Glossary
Course Glossary for the Personal Finance with AI Course
This glossary provides clear, concise definitions for key concepts covered in the personal finance course. Each entry includes a practical example of how the concept applies in real-world financial situations. Terms are organized alphabetically for easy reference. Many terms also have an example of how the term is used in this course. Many of the terms also provide links to the relevant MicroSim
A
401(k) Plans
An employer-sponsored retirement savings plan that allows employees to contribute a portion of their pre-tax salary, often with matching contributions from employers.
Example: In this class, we'll analyze how contributing to a 401(k) plan with a 5% employer match can potentially double your retirement savings compared to saving the same amount in a standard savings account.
529 Plans
Tax-advantaged savings accounts specifically designed to help pay for education expenses, with contributions growing tax-free when used for qualified educational costs.
Example: We'll explore how starting a 529 plan when your child is born can provide substantial funds for college tuition through compound growth over 18 years.
Active Fund Management
A financial professional who makes specific investment decisions for a mutual fund, exchange-traded fund (ETF), pension fund, or other investment vehicle with the goal of outperforming a designated market benchmark or index.
Active fund managers operate under the premise that markets are not perfectly efficient and that skilled professionals can identify mispriced securities or capitalize on market trends to generate superior returns. However, numerous studies have shown that the majority of active managers fail to consistently outperform their benchmarks over long time periods after fees are considered.
Algorithmic Investing
An automated investment strategy that uses computer programs to execute trades based on predetermined rules, criteria, and mathematical models.
Example: During our investment module, you'll learn how algorithmic investing allows individual investors to implement sophisticated strategies previously available only to professional traders.
Angel Investing
The practice where wealthy individuals provide capital to startup companies in exchange for ownership equity or convertible debt.
Example: In our entrepreneurial finance section, you'll explore how angel investing fills the funding gap between friends-and-family support and venture capital investments.
Asset Allocation
The strategic distribution of investments across different asset classes based on risk tolerance, time horizon, and financial goals.
Example: This course will teach you how proper asset allocation - spreading investments across stocks, bonds, and cash - is critical for maximizing returns while minimizing risk.
B
Balance Sheet
A financial statement showing what an individual or organization owns (assets), owes (liabilities), and the difference between them (net worth/equity) at a specific point in time.
Example: You'll create your own personal balance sheet in this class to visualize your current financial position and set realistic wealth-building goals.
Bank Fees
Charges imposed by financial institutions for account maintenance, transactions, services, or policy violations.
Example: In our banking module, you'll learn how to identify and avoid common bank fees that can silently drain your accounts over time.
Banking System
The network of institutions and services that facilitate the holding, transferring, and lending of money within an economy.
Example: Understanding how the banking system works will help you make informed decisions about where to keep your money and how financial institutions contribute to economic stability.
Bankruptcy
A legal process that provides relief from debt when an individual or business cannot meet their financial obligations, with different chapters offering various solutions.
Example: While we hope you'll never need this information, we'll discuss how bankruptcy serves as a last-resort financial safety net and the long-term implications for your credit.
Behavioral Finance
The study of psychological influences and biases affecting financial decisions and market behavior.
Example: Our discussion on behavioral finance will reveal how emotional biases like loss aversion can lead even smart investors to make irrational financial decisions.
Blockchain
A distributed, digital ledger technology that records transactions across multiple computers to ensure transparency, security, and decentralization.
Example: In our digital assets module, you'll learn how blockchain technology enables cryptocurrencies by creating tamper-resistant transaction records without requiring a central authority.
Bonds
Debt securities where investors lend money to an entity (corporate or governmental) that borrows funds for a defined period at a variable or fixed interest rate.
Example: This course will demonstrate how bonds can provide steady income and serve as a counterbalance to stock market volatility in your investment portfolio.
Budget
A financial plan allocating expected income toward expected expenses, savings, and debt repayment over a specific time period.
Example: You'll develop a personalized monthly budget during this course that aligns your spending with your values and financial goals.
Building Credit
The process of establishing and improving creditworthiness through responsible financial behavior to enhance credit scores and borrowing capabilities.
Example: We'll explore concrete strategies for building credit, such as becoming an authorized user on a parent's credit card and making small, regular purchases that you pay off immediately.
Buy Now Pay Later Services
Financial products allowing consumers to purchase items immediately and pay for them over time, often without interest if paid within a specified period.
Example: This class will analyze the benefits and potential pitfalls of buy now pay later services that have become increasingly popular among young consumers.
C
Cash Flow Statement
A financial record that summarizes the money coming in (income) and going out (expenses) over a specific time period.
Example: Creating a personal cash flow statement in this class will help you identify spending leaks and opportunities to increase your savings rate.
Cash Management
The process of collecting, handling, and using cash efficiently to maximize liquidity and minimize costs.
Example: Effective cash management techniques we'll cover include separating spending money from saving money through multiple accounts and automated transfers.
Certificates of Deposit
Time-restricted savings products offered by financial institutions that typically pay higher interest rates than standard savings accounts in exchange for leaving funds untouched for a set period.
Example: In our savings vehicles comparison, you'll learn how certificates of deposit can earn more interest than regular savings accounts when you won't need access to funds for 6-60 months.
Charitable Giving
The act of donating money, goods, services, or time to organizations or causes that benefit others, often with tax advantages for the donor.
Example: You'll discover how strategic charitable giving can simultaneously support causes you care about and provide valuable tax deductions.
Charitable Legacy
A planned arrangement to donate a portion of one's assets to charitable organizations after death.
Example: Our estate planning section will introduce you to charitable legacy options like donor-advised funds that allow you to support causes meaningful to you even after you're gone.
Checking Accounts
Bank accounts designed for frequent transactions, including deposits, withdrawals, and payments, typically with minimal or no interest earned.
Example: You'll compare features of various checking accounts to identify those that offer benefits particularly valuable to students, such as no monthly fees and ATM fee reimbursements.
Children & Financial Planning
The process of adjusting financial strategies to accommodate the additional expenses and long-term savings goals associated with raising children.
Example: This course will help you understand the significant financial adjustments needed when planning for children, from increased healthcare costs to education funding.
Claims Process
The procedure for requesting compensation from an insurance company after experiencing a covered loss.
Example: We'll walk through a simulated insurance claims process so you'll be prepared to efficiently navigate this sometimes confusing procedure after an accident or loss.
Collectibles
Physical items collected and valued for their rarity, condition, historical significance, or aesthetic appeal, sometimes serving as alternative investments.
Example: In our alternative investments module, you'll analyze whether collectibles like limited-edition sneakers can be viable investments or if they're better viewed as consumption purchases.
College Funding
The strategies and vehicles used to save and pay for higher education expenses.
Example: This course evaluates various college funding approaches beyond student loans, including 529 plans, scholarships, work-study programs, and income-sharing agreements.
Collision Insurance
Auto insurance coverage that pays for damage to your vehicle resulting from a collision with another vehicle or object, regardless of fault.
Example: Through case studies, you'll determine when collision insurance makes financial sense and when it might be reasonable to drop this coverage on an older vehicle.
Commercial Banks
Financial institutions that provide services such as accepting deposits, making loans, and offering basic investment products to both individuals and businesses.
Example: Our banking module will contrast commercial banks with credit unions and online banks to help you select the institution that best meets your specific needs.
Commodities
Basic goods and raw materials, such as gold, oil, or agricultural products, that can be bought and sold as investments.
Example: We'll examine how commodities like gold can serve as inflation hedges in your investment portfolio during economic uncertainty.
Compound Interest
The interest earned on both the initial principal and the accumulated interest over time, resulting in accelerated growth of savings or investments.
Example: Using compound interest calculators in class, you'll see how saving $200 monthly from age 18 can grow to over $1 million by retirement through the power of compound returns.
Comprehensive Insurance
Auto insurance coverage that pays for damage to your vehicle caused by events other than collisions, such as theft, vandalism, natural disasters, or falling objects.
Example: In our risk management section, you'll evaluate whether comprehensive insurance is worth the premium cost based on factors like your vehicle's value and where you live.
Consumer Debt
Money owed by individuals for purchases of goods and services for personal use, typically including credit card balances, auto loans, and personal loans.
Example: You'll analyze different approaches to managing consumer debt, including the snowball method (paying smallest balances first) versus the avalanche method (paying highest interest rates first).
Consumer Rights
Legal protections and entitlements granted to consumers regarding product safety, fair business practices, and financial transactions.
Example: This course will introduce key consumer rights legislation, such as the Fair Credit Reporting Act, that protects you when applying for loans and reviewing your credit reports.
Credit Bureaus
Companies that collect and maintain consumer credit information, which they use to generate credit reports and scores for potential lenders.
Example: You'll learn how to contact the three major credit bureaus (Equifax, Experian, and TransUnion) to dispute inaccurate information on your credit reports.
Credit Counseling
Professional guidance services that help individuals develop strategies to address credit problems and debt management.
Example: In our debt management section, we'll explore situations where credit counseling services might be beneficial and how to identify reputable non-profit counselors.
Credit Reports
Detailed summaries of an individual's credit history, including payment records, amounts owed, and credit applications, used by lenders to evaluate creditworthiness.
Example: During this course, you'll access your free annual credit reports and learn to identify errors that could be negatively affecting your borrowing ability.
Credit Score
A numerical representation of an individual's creditworthiness based on their credit history, commonly used by lenders to assess the likelihood of repayment.
Example: You'll discover the five factors that determine your credit score and specific actions you can take to improve each component.
Credit Unions
Member-owned financial cooperatives that provide traditional banking services with potential benefits including lower fees, better rates, and more personalized service.
Example: Our comparison of financial institutions will explain how credit unions often offer more favorable terms than traditional banks because they are non-profit organizations focused on serving members.
Crowdfunding
The practice of funding projects or ventures by raising small amounts of money from many people, typically via internet platforms.
Example: This class will analyze how crowdfunding has revolutionized small business financing by allowing entrepreneurs to raise capital directly from consumers who believe in their products.
Cryptocurrencies
Digital or virtual currencies that use cryptography for security and operate on decentralized networks based on blockchain technology.
Example: In our digital assets section, you'll learn about the potential benefits and significant risks of cryptocurrencies like Bitcoin as alternative investments.
Currency Exchange
The process of converting one country's currency into another, with rates that fluctuate based on economic conditions and market forces.
Example: Our global investing module will explain how currency exchange rates affect international investment returns and strategies to manage this additional risk factor.
D
Debt Consolidation
The process of combining multiple debts into a single loan, ideally with a lower interest rate or more favorable repayment terms.
Example: This course will analyze scenarios where debt consolidation makes financial sense, such as combining high-interest credit card balances into a lower-rate personal loan.
Debt Reduction Strategies
Systematic approaches to paying down debt efficiently through methods like the snowball or avalanche techniques.
Example: You'll create personalized debt reduction strategies in class by analyzing your specific debts and choosing between interest-saving and motivational approaches.
Debt Settlement
The process of negotiating with creditors to allow a borrower to pay a lump sum that is less than the full amount owed to satisfy a debt.
Example: We'll discuss the serious credit implications of debt settlement and why it should generally be considered only when facing potential bankruptcy.
Deductibles
The amount a policyholder must pay out-of-pocket before insurance coverage begins to pay for covered losses.
Example: Through practical exercises, you'll determine appropriate deductible levels for various insurance policies by balancing premium savings against your emergency fund capacity.
Deflation
A decrease in the general price level of goods and services, typically associated with increases in the purchasing power of money but potentially causing economic contraction.
Example: Our economic literacy section will explain how deflation can be dangerous for borrowers since their debt remains constant while their income may decrease.
Dependents (Tax)
Individuals, typically children or relatives, who rely on a taxpayer for financial support and can qualify the taxpayer for certain tax benefits.
Example: This course will clarify the IRS tests for claiming dependents and how each qualifying dependent can potentially save you thousands in tax liability.
Digital Payment Systems
Electronic platforms and technologies that enable the transfer of money without physical cash or traditional banking methods.
Example: You'll compare various digital payment systems like Venmo, Zelle, and Apple Pay to understand their security features, transaction limits, and fee structures.
Disability Insurance
Insurance that provides income replacement if the policyholder becomes unable to work due to illness or injury.
Example: Our risk management module will explain why disability insurance could be more important than life insurance for young professionals whose greatest asset is their future earning potential.
Diversification
The practice of spreading investments across various asset types, industries, and geographic regions to reduce risk.
Example: Through portfolio simulations, you'll see how proper diversification can protect your investments during market downturns while still capturing growth during expansions.
Dollar-Cost Averaging
An investment strategy where a fixed amount is regularly invested regardless of market conditions, resulting in purchasing more shares when prices are low and fewer when prices are high.
Example: This class will demonstrate how dollar-cost averaging through automatic monthly investments reduces the risk of making emotional timing decisions and can lower your average cost per share.
E
Economic Growth
An increase in the production of goods and services over time, typically measured by gross domestic product (GDP).
Example: We'll analyze how economic growth affects employment opportunities, wage levels, and investment returns across different sectors of the economy.
Economic Indicators
Statistics that provide information about economic activity and performance, used to analyze current conditions and predict future developments.
Example: You'll learn to interpret key economic indicators like unemployment rates and consumer confidence indexes to make more informed financial and investment decisions.
Electronic Banking
Banking services accessible through electronic channels, including online platforms, mobile apps, and ATMs.
Example: Our banking module will cover electronic banking security best practices, such as enabling two-factor authentication and recognizing phishing attempts.
Emergency Fund
Money set aside to cover unexpected expenses or financial emergencies such as medical bills, car repairs, or job loss.
Example: In this class, you'll develop a strategy to build an emergency fund covering 3-6 months of essential expenses as your first financial security measure.
Emerging Markets
Developing economies transitioning toward more advanced economic systems, often characterized by increasing integration with global markets but higher volatility.
Example: Our investment diversity section will explore how allocating a portion of your portfolio to emerging markets can potentially boost long-term returns while adding diversification.
Employer Retirement Plans
Workplace-sponsored programs that help employees save for retirement, often with tax advantages and potential employer matching contributions.
Example: This course will explain why contributing at least enough to get your full employer match in retirement plans is one of the most important financial decisions you can make.
Equities
Ownership interests in companies, typically in the form of stock, representing a claim on the corporation's assets and earnings.
Example: You'll learn how equities have historically provided the highest long-term investment returns despite their short-term volatility.
Estate Planning
The process of arranging for the management and disposal of a person's assets during their lifetime and after death.
Example: Our estate planning section will emphasize that even young adults need basic documents like a will, power of attorney, and healthcare directive.
Estate Planning Basics
Fundamental principles and tools for managing assets during life and transferring them after death according to one's wishes.
Example: This class introduces essential estate planning basics, explaining how even college students should have a simple will and designated power of attorney.
Estate Tax
A tax levied on the total value of a deceased person's estate before distribution to heirs, typically applying only to estates exceeding certain thresholds.
Example: You'll learn about federal estate tax exemption amounts and strategies families can use to minimize this tax when passing wealth between generations.
ETFs
Exchange-Traded Funds; investment funds traded on stock exchanges that hold assets such as stocks, bonds, or commodities and typically track an index.
Example: This course will explain how ETFs combine the diversification benefits of mutual funds with the trading flexibility of individual stocks, often at lower cost.
Expense Categories
Classifications used to organize and analyze spending patterns for budgeting and financial planning purposes.
Example: You'll develop personalized expense categories that align with your lifestyle, distinguishing between fixed necessities, variable expenses, and discretionary spending.
Expense Tracking
The process of recording and categorizing all expenditures to understand spending patterns and adhere to budgets.
Example: In our budgeting workshop, you'll compare various expense tracking methods from simple spreadsheets to automated apps that categorize transactions.
F
Family Insurance Needs
Insurance requirements specific to households with dependents, typically including enhanced life, health, disability, and property coverage.
Example: This course will help you understand how family insurance needs evolve with the addition of children, requiring adjustments to coverage types and amounts.
Federal Reserve
The central banking system of the United States, responsible for monetary policy, financial system stability, and regulatory oversight.
Example: Our economic literacy module will explain how Federal Reserve decisions on interest rates directly affect your borrowing costs for everything from credit cards to mortgages.
Federal Student Loans
Education loans issued or guaranteed by the U.S. government, typically offering more favorable terms, protections, and repayment options than private alternatives.
Example: You'll learn why federal student loans should generally be exhausted before considering private loans due to their lower interest rates and income-driven repayment options.
Financial Goals
Specific, measurable objectives related to money management, serving as targets for saving, spending, investing, or debt reduction.
Example: In this class, you'll establish short-term (under 2 years), medium-term (2-5 years), and long-term (5+ years) financial goals that will guide your decision-making.
Financial Independence
The state of having sufficient personal wealth to live without having to work actively for basic necessities.
Example: This course introduces the concept of financial independence as a milestone where your passive income from investments exceeds your living expenses.
Financial Institutions
Organizations that conduct financial transactions such as investments, loans, and deposits, including banks, credit unions, insurance companies, and investment firms.
Example: You'll compare different types of financial institutions to understand which combination might best serve your unique banking, borrowing, and investing needs.
Financial Literacy
The ability to understand and effectively apply various financial skills, including personal financial management, budgeting, and investing.
Example: Improving your financial literacy through this course will help you avoid costly mistakes and make informed decisions throughout your life.
Financial Philosophy
A personal framework of principles and values that guides financial decisions and behaviors.
Example: During this class, you'll develop your own financial philosophy that aligns your money management with your values, goals, and risk tolerance.
Financial Planning Process
A systematic approach to setting and achieving financial goals through assessment, strategy development, implementation, and regular review.
Example: This course teaches the six-step financial planning process professional planners use, adapted for your personal decision-making.
Financial Priorities
The order of importance assigned to various financial goals based on urgency, significance, and alignment with personal values.
Example: You'll learn to establish clear financial priorities to guide your decisions when facing competing goals like building an emergency fund, paying off debt, and saving for retirement.
Financial Safety Net
Resources and strategies providing protection against financial hardship, including emergency funds, insurance coverage, and social support systems.
Example: This class will help you construct a comprehensive financial safety net with multiple layers of protection against life's unexpected challenges.
Financial Statements
Documents that summarize an individual's or organization's financial position, including balance sheets, income statements, and cash flow statements.
Example: You'll create your own personal financial statements to establish a baseline for measuring progress toward your money goals.
Financial Well-Being
A state of being wherein a person can fully meet current and ongoing financial obligations, feel secure in their financial future, and make choices that allow them to enjoy life.
Example: Throughout this course, we emphasize that financial well-being encompasses more than just wealth - it includes security, freedom of choice, and alignment with personal values.
Fintech
Financial technology; innovations and technologies aimed at competing with traditional financial methods in the delivery of financial services.
Example: Our banking module explores how fintech innovations like robo-advisors and peer-to-peer lending platforms are revolutionizing financial services for young adults.
First Job Financial Decisions
Key money choices facing new workforce entrants, including retirement plan enrollment, insurance selection, and cash flow management.
Example: This course will prepare you for critical first job financial decisions like determining appropriate 401(k) contribution levels and selecting benefits packages.
Fiscal Policy
Government decisions about taxation and spending, designed to influence economic conditions.
Example: You'll learn how fiscal policy changes like tax cuts or infrastructure spending can affect your employment prospects and investment returns.
Fixed Income Securities
Investment instruments that pay investors fixed interest or dividend payments until their maturity date, including bonds and certificates of deposit.
Example: This class will explain how fixed income securities can provide stability and income in investment portfolios, especially as you approach financial goals.
Flexible Spending Accounts
Employer-sponsored benefit programs allowing employees to set aside pre-tax dollars for specific expenses, typically for healthcare or dependent care.
Example: Our workplace benefits section will demonstrate how Flexible Spending Accounts can save hundreds in taxes when used for predictable medical or childcare expenses.
Flood Insurance
Specialized property insurance covering damage caused by flooding, typically not included in standard homeowners policies.
Example: This course explains why flood insurance may be essential even if you don't live in a high-risk zone, as standard policies don't cover rising water damage.
Foreign Securities
Stocks, bonds, and other investment instruments issued by entities based outside an investor's home country.
Example: You'll explore how including foreign securities in your portfolio provides exposure to global growth opportunities and diversification benefits.
Fraud Prevention
Measures taken to detect and deter deceptive practices attempting to steal money or personal information.
Example: Our personal security module will teach practical fraud prevention techniques, from freezing your credit reports to recognizing common scams targeting young adults.
Full Retirement Age
The age at which you get the full retirement benefits.
This is called "FRA".
In the US, the FRA is currently 67 years old for anyone born in 1960 or later (66 plus a number of months for those born earlier).
When you claim before your Full Retirement Age (FRA), your benefits are permanently reduced. The reduction is approximately 0.556% per month (or about 6.67% per year) for the first 36 months before your FRA. If you claim more than 36 months early, any additional months are reduced by 0.417% per month (or about 5% per year)
Futures
Standardized contracts obligating parties to buy or sell an asset at a predetermined future date and price.
Example: In our advanced investment section, you'll learn how futures contracts allow businesses to hedge against price changes in commodities essential to their operations.
G
Geopolitical Risks
Potential for international political events or conflicts to affect investment markets and economic conditions.
Example: This course examines how geopolitical risks like trade disputes and regional conflicts can create both challenges and opportunities for global investors.
Gift Tax
A federal tax imposed on individuals who give money or property to others above certain thresholds without receiving equivalent value in return.
Example: You'll learn about the annual gift tax exclusion amount and how it affects strategies for transferring wealth to family members.
Globalization
The increasing interdependence of economies around the world, particularly through cross-border trade, investment, and technology transfer.
Example: Our economic literacy module explores how globalization affects job markets, consumer prices, and investment opportunities across different industries.
Growth Investing
An investment strategy focused on companies expected to grow at an above-average rate relative to other companies in the market.
Example: This class compares growth investing with value investing approaches, helping you understand which style aligns better with your financial goals and risk tolerance.
H
HDHP Plans
High Deductible Health Plans; health insurance policies with lower premiums but higher deductibles, often paired with Health Savings Accounts.
Example: In our insurance module, you'll analyze whether an HDHP plan combined with an HSA might save money compared to traditional health insurance for young, healthy individuals.
Health Insurance Plans
Policies that cover medical expenses incurred by the insured, with various structures affecting coverage, access to providers, and out-of-pocket costs.
Example: This course will help you compare health insurance plans using total cost scenarios rather than just monthly premiums.
Health Savings Accounts
Tax-advantaged savings accounts available to individuals enrolled in high-deductible health plans, used for qualified medical expenses.
Example: You'll discover why Health Savings Accounts offer unique triple tax advantages, making them valuable vehicles for both current medical costs and long-term savings.
Healthcare in Retirement
Planning for medical expenses during retirement years, including Medicare coverage, supplemental insurance, and long-term care needs.
Example: Our retirement planning section will help you estimate and prepare for healthcare costs in retirement, which typically exceed $300,000 per couple.
HMO Plans
Health Maintenance Organization plans; health insurance coverage that restricts patients to a network of contracted providers and requires referrals for specialists.
Example: This class explains the trade-offs of HMO plans, which typically offer lower out-of-pocket costs in exchange for less flexibility in choosing healthcare providers.
Home Buying Process
The sequence of steps involved in purchasing residential property, from initial search to closing.
Example: Our housing module walks through the entire home buying process, from determining affordability to negotiating offers and securing financing.
Homeowners Insurance
Property insurance that covers losses and damages to a person's residence along with furnishings and other assets, plus liability coverage for accidents on the property.
Example: You'll learn how homeowners insurance policies are structured and what additional endorsements might be necessary to fully protect your property and possessions.
HSA Accounts
Health Savings Accounts; tax-advantaged accounts used with high-deductible health plans to pay for qualified medical expenses.
Example: This course will demonstrate how HSA accounts can serve as powerful retirement savings vehicles when used strategically for long-term growth rather than current medical expenses.
I
Identity Protection
Measures taken to safeguard personal information and prevent its unauthorized use for fraudulent purposes.
Example: Our personal security section covers comprehensive identity protection strategies, from securing digital accounts to monitoring credit reports regularly.
Income Sources
Various channels through which individuals receive money, including wages, investment returns, business profits, and passive income streams.
Example: You'll explore diverse income sources beyond traditional employment, including side hustles, passive investments, and entrepreneurial ventures.
Income Tax
A tax levied on the financial income of individuals and businesses, typically calculated as a percentage of taxable income.
Example: This course demystifies income tax calculations, helping you understand how tax brackets work and why your marginal tax rate differs from your effective tax rate.
Index Funds
Investment funds designed to track the performance of a specific market index by holding the same securities in the same proportions.
Example: You'll learn why low-cost index funds form the foundation of many successful investment strategies by providing broad market exposure without trying to outguess the market.
Individual Retirement Accounts
Tax-advantaged accounts designed to help individuals save for retirement, available in traditional (tax-deferred) and Roth (tax-free growth) variations.
Example: This class will help you decide between traditional and Roth IRAs based on your current tax situation and expectations for future income and tax rates.
Inflation
A general increase in prices and corresponding decrease in purchasing power over time.
Example: Our economic module demonstrates why inflation makes seemingly safe investments like savings accounts actually risky for long-term goals due to the erosion of purchasing power.
Inheritance Planning
The process of arranging for the transfer of assets to heirs after death, minimizing tax implications and family conflicts.
Example: This course introduces inheritance planning concepts, including the importance of clear documentation and communication about your wishes regarding asset distribution.
Installment Debt
Loans that are repaid through regular payments over a set period, typically including auto loans, mortgages, and personal loans.
Example: You'll analyze different types of installment debt to understand which forms can be considered "good debt" that potentially increases your net worth over time.
Insurance Coverage
The specific protections provided by an insurance policy, detailing what losses or damages will be paid for by the insurer.
Example: This class teaches you to assess insurance coverage needs based on your specific risk factors rather than industry averages or sales recommendations.
Insurance Coverage Amounts
The maximum monetary benefits available under an insurance policy for covered losses or claims.
Example: You'll learn methodologies for calculating appropriate insurance coverage amounts for life, disability, and property policies based on your specific circumstances.
Insurance Terminology
Specialized vocabulary used in insurance policies and by insurance professionals to describe coverage, claims, and policy features.
Example: Our insurance module includes a comprehensive review of insurance terminology to help you understand the precise meanings of terms like premium, deductible, and exclusion.
Interest Rates
The proportion of a loan charged as interest to the borrower, typically expressed as an annual percentage of the loan outstanding.
Example: This course explains how interest rates influence virtually every aspect of your financial life, from the cost of borrowing to the returns on your savings.
International Markets
Financial markets outside an investor's home country, offering additional investment opportunities and diversification benefits.
Example: You'll explore how incorporating international markets into your investment strategy can reduce portfolio volatility while capturing global growth opportunities.
IRA Accounts
Individual Retirement Accounts; tax-advantaged savings vehicles designed specifically for retirement planning.
Example: This class compares Traditional IRA tax deductions now versus Roth IRA tax-free withdrawals later to help you choose the best option for your situation.
Itemized Deductions
Eligible expenses that taxpayers can claim individually on tax returns instead of taking the standard deduction, potentially reducing taxable income.
Example: Our tax planning section will help you track potential itemized deductions throughout the year and determine whether they're likely to exceed the standard deduction.
L
Liability Insurance
Coverage that protects against claims from injuries and damage to people or property, typically included in auto, homeowners, and renters policies.
Example: This course explains why liability insurance is often the most important component of your insurance policies, protecting your current and future assets from lawsuits.
Life Cycle Financial Planning
An approach to financial planning that addresses varying needs, goals, and challenges at different stages of life.
Example: You'll develop a flexible life cycle financial plan that anticipates how your priorities will shift from debt management in your 20s to college funding in your 30s and retirement planning in your 40s and beyond.
Lines of Credit
Flexible loans allowing borrowers to draw funds up to a preset limit and pay interest only on the amount used.
Example: Our credit module compares personal lines of credit with credit cards, explaining when each might be the more appropriate borrowing tool.
Long-Term Care Insurance
Insurance coverage that helps pay for extended care services, including nursing home care, home health care, or assisted living.
Example: This class discusses when to consider purchasing long-term care insurance and alternative strategies for funding potential care needs in advanced age.
M
Market Cycles
Recurring patterns of expansion, peak, contraction, and trough in economic activity and financial markets.
Example: Understanding market cycles will help you maintain perspective during market downturns and avoid the common mistake of selling investments at low points.
Market Indices
Standardized measurements of a specific segment of the financial market, created by combining the values of selected securities.
Example: In our investment module, you'll learn how market indices like the S&P 500 serve as benchmarks to evaluate the performance of your investment portfolio.
Market Participants
Individuals and organizations that buy and sell financial instruments in the marketplace, including retail investors, institutional investors, market makers, and regulators.
Example: This course examines how different market participants—from individual investors to large pension funds—affect market dynamics and price movements.
Market Psychology
The collective emotional and behavioral patterns that influence investor decisions and market movements.
Example: You'll explore how market psychology drives boom and bust cycles, often causing asset prices to rise or fall beyond levels justified by fundamental values.
Market Structure
The organizational framework that determines how buyers and sellers interact in a market, including regulations, trading mechanisms, and information distribution.
Example: Our financial markets section explains how market structure has evolved from physical trading floors to electronic exchanges, changing how individual investors participate.
Market Volatility
The rate at which the price of a security or market increases or decreases over a particular period.
Example: This class will teach you strategies for managing market volatility, including maintaining appropriate asset allocation and avoiding emotional reactions to price swings.
Marriage & Finances
The process of combining or coordinating financial management between spouses, including joint accounts, shared goals, and legal considerations.
Example: You'll learn practical approaches to handling finances in marriage, from deciding whether to combine accounts to strategies for discussing money differences constructively.
Medicaid
A joint federal and state program that provides health coverage to eligible low-income individuals and families.
Example: Our healthcare module explains circumstances where Medicaid might provide coverage for long-term care expenses that Medicare doesn't cover.
Medicare
The federal health insurance program for people 65 or older, certain younger people with disabilities, and people with End-Stage Renal Disease.
Example: This course outlines the different parts of Medicare (A, B, C, and D) and what you should understand now to help aging parents navigate their coverage options.
Microloans
Small loans, typically with simplified application processes, designed to support entrepreneurs and small businesses that may not qualify for traditional bank loans.
Example: In our entrepreneurship section, you'll explore how microloans can provide critical startup capital for small businesses with minimal credit history.
MicroSim
A small in-browser simulation of concepts in personal finance.
MicroSims have input controls that the users manipulate to see how their financial decisions will impact outcomes.
Example: The College Loan Payback MicroSim can teach you the benefits of paying off loans early to avoid excessive interest payments.
Mobile Banking
Financial services accessed through mobile devices, allowing users to conduct transactions, check balances, deposit checks, and manage accounts remotely.
Example: You'll learn security best practices for mobile banking, such as using biometric authentication and avoiding public Wi-Fi for financial transactions.
Monetary Policy
Central bank actions that manage the money supply and interest rates to promote economic goals such as price stability, employment, and growth.
Example: This course demonstrates how monetary policy decisions—particularly changes to interest rates—directly affect your borrowing costs and investment returns.
Money Management
The process of budgeting, saving, investing, spending, and overseeing the use of financial resources to achieve goals.
Example: Effective money management skills you'll develop in this class include tracking expenses, prioritizing financial goals, and making informed spending decisions.
Money Market Accounts
Deposit accounts that typically offer higher interest rates than regular savings accounts in exchange for higher minimum balances and limited transactions.
Example: Our banking comparison will show when money market accounts provide advantages over standard savings for your emergency fund.
Money Market Funds
Investment vehicles that invest in short-term, low-risk securities such as government bonds, certificates of deposit, and commercial paper.
Example: This course explains how money market funds serve as a cash management tool offering better returns than checking accounts while maintaining liquidity.
Mortgage Loans
Long-term loans used to finance the purchase of real estate, with the property serving as collateral.
Example: You'll analyze different mortgage loan options, including how the choice between 15-year and 30-year terms affects monthly payments and total interest paid.
Mortgage Types
Various structures of home loans with different interest rates, terms, and payment arrangements.
Example: This class compares fixed-rate, adjustable-rate, FHA, VA, and other mortgage types to help you determine which would best suit your housing needs and financial situation.
Mutual Funds
Investment vehicles that pool money from multiple investors to purchase a diversified portfolio of stocks, bonds, or other securities, managed by professional fund managers.
Example: Our investment module demonstrates how mutual funds provide instant diversification for beginning investors who have limited capital to spread across individual securities.
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Net Worth
The difference between an individual's total assets and total liabilities, representing their overall financial position.
Example: Throughout this course, you'll track your net worth as the most comprehensive measure of financial progress, rather than focusing solely on income.
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Online Banks
Financial institutions that operate primarily through the internet without traditional physical branch locations.
Example: This class compares online banks with traditional brick-and-mortar institutions, highlighting how reduced overhead costs often translate into better interest rates and lower fees.
Opportunity Cost
The value of the next best alternative foregone when making a financial decision.
Example: You'll analyze the opportunity cost of different choices, such as keeping excess cash in a low-yield savings account versus investing it for potential higher returns.
Options
Financial contracts giving buyers the right, but not the obligation, to buy or sell an underlying asset at a set price within a specific time period.
Example: Our advanced investing section explains how options can be used as insurance for your portfolio, protecting against significant market declines.
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Payday Loans
Short-term, high-interest loans typically due on the borrower's next payday.
Example: This course examines why payday loans often lead to cycles of debt and explores alternative emergency funding options with less punishing terms.
Payroll Tax
Taxes withheld from employee paychecks to fund Social Security and Medicare programs.
Example: You'll learn how payroll taxes differ from income taxes and why they're applied to earned income but not investment income.
Peer-to-Peer Lending
Online platforms connecting borrowers directly with individual lenders, bypassing traditional financial institutions.
Example: Our alternative banking module explores how peer-to-peer lending can potentially offer better rates for borrowers and higher returns for investors than traditional banking relationships.
Permanent Life Insurance
Life insurance policies that provide coverage for the insured's entire life and include a cash value component that grows over time.
Example: This class compares permanent life insurance with term policies, helping you determine which type best fits your protection needs and financial goals.
Personal Finance
The management of an individual's or family's financial resources, including budgeting, saving, investing, spending, and planning for future needs.
Example: Throughout this course, you'll develop personal finance skills that will serve as the foundation for achieving your short and long-term financial goals.
Personal Loans
Unsecured loans issued based on creditworthiness rather than collateral, typically used for consolidating debt, financing large purchases, or covering unexpected expenses.
Example: You'll analyze scenarios where personal loans might be appropriate funding solutions compared to credit cards or other borrowing options.
Policy Exclusions
Specific conditions, events, or circumstances not covered by an insurance policy.
Example: This course emphasizes the importance of understanding policy exclusions before purchasing insurance to avoid discovering gaps in coverage when filing a claim.
PPO Plans
Preferred Provider Organization plans; health insurance that offers more flexibility in choosing healthcare providers, with higher coverage for in-network services.
Example: Our health insurance comparison demonstrates how PPO plans typically cost more in premiums but provide greater provider choice than HMO alternatives.
Precious Metals
Rare, naturally occurring metallic elements with high economic value, such as gold, silver, and platinum, often held as investments.
Example: This class examines the role of precious metals as potential inflation hedges and portfolio diversifiers during economic uncertainty.
Predatory Lending
Unfair, deceptive, or fraudulent lending practices that impose unreasonable loan terms on borrowers, often targeting vulnerable populations.
Example: You'll learn to identify warning signs of predatory lending, such as excessive fees, balloon payments, and pressure tactics to make quick decisions.
Premiums
Regular payments made to insurance companies for coverage, typically paid monthly, quarterly, semi-annually, or annually.
Example: This course will help you evaluate insurance premiums in context with coverage limits, deductibles, and your specific risk factors.
Private Equity
Investment in companies that are not publicly traded, typically aiming for control or significant influence over the company's operations.
Example: Our alternative investments module explains how private equity funds pool capital from investors to acquire companies, improve their operations, and eventually sell them for profit.
Private Student Loans
Education loans issued by banks, credit unions, or online lenders, typically with market-based interest rates and fewer borrower protections than federal student loans.
Example: This class covers situations where private student loans might be necessary after exhausting federal options, and strategies to secure the most favorable terms.
Progressive Taxation
A tax system where the tax rate increases as the taxable amount increases, with higher-income individuals paying a higher percentage than those with lower incomes.
Example: You'll learn how progressive taxation affects your financial planning, including strategies to manage your taxable income across different tax brackets.
Property Tax
Taxes assessed by local governments on real estate based on the estimated value of the property.
Example: Our housing module explains how property taxes are calculated, how to assess their impact on housing affordability, and potential exemptions available in different localities.
Purchasing Power
The value of money expressed in terms of the amount of goods or services it can buy.
Example: This course demonstrates how inflation erodes purchasing power over time, emphasizing why maintaining adequate investment growth is essential for long-term financial goals.
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Real Estate Investment Trusts
Companies that own, operate, or finance income-producing real estate across various property sectors, allowing individual investors to earn dividends from real estate investments without buying, managing, or financing properties themselves.
Example: You'll explore how REITs can provide both income through dividends and growth potential through property appreciation, serving as a practical way to add real estate to your investment portfolio.
Recession
A significant decline in economic activity lasting more than a few months, typically visible in real GDP, income, employment, industrial production, and retail sales.
Example: This class discusses financial strategies for preparing for and navigating through economic recessions, including building adequate emergency reserves and maintaining appropriate asset allocation.
Refinancing
The process of replacing an existing loan with a new one, typically to secure better terms or extract equity.
Example: Our debt management section will walk through scenarios where mortgage refinancing makes financial sense based on interest rate differences, closing costs, and how long you plan to keep the property.
Rent vs Buy Analysis
The comparison of financial and lifestyle factors involved in renting a home versus purchasing one.
Example: You'll conduct a comprehensive rent vs. buy analysis that considers not just monthly payments, but also opportunity costs, tax implications, maintenance expenses, and flexibility needs.
Renters Insurance
Coverage that protects tenants' personal belongings against covered perils and provides liability protection for accidents that occur within the rented property.
Example: This course explains why renters insurance is an essential and affordable protection that many young adults mistakenly believe is unnecessary or included in their landlord's policy.
Required Minimum Distributions
Mandated withdrawals from retirement accounts such as traditional IRAs and 401(k)s that must begin when the account holder reaches a specific age.
Example: Our retirement planning module covers how required minimum distributions affect tax planning in retirement and strategies to manage their impact on your overall financial picture.
Retirement Income Planning
The process of determining how to convert accumulated assets into sustainable income streams during retirement.
Example: This class explores different retirement income planning approaches, including the "4% rule," bucket strategies, and combining guaranteed and flexible income sources.
Retirement Income Strategies
Methods for converting accumulated retirement savings into reliable income streams to fund one's lifestyle after leaving the workforce.
Example: You'll compare various retirement income strategies, such as systematic withdrawals, annuitization, and interest-only approaches, to understand which might best match your future needs.
Reverse Mortgages
Loans available to homeowners 62 or older that allow them to convert a portion of their home equity into cash while retaining ownership and occupancy.
Example: Our housing finance section examines when reverse mortgages might be appropriate financial tools and important consumer protections to understand before considering one.
Revolving Debt
Credit arrangements that allow borrowers to repeatedly borrow up to a set limit, make payments, and borrow again without reapplying, typically including credit cards and lines of credit.
Example: This course will help you manage revolving debt responsibly, including understanding minimum payment traps and strategies to reduce interest costs.
Risk Assessment
The process of identifying and analyzing potential financial threats or vulnerabilities that could negatively impact an individual or organization.
Example: You'll conduct personal risk assessments to identify which financial hazards pose the greatest threats to your financial security, from inadequate insurance to concentrated investments.
Risk Management
The practice of identifying, evaluating, and prioritizing financial risks, followed by coordinated application of resources to minimize, monitor, and control their impact.
Example: This class introduces a comprehensive risk management framework addressing major life risks through insurance, emergency funds, estate planning, and diversification.
Risk-Return Relationship
The correlation between the level of risk taken and the potential return on an investment, with higher returns generally requiring acceptance of higher risk.
Example: Our investment fundamentals section demonstrates the historical risk-return relationship across different asset classes, helping you set realistic expectations for portfolio performance.
Robo-Advisors
Digital platforms providing automated, algorithm-driven financial planning and investment services with minimal human supervision and typically lower fees than traditional financial advisors.
Example: You'll compare traditional financial advisors with robo-advisors to understand which might better serve your needs at different stages of your financial journey.
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Sales Tax
A consumption tax imposed by state and local governments on the sale of goods and certain services.
Example: This course explains how sales tax rates vary significantly by location and how to account for this expense in your budget, especially for major purchases.
Savings Accounts
Basic deposit accounts at financial institutions that earn interest and are designed to hold funds not needed for immediate expenses.
Example: You'll learn strategic uses for different types of savings accounts, from holding emergency funds to separating money for specific short-term goals.
SBA Resources
Programs, services, and tools provided by the Small Business Administration to support entrepreneurs and small business owners.
Example: Our entrepreneurial finance section explores SBA resources including guaranteed loans, educational programs, and mentorship opportunities for aspiring business owners.
Self-Insurance
The practice of setting aside funds to cover potential losses rather than purchasing an insurance policy.
Example: This class examines scenarios where self-insurance might be appropriate, such as maintaining a dedicated fund for auto repairs rather than carrying comprehensive coverage on an older vehicle.
Simple Interest
Interest calculated only on the initial principal amount, without compounding on previously earned interest.
Example: You'll compare simple interest with compound interest calculations to understand why the difference becomes increasingly significant over longer time periods.
Small Business Loans
Financing options designed specifically for small businesses, ranging from traditional bank loans to specialized SBA programs and alternative lenders.
Example: Our entrepreneurship module reviews various small business loan options, including their qualification requirements, typical terms, and appropriate uses.
SMART Goals
An acronym for goals that are Specific, Measurable, Achievable, Relevant, and Time-bound, providing a framework for effective goal setting.
Example: This course guides you through creating SMART financial goals that transform vague aspirations like "save more money" into specific targets like "save $3,000 for a car down payment within 12 months."
Social Security Benefits
Federal program benefits providing retirement income, disability income, and other assistance to eligible individuals.
Example: You'll learn how Social Security benefits are calculated and strategies to optimize your future benefits through timing decisions and earnings history.
Social Security Optimization
Strategies to maximize lifetime Social Security benefits through careful analysis of claiming ages, spousal benefits, and tax implications.
Example: This class demonstrates how delaying Social Security benefits can significantly increase monthly payments and potentially provide thousands of additional dollars over a lifetime.
Standard Deduction
A flat amount that reduces taxable income, available to taxpayers who do not itemize deductions on their tax returns.
Example: Our tax planning section explains how recent tax law changes significantly increased the standard deduction, making itemizing less beneficial for many taxpayers.
State & Local Taxation
Tax systems imposed by states, counties, cities, and other local jurisdictions, including income, property, and sales taxes.
Example: You'll explore how state and local taxation can significantly impact your overall tax burden and potentially influence relocation decisions.
Stocks
Securities representing ownership interest in corporations, entitling shareholders to a portion of the company's assets and earnings.
Example: This course explains different classes of stocks, how they're valued, and their historical role as growth engines in long-term investment portfolios.
Strategic Borrowing
The intentional use of debt as a financial tool to achieve specific objectives, such as leveraging investments or financing appreciating assets.
Example: Our debt management module discusses strategic borrowing principles, including when taking on debt might actually improve your overall financial position.
Student Loan Management
Techniques for effectively handling education debt, including repayment plan selection, consolidation/refinancing options, and forgiveness programs.
Example: You'll develop a personalized student loan management plan addressing your specific loan types, career path, and financial priorities.
Student Loans
Money borrowed to finance higher education expenses, available through federal government programs and private lenders.
Example: This class compares federal and private student loan options, highlighting the unique consumer protections and flexible repayment plans available only with federal loans.
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Tangible Assets
Physical assets that have inherent value due to their physical properties, such as real estate, precious metals, art, and collectibles.
Example: Our alternative investments section explores how tangible assets can provide portfolio diversification and potential inflation protection compared to financial assets.
Tax Credits
Dollar-for-dollar reductions in tax liability, more valuable than tax deductions which only reduce taxable income.
Example: You'll learn about valuable tax credits like the Earned Income Tax Credit and Education Credits that can significantly reduce your tax bill or even result in a refund.
Tax Filing Status
The category that determines which tax rates and standard deduction amounts apply to a taxpayer, including options like single, married filing jointly, married filing separately, and head of household.
Example: This course explains how your tax filing status affects your tax liability and strategies for selecting the most advantageous status when you have options.
Tax Loss Harvesting
The practice of selling investments at a loss to offset capital gains tax liability.
Example: Our tax planning module demonstrates how tax loss harvesting can be used strategically to reduce tax bills while maintaining appropriate portfolio allocation.
Tax System
The structure and processes through which governments collect revenue from individuals and businesses to fund public expenditures.
Example: You'll gain a comprehensive understanding of how the U.S. tax system works, including progressive income taxation, payroll taxes, and various consumption taxes.
Term Life Insurance
Life insurance that provides coverage for a specified period, typically 10-30 years, with premiums that remain level throughout the term.
Example: This class explores how term life insurance provides cost-effective death benefit protection during the years when financial responsibilities to others are highest.
Time Value of Money
The concept that money available now is worth more than the same amount in the future due to its potential earning capacity.
Example: Our investment fundamentals section uses time value of money calculations to demonstrate why starting to save for retirement in your 20s requires significantly smaller contributions than waiting until your 30s or 40s.
Treasury Securities
Debt obligations issued by the U.S. Department of the Treasury, including bills, notes, and bonds, backed by the full faith and credit of the U.S. government.
Example: You'll learn how Treasury securities serve as benchmarks for other interest rates and can provide safety and liquidity in investment portfolios.
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U.S. Healthcare System
The organization, financing, and delivery of healthcare services in the United States, including public programs, private insurance, and direct payment models.
Example: This course provides an overview of the U.S. healthcare system to help you navigate insurance options, understand costs, and advocate for yourself as a healthcare consumer.
Umbrella Liability Policies
Supplemental insurance providing additional liability coverage beyond the limits of homeowners, auto, or other primary insurance policies.
Example: Our risk management section explains how affordable umbrella liability policies can provide crucial protection for your future earnings and assets against major lawsuits.
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Venture Capital
Financing provided to early-stage, high-potential growth startup companies in exchange for equity ownership.
Example: You'll explore how venture capital differs from other forms of business financing and the stages of funding from seed capital through later investment rounds.
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W-4 Form
The IRS form used by employees to indicate their tax situation to employers for income tax withholding purposes.
Example: This class demonstrates how to properly complete your W-4 form to avoid significant tax underpayment or overpayment throughout the year.
Wealth Building
The process of increasing net worth through systematic saving, investing, and asset accumulation over time.
Example: Our comprehensive financial planning section introduces proven wealth-building principles including paying yourself first, leveraging compound growth, and maintaining a long-term perspective.
Workplace Benefits
Non-wage compensation provided to employees, including insurance coverage, retirement plans, paid time off, and various perks.
Example: You'll learn to evaluate the full value of workplace benefits packages when comparing job offers, as these benefits often represent 20-30% of total compensation.