More For Your Money - University of Illinois Extension


Bonds: An investment where money is loaned and interest paid. When you loan a company money and the company pays you interest on the loan, then you have a company bond.

Certificate of Deposit (CD): Money deposited in a bank for a specific time period which usually pays a fixed rate of interest. CDs are also known as timed deposits.

Commission: A fee that is paid by a client to a broker. The fee is usually a percentage of the cost of the stock that was bought or sold.

Compounding: Interest earned on interest. For example, interest earned in a savings account that is left in the account, then earns more interest (money.)

Diversify: Investing in a variety of investments to reduce risk. A mutual fund can help you diversify.

Employer-Sponsored Retirement Plan: Retirement plans available at your work. The plans allow you to delay paying taxes on your income until you retire. Your employer may match the amount you put into your plan.

Financial Planner: A professional person who analyzes a client's overall financial situation and develops a plan that meets his/her goals and objectives.

Index Mutual Fund: A mutual fund with stocks that are a mix of the whole stock market. Index mutual funds usually have very low fares. It earns close to what the stock market earns.

Individual Retirement Account (IRA): A savings plan that gives you tax advantages to set aside money for retirement. The two types of IRAs are Roth and Traditional.

Inflation: A general increase in the price of goods and services or a decrease in the amount of money you have available to buy what you need.

Interest: Earnings paid on loans. When you put money in a savings account, you loan the bank money and the bank pays you money for this loan.

Investment: Increases future wealth and helps to achieve long-term goals. Investing involves risk (chance of losing money) and is to be considered only after you have adequate savings.

Investment Adviser: A person or organization employed by an individual or mutual fund to manage your money or provide investment advice.

Money Market Account: A high-interest earning account that has limited check-writing privileges.

No-Load Index Stock Mutual Fund: A mutual fund that does not have a fee to purchase it.

Purchasing Power Risk: With inflation, a dollar in the future will not buy the same amount as it will buy today.

Savings Account: Money deposited in a bank or credit union. Savings accounts earn interest on all money kept in the account.

Stockbroker: A professional person (broker) who buys or sells stocks for clients.

Stocks: A share or part of a company. If you own stock in a company, then you own a small part of the company.

Tax-Deferred Retirement Plan: Investments that you can make with money that you haven't yet paid tax on. With tax-deferred investments, you have more dollars to grow. When you take money from this plan, you pay the tax.