Glossary of Personal Finance Terms
401(k) – A plan offered by corporations to its employees to set aside tax deferred money for retirement.
403(b) – A plan offered by non–profits and universities to its employees to set aside tax deferred money for retirement.
457 Plans – A plan slightly different from 401(k) in that it is offered to state and governmental employees, but there are never employer matches made.
Adjustable Rate – A loan in which the interest rate can change during the term of the loan. (opposite of fixed rate and also called variable rate.)
Annual Percentage Rate – The yearly cost of the amount financed, including interest and any fees, expressed as a percentage rate (also called APR.)
Annuities – An insurance industry investment product. These contracts between an individual and an insurance contract are set–up so that you deposit a sum of money with the insurance company and they in turn make monthly payments to you.
Application – The process of a borrower asking for the extension of credit from a creditor.
APR – The yearly cost of a credit, including interest, mortgage insurance, and the origination fee (points), expressed as a percentage (also called Annual Percentage Rate.)
Assets – Any item of economic value owned by an individual.
Auto Insurance – An insurance policy to insure the value of your automobile. Many states require a minimum insurance coverage to register your vehicle.
Ad Hoc – For the specific purpose, case, or situation at hand and for no other
Bank – publicly traded corporation, banks are chartered by the state or federal government and offer checking/savings accounts as well as make loans.
Bankruptcy – (1)The condition of being financially insolvent (2)The administration of an insolvent debtor’s property by the court for the benefit of the debtor’s creditors
Chapter 7 – A liquidation proceeding, available to individuals, married couples, partnerships and corporations.
Chapter 13 – A repayment plan for individuals with debts falling below statutory levels which provides for repayment of some or all of the debts out of future income over 3 to 5 years.
Bonds – A certificate of debt issued by either a corporation or a government.
Borrower – A individual who signs a promissory note and assumes liability to repay under the terms of that note. (also called a debtor)
Buy-Here, Pay-Here – auto dealer financing for high risk applicants
Certificate of Deposit (CD) – A deposit account that pays higher interest rate than a savings account.
Charged Off – When a loan becomes uncollectible and is written off, 120 days delinquent for closed–end and 180 days delinquent for open–end loans.
Collateral – Assets pledged by a borrower to secure a loan or other credit, and subject to seizure in the event of default. (also called security.)
Commercial Credit – A bank loan to a business.
Consumer Credit – A loan from a bank, credit union or finance company to a person.
Cosigner – An individual other than the borrower who signs a promissory note and thereby assumes equal liability for it.
Credit – A contractual agreement in which a borrower receives something of value now and agrees to repay the lender at some later date.
Credit Bureau – Agency which collects and sells information about the creditworthiness of individuals. (also called credit reporting agency)
Credit Counseling Agency – An agency that offers education, counseling and budget analysis to consumers
Credit Repair Organizations Act – A federal law which regulates credit repair businesses.
Credit Report – A report which will contains information about a person’s credit history.
Credit Reporting Agency – Agency which collects and sells information about the creditworthiness of individuals. (also called credit bureau)
Credit Score – A measure of credit risk calculated from a credit report using a standardized formula.
Credit Scoring – A statistical technique used to determine whether to extend credit to a borrower.
Credit Union – Non–profit financial institutions that offer their members check/savings accounts as well as loans.
Creditor – A person or organization which extends credit to others. (also called lender)
Debt – A liability or obligation in the form of a loan, owed by one person to another person and required to be paid by a specified date.
Debt Consolidation – A loan, usually secured with the equity in a home, used to pay off other, higher interest debts resulting in one monthly payment.
Debt Management Program (DMP) – A program where an agency works with a debtor and the debtor’s creditors to come up with a repayment plan. The agency receives payment from the debtor and then distributes the money to the creditors. Creditors will occasionally make concessions, such as a reduced interest rate, waiving of fees or re–aging accounts.
Debt Negotiation – An agency negotiates with creditors on a debtor’s behalf to reduce the amount of money owed. The agency usually retains a monthly fee, percentage of the money saved or both. The money saved in such a program can be considered taxable income by the IRS. (also called Debt Settlement)
Debt Settlement – An agency negotiates with creditors on a debtor’s behalf to reduce the amount of money owed. The agency usually retains a monthly fee, percentage of the money saved or both. The money saved in such a program can be considered taxable income by the IRS. (also called Debt Negotiation)
Debtor – An individual who signs a promissory note and assumes liability to repay under the terms of that note. (also called a borrower)
Delinquent – Failure to make a contractual payment on time.
Disability Insurance – An insurance that will supplement your income should you become unable to work.
Equal Credit Opportunity Act – A federal law prohibiting lenders from discriminating on the basis of the borrower’s race, color, national origin, religion, age, sex, marital status, or public assistance program participation.
Fair and Accurate Credit Transactions Act – A federal law which in part will reduce identity theft and assist victims in recovering from fraud.
Fair Credit Reporting Act – A federal law designed to promote accuracy and ensure the privacy of the information used in a credit report.
Federal Trade Commission – Also known as the FTC, this government agencies has oversight for the FCRA, ECOA, FACT Act as well as other credit related regulations.
FICO – Fair Isaac Corporation; the inventor of credit scoring models.
Finance Company – A company which makes loans to individuals.
Fixed Rate – A loan in which the interest rate does not change during the entire term of the loan. (opposite of adjustable rate.)
Government Bond – A bond issued by the US Treasury.
Health Insurance – An insurance policy to cover against health claims. There are various types such as HMO, PPO & HSA.
Health Savings Accounts (HSA) – A savings account with tax benefits that can be used for paying medical expenses.
Homeowners Insurance – An insurance to cover the value of real estate. Most mortgage companies require that you insure the value of the home to cover against loss while there is a mortgage in place.
Installment Loans – A loan that is repaid with a fixed number of periodic equal–sized payments.
Interest Rate – The fee charged by a lender to borrower money, expressed as an annual percentage of the principal.
Individual Retirement Accounts (IRA) – An account that allows you to personally save for retirement.
Junk Bond – A bond that carries a higher than average risk of default and has been given a poor rating by a bond rating company.
Keogh – Retirement accounts for self-employed individuals.
Lender – A person or organization which extends credit to others. (also called creditor)
Liabilities – The monetary obligations that you owe to others.
Life Insurance – An insurance policy to cover against loss of life. There are various types of polices such as term and permanent insurance.
Money Market Account – A type of savings account that pays higher interest rates but requires a minimum balance and restricts the number of withdrawals.
Mortgage – security agreement where house is pledged for a loan.
Mutual Funds – A fund where people pool together there monies to invest together. Typically professionally managed and management fees are charged.
NASDAQ – Largest OTC exchange.
Net Worth – The resulting value between your assets and liabilities.
NYSE – New York Stock Exchange is the largest equity exchange in the world.
Over the Counter (OTC) – The NASDAQ stock exchange is an example of an OTC exchange. Most stocks in the US are traded on the OTC.
Pawnshop – Lends money and holds some of the borrower’s personal goods as collateral
Payday Loan – Short term loans with high interest rates.
Pension Plan – A retirement plan set by a employer for its employees.
Personal Liability Umbrella Insurance – An insurance policy to cover in excess of homeowner or auto insurance policies. Typically used to raise coverage to higher limits.
Promissory Note – A document signed by a borrower promising to repay a loan under agreed–upon terms.
Pro Bono – Done without compensation for the public good.
Qualified Retirement Plan – Employer sponsored, tax–deferred retirement plans which employees can contribute to.
Re-aging – Bringing your account current. Bank guidelines vary on their re–aging process (i.e., some re–age once in a twelve month period; some once in a five–year period).
Real Property – Land, houses, condos. (also called Real Estate.)
Renters Insurance– An insurance policy renters can take out to cover the value of their personal belongings while renting a home or apartment.
Revolving Credit – An agreement by a bank to lend a specific amount to a borrower, and to allow that amount to be borrowed again once it has been repaid.
Roth IRA – An IRA which you deposit after tax dollars.
Savings Account – A deposit account that pays interest and allows for unlimited deposits and withdrawals.
Secured – Backed by a pledge of collateral. (opposite of unsecured.)
Security – Assets pledged by a borrower to secure a loan. (also called collateral.)
Security Agreement – loan document pledging asset for a loan.
Simplified Employee Pension (SEP) – A plan for self–employed individuals (and their employees) yet who have less than 25 employees.
Social Security Tax – A tax withheld from your pay to fund the Social Security Retirement System. If you are self–employed you contribute the full percentage, if you are employed you contribute half and your employer the other half.
Stocks – Instruments that signify ownership in a corporation. There can be different classes such as common stock or preferred.
Truth in Lending – A federal law requiring lenders to fully disclose in writing the terms and conditions of a mortgage, including the annual percentage rate and other charges. (also called Regulation Z.)
U.S. Savings Bonds – Bonds issued by the United States government.
Unsecured – Backed not by collateral but only by the integrity of the borrower.
Variable Rate – A loan in which the interest rate can change during the term of the loan. (opposite of fixed rate and also called adjustable rate.)
Will – A legal document which states your wishes for deposition of your belonging upon your death.
Yield – The rate of return on an investment.
Zero-Coupon Bond – Bonds which pay interest only upon their maturity.
Debt Collection and Credit Bureau Information
Fair Debt Collection Act
A debt collector may not:
Call before 8 am
Call after 9 pm
Call your place of work if they are aware that your employer doesn’t approve
Lie or harass you
Ignore a written request to a stop contact
For more information:
Opt Out List for Pre-Screened Offers
Good for two years.
Credit Bureau Information
P.O. Box 2002
Allen, TX 75013
1 888 EXPERIAN (1 888-397-3742)
P.O. Box 740241
Atlanta, GA 30374
Post Office Box 1000
Chester, PA 19022
Free Annual Credit Report per the FACT Act
P.O. Box 105281
Atlanta, GA 30348-5281
(A service sponsored by the three major credit bureaus)
Disclaimer: The Institute for Financial Literacy provides the links below as additional potential resources for the convenience of its clients and members of the general public. The Institute does not endorse or support any political or religious activities or positions of any listed organization, nor does it endorse or guarantee the quality or availability of any product or service any listed organization may offer.
ABI World: www.abiworld.org
The American Bankruptcy Institute is the largest multi-disciplinary, non-partisan organization dedicated to research and education on matters related to insolvency. In fulfillment of its mission to provide information to its members, journalists, Congress and the public, ABI is engaged in numerous educational and research activities, as well as the production of a number of publications both for the insolvency practitioner and the public.
The American Association of Retired Persons is a nonprofit, nonpartisan membership organization for people age 50 and over dedicated to enhancing quality of life for all as we age. AARP leads positive social change and delivers value to members through information, advocacy and service.
Affordable Schools Online: www.AffordableSchoolsOnline.com/Cheap-Colleges
Affordable Schools Online is a comprehensive and informative resource that allows you to search for colleges and their respective tuition. I believe this type of information is very valuable to today’s students who are not only dealing with a more competitive higher educational environment but also with the rising costs associated with them.
American Bar Association Referral Service: www.findlegalhelp.org
The mission of the American Bar Association is to be the national representative of the legal profession, serving the public and the profession by promoting justice, professional excellence and respect for the law. Although the ABA cannot help you directly, there are many of its members out there who can. This site will guide you to a list of resources in your state. Most legal issues are regulated by the law in the state where you live, or where the problem occurred.
Child Care Aware: www.childcareaware.org
Child Care Aware is committed to helping parents find the best information on locating quality child care and child care resources in their community. Child Care Aware does this by raising visibility for local child care resource and referral agencies nationwide and by connecting parents with the local agencies best equipped to serve their needs. Child Care Aware is a program of the National Association of Child Care Resource & Referral Agencies (NACCRRA).
Choose to Save: www.choosetosave.org
Choose to Save is a national public education and outreach program dedicated to raising awareness about the need to plan and save for long-term personal financial security.
Community Investment Network: www.communityinvestmentnetwork.org
A networking resource for community leaders, advocates and financial services leaders focused on building and maintaining healthy economies and communities through CRA (Community Reinvestment Act) compliance, affordable and accessible housing, job creation, banking services, bank-community relationships, regulatory affairs, legislation and rural affairs. Includes a clearinghouse for news, information, commentary, reports, profiles of key players in communities and links to reliable sources.
Goodwill Industries: www.goodwill.org
Goodwill Industries is a national provider of education, training, and career services for people with disadvantages, such as welfare dependency, homelessness, and lack of education or work experience, as well as those with physical, mental and emotional disabilities.
Onlineschools is a comprehensive database of online schools designed to help students find the school most suitable for them, while also providing accurate data and information on online schooling and education.
How The Market Works: www.HowTheMarketWorks.com
How The Market Works is a free educational site for middle and high school teachers and their students to show them how the stock market works. Teachers register for free, create a virtual stock trading contest for their class, and then students pretend to buy and sell U.S. stocks and mutual funds to see how their portfolio performs over the duration of their contest. The site also features hundreds of educational articles, lesson plans, and a full glossary of stock market related terms. The site is owned by StockTrak.com, the leading provider of education virtual trading websites for high school and college classes.
The National Association of Consumer Bankruptcy Attorneys is a national organization dedicated to serving the needs of consumer bankruptcy attorneys and protecting the rights of consumer debtors in bankruptcy. This site includes an Attorney Finder service that will assist you in locating a bankruptcy attorney who is a member of NACBA.
National Network for Child Care: www.nncc.org
The National Network for Child Care is a resource for child care providers. NCC unites the expertise of many of the nation’s leading universities through the outreach system of Cooperative Extension. Its goal is to share knowledge about children and child care from the vast resources of the landgrant universities with parents, professionals, practitioners, and the general public.
National Stock Market Simulation: www.nationalsms.com
The SMS (Stock Market Simulation) is a comprehensive online trading game for high, middle, and elementary school students.
Paying for Senior Care: www.payingforseniorcare.com
Provides the Eldercare Financial Resource Locator, a free, searchable database of financial resources and programs that help pay for or reduce the cost of home care, assisted living and skilled nursing homes.
Red Cross: www.redcross.org
The American Red Cross is a humanitarian organization guided by its Congressional Charter and the Fundamental Principles of the International Red Cross Movement. It provides relief to victims of disaster and helps people prevent, prepare for, and respond to emergencies.
Salvation Army: www.salvationarmy.org
The Salvation Army, an international movement, is an evangelical part of the universal Christian Church and provides international health services, community development assistance and international emergency services as part of its evangelical mission.
Student Loan Borrower Assistance Project: www.studentloanborrowerassistance.org
National Consumer Law Center’s Student Loan Borrower Assistance Project is a resource for borrowers, their families, and advocates representing student loan borrowers. This site is for people who already have student loans and want to know more about their options and rights.
TaxHelp.org strives to help taxpayers understand taxes better. This site offers consumers over 150 free tax help resources, tax guides for different financial situations, and a comprehensive database of over 200,000 licensed CPAs.
Federal Deposit Insurance Corporation: www.fdic.gov
Federal Housing Finance Board: www.fhfb.gov
Federal Trade Commission: www.ftc.gov
Securities and Exchange Commission: www.sec.gov
Small Business Administration: www.sba.gov
Social Security Administration: www.ssa.gov
District of Columbia: www.dc.gov
New Hampshire: www.state.nh.us
New Jersey: www.state.nj.us
New Mexico: www.state.nm.us
New York: www.state.ny.us
North Carolina: www.ncgov.com
North Dakota: www.nd.gov
Rhode Island: www.ri.gov
South Carolina: www.myscgov.com
South Dakota: www.state.sd.us
West Virginia: www.wv.gov
American Samoa: www.government.as
Federated States of Micronesia: www.fsmgov.org
Midway Islands: www.fws.gov/refuge/Midway_Atoll/
Puerto Rico: http://gobierno.pr/gprportal/inicio
U.S. Virgin Islands: www.gov.vi/
www.AffordableSchoolsOnline.com/Cheap-Colleges — is a comprehensive and informative resource that allows you to search for colleges and their respective tuition. I believe this type of information is very valuable to today’s students who are not only dealing with a more competitive higher educational environment but also with the rising costs associated with them.
National Standards for Adult Financial Literacy Education
The National Standards for Adult Financial Literacy Education identify the personal finance knowledge and skills an adult should possess. The Institute for Financial Literacy® contends that all adults who receive financial literacy education should have, at a minimum, the knowledge and ability to competently perform the basic tasks of managing their personal finances.
Financial literacy is a lifelong process requiring both academic and practical components. No single textbook or educational program can result in a financially literate adult. Financial literacy textbooks and education programs must be clear and concise, and they may be components of a comprehensive financial literacy curriculum. Such curricula should be graduated and consistent with the user’s financial sophistication. Furthermore, the effectiveness of adult financial literacy education programs and textbooks should be validated by research.
The Institute for Financial Literacy strongly recommends that adult financial literacy education programs be designed to appeal to multiple adult learning styles and modalities, and utilize any educational resources found to be effective.
Standard I: Money Management
Recognize how cash flow management and net worth analysis can be used as tools to achieve financial goals.
Money Management Benchmarks:
Cash Flow Management
Identify the components of a budget
Create personalized budget documents
Revise their budgets to reflect current cash flow
Personal Net Worth
Identify the components of a personal net worth statement
Create personalized net worth statements
Understand that their net worth will fluctuate as the values of their assets and liabilities change
Financial Goal Setting
Differentiate between short and long term financial goals
Prioritize their financial goals
Construct a realistic financial goal action plan
Revise their financial goals as life circumstances change
Standard II: Credit
Know how and where to obtain credit, and the implications of using and misusing credit.
Differentiate among the types of credit
Understand which types of credit are better suited for particular purposes than other types
Identify types of financial institutions where credit can be obtained
Understand how the credit application process works
Utilization of Credit
Comprehend the legal implications of using credit
Understand what a credit report is, how to dispute errors in credit reports, and what a consumer’s rights are regarding credit reports
Understand what credit scores mean and the significance of their use in modern life
Recognize what precautions can be taken to prevent identity theft and fraud, and what to do if victimized
Standard III: Debt Management
Recognize how using debt can be a tool in asset building.
Debt Management Benchmarks:
Know what tools are available to them to measure their debt load
Determine what their appropriate debt load is
Understand the difference between good debt and bad debt
Recognize the warning signs of excessive consumer debt
Understand options available to assist with excessive debt loads
Evaluate which professionals can assist in dealing with excessive debt issues
Standard IV: Risk Management
Use appropriate risk management strategies to protect assets and quality of life.
Risk Management Benchmarks:
Differentiate among the types of insurance products
Understand their insurance needs
Comprehend the implications of being insured or uninsured
Evaluate the effectiveness of risk management tools in protecting against financial loss
Assess their risk tolerance level
Use risk tolerance levels in developing risk management strategies
Standard V: Investing & Retirement Planning
Implement investment and retirement strategies to achieve financial goals.
Investing & Retirement Planning Benchmarks:
Differentiate among the types of investment vehicles
Identify the types of financial institutions where investment products can be purchased
Understand the differences between retirement and non-retirement, and qualified and non-qualified investments
Recognize the importance of planning for retirement
Evaluate the risks and rewards associated with investment options
Understand the role risk tolerance plays when choosing investment vehicles
Comprehend the legal implications of investing
Assess their overall financial situation in determining retirement needs
Best Practices Guidelines for Adult Financial Literacy Education Materials
The Institute for Financial Literacy® recommends the following Best Practices Guidelines when developing and/or selecting financial literacy education materials for adults. Best Practices create recommendations regarding processes or techniques for the use or implementation of standards and benchmarks.
Educators, authors, publishers and others are encouraged to apply as many of these Best Practices Guidelines as are appropriate for a specific educational resource in the area of adult financial literacy.
The Institute for Financial Literacy strongly recommends that adult financial literacy education programs also be designed in compliance with the National Standards for Adult Financial Literacy Education.
Aligned to Standards
Materials developed for adults align to the National Standards for Adult Financial Literacy Education developed by the Institute for Financial Literacy, which are available on the web at www.financiallit.org.
Materials developed for teenagers align to the K-12 National Standards in Personal Finance developed by Jump$tart, which are available on the web at www.jumpstart.org.
Materials should be objective in content and neutral in tone.
Materials should not deceive or mislead.
Materials should be informative and unbiased in nature.
Materials should not promote a specific brand, product, or provider.
Materials should clearly identify their content creator, copyright holder and publisher.
Resource lists should also meet objectivity guidelines.
Materials should be written concisely and at an appropriate reading level.
Technical terms, abbreviations, and acronyms need to be clearly defined.
Materials should be relevant to target audiences in content.
Materials should utilize multiple learning styles.
Materials should be accurate.
Materials should be kept current.
Revised materials should be indicated with a revision date and edition number.
Materials should be evaluated for effectiveness.