Standard 5 Savings and Investing Review

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

Setting aside income for a period of time so that it can be used later

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

The quality of an asset that permits it to be converted quickly into cash without loss of value. For example, a checking account is more liquid than real estate.

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

A measure of the likelihood of loss or profit on an investment's rate of return.

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

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.

A fund restricted by law to investing in the short-term money market. MMMFs provide low risk and low returns, but they maintain their investment value.

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