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WISE Financial Literacy Test terms
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WISE Financial Literacy Test terms
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WISE Financial Literacy Test termssources of income - ANS-wages, rentals, interest, capital, profits, investments,
entrepreneurship
exemption - ANS-also called allowance: used to reduce amount of taxed income
liquidity - ANS-the degree of ease in which assets can be sold
gift cards - ANS-closed loop system and open loop system;
can be purchased in fixed amounts and redeemed for purchases from particular
businesses
discretionary income - ANS-also called budget surplus; not allocated for food or shelter
money order - ANS-a payment order for a pre-specified amount of money and is
purchased at a different types of stores- it is used like a check. They are usually limited
in maximum face value to some specified figure. (For example, the United States Postal
Service limits domestic postal money orders to US $1,000.00); US Postal money orders
are hard to counterfeit.
why does US currency have value - ANS-there is a belief that money has value and
therefore is accepted.
opportunity cost - ANS-next best alternative; it is what is given up when a choice is
made.
inflation - ANS-hurt: lenders (banks) and people living on fixed income. Least hurt: those
who owe large amounts of money;
a general increase in prices and fall in the purchasing value of money.
treasury department - ANS-collects taxes, prints money, issues treasury bonds.
pay yourself first - ANS-strategy for saving for the future by putting money aside before
paying regular monthly bills
certificate of deposit - ANS-it is a time deposit offered at financial institutions-penalty if
cashed before maturity.
, institutions that give loans - ANS-banks, credit unions, financial companies, payday
lenders, tax preparers
institutions that charge high intrest - ANS-pawnshops, payday lenders, tax refund
lenders, tax refund lenders, finance companies.
credit union - ANS-member owned co-operative financial institution- advantage is lower
interest rates on loans.
overdraft protection - ANS-a feature offered by banks to keep your checking account
from over drafting when you write a check or swipe your debit card but don't have
enough money in your account. It is a loan that is paid back.
compound interest - ANS-interest added to principal- interest earned on interest.
time value of money - ANS-calculated by value of money with given amount earned
over a period of time; the longer you keep your money invested, the more interest you
will earn.
liquid financial product - ANS-savings and checking accounts are most liquid, certificate
of deposit and money market accounts are less liquid
rule of 72 - ANS-technique for estimating the number of years required to double your
money at a given rate of return
reconciling a checking account - ANS-to view what activity has occurred in your
account. Keep current with your check register to know what your current balance is at
all times. When you receive your bank statement, you reconcile your check register
against the statement to be sure no errors have been made and to record any bank fees
and/or interest earned in your register
repayment of student loans - ANS-6 month grace period after leaving school before you
start making payments
tax anticipation loans - ANS-a short term consumer loan secured by a taxpayer's
expected tax refund
credit card cash advances - ANS-provided by credit card companies- withdraw cash
with credit card- you pay a higher interest rate
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