Financial Terms Explained: Part 2
With so many financial terms to master, it can be difficult to learn them alone. In an effort to help, ACCC decided to explain even more financial terms.
Term life insurance – insurance coverage over a set period of time. If you die within the set term, your beneficiaries receive a payout.
Umbrella insurance – provides additional liability insurance beyond what your home or auto insurance provides
Net Income – A consumer’s total income after taxes and deductibles.
Net worth –the difference between your assets (what you own) and liabilities (what you owe)
APR – annual percentage rate. Interest paid on a loan such as a credit card or student loan.
Compound interest - Interest that is calculated on the principal amount invested as well as the added interest
Capital gains – is the difference between the value of something now versus how much it was originally purchased for
Stock options – the ability to buy your employer’s stock at a pre-set price within a specified time
Return on investment (ROI) – A ROI is a measurement of a gain or loss. ROIs can be calculate by dividing the gain or loss by the investment.
IRA – Individual Retirement Account. Anyone, employed or unemployed, can contribute to an IRA up to $5,000 per year. All investments are made by the contributor, meaning there is no match made by an employer. The money is only taxed when it is withdrawn.
401(k) – This is an employer sponsored retirement plan. Most employers offer a match up to a certain percent. Employees are allowed to contribute up to $18,000 per year. This money is pre-taxed and will not be taxed until withdrawn.
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