PFL # 5a Savings & Investing VOCAB

The quality of an asset that permits it to be converted quickly into cash without loss of value.

• Liquidity

• Opportunity Cost

• Risk

• Savings

The value of the second-best alternative that a person gives up when making one choice instead of another.

• Liquidity

• Opportunity Cost

• Risk

• Savings

The likelihood of loss or profit on an investment’s rate of return.

• Liquidity

• Opportunity Cost

• Risk

• Savings

A measure of the likelihood of loss or profit. The uncertainty of an investment’s rate of return.

• Liquidity

• Opportunity Cost

• Principal

• Risk Tolerance

Purchasing securities such as stocks, bonds, and mutual funds with the goal of increasing wealth over time, but with the risk of loss. Setting aside money for future income, benefit, or profit to meet long-term goals; using savings to earn a financial return.

• Investing
• Saving
• Savings
• Savings Account

The process of setting income aside for future spending. Provides ready cash for emergencies and short-term goals, and funds for investing.

• Investing
• Saving
• Savings
• Savings Account

Money set aside for a future use that is held in easily accessed accounts, such as savings accounts and certificates of deposit (CDs).

• Investing
• Saving
• Savings
• Savings Account

A financial institution deposit account that pays interest and allows withdrawals.

• Investing
• Saving
• Savings
• Savings Account

Interest earned not only on the principal but also on the interest already earned.

• Compound Interest
• Simple Interest
• Principal
• Rule of 72

Interest calculated periodically on the loan principal or investment principal only, not on previously earned interest.

• Compound Interest
• Simple Interest
• Principal
• Rule of 72