons”

15. New Jersey sales tax:

• 7%

• 3.5% in urban enterprise zones