R
Rate of return – how fast money in savings account or investment grows. Annual earnings on an investment expressed as a percentage of the amount invested; also known as yield. Example: A $3 annual dividend divided by $34 share cost = 0.088, an 8.8% rate of return.
Reconcile – the process of comparing personal bank account records to the bank’s records of that account balance in order to uncover any possible discrepancies.
Rent-to-own – a plan to buy a product with little or no down payment by renting it until the final payment is made, at which point the total paid far exceeds the product’s purchase price.
Repossession – confiscation of collateral, often without notice, if a borrower defaults on a loan.
Retirement accounts – accounts such as IRAs (Individual Retirement Accounts), annuities and 401Ks that allow individuals to save money toward retirement on a tax-deferred basis.
Return on investment – the measure of profitability of an investment.
Reverse Mortgage – an arrangement in which a homeowner borrows against the equity in his/her home and receives regular monthly tax-free payments from the lender. This is also called reverse-annuity mortgage or home equity conversion mortgage.
Rule of 72 – how long it takes money to double in value. A rough calculation of the time or interest rate needed to double the value of an investment. Divide 72 by the interest rate to determine the number of years it will take money to double. Calculating interest on both principal and previously earned interest. For example: to figure how many years it will take to double a lump sum invested at an annual rate of 8%, divide 72 by 8, for a result of 9 years.
S
Savings – money set aside for future use that is held in easily accessed accounts, such as savings accounts and certificates of deposit (CDs).
Savings account – a financial institution deposit account that pays interest and allows withdrawals.
Savings bond – a document representing a loan of more than one year to the U.S. government, to be repaid, with interest on a specified date.
Shared Risk – Insurance Principle – using premiums from many policyholders to reimburse the losses of a few, so that no one suffers a financially devastating loss.
Simple interest – interest calculated periodically on loan principal or investment principal only, not on previously earned interest.
Social Security – a federal government program that provides retirement, survivor’s, and disability benefits, funded by a tax on income, which appears on workers’ pay stubs as a deduction labeled FICA (for Federal Insurance Contributions Act, the enabling legislation).
Stock – an investment that represents shares of ownership of the assets and earnings of a corporation.
Stored-value card – a prepaid plastic card that allows purchases up to a set limit, at which point the card is discarded or; if “rechargeable,” replenished from an account.
T
Taxes – government fees on business and individual income, activities, or products to support government programs.
Tax credit – an amount that a taxpayer who meets certain criteria can subtract from tax owed. Examples include a credit for earned income below a certain limit and for qualified postsecondary school expenses.
Tax deduction – an expense that a taxpayer can subtract from taxable income. Examples include deductions for home mortgage interest and for charitable gifts.
Tax deferral – the feature of an investment in which taxes due on principal and/or earnings are postponed until funds are withdrawn, often at retirement.
Tax exemption – earnings, such as interest from municipal bonds that are free of certain taxes.
Time value of money – the relationship between time, money, and rate of return (interest), and their effect on earnings growth. The more time, money, and rate of interest, the more money yielded at the end of a period of time.
Title loan – a high-cost, short-term loan that uses the borrower’s automobile as collateral.
Transfer payment – money that a government provides to citizens for reasons other than current employment or the delivery of goods or services in exchange. Examples include Social Security, veteran’s benefits, and welfare.
Trust – a legal arrangement through which a trust or individual manages a trustee’s assets for the good of one or more beneficiaries.
Truth in Lending Act – a federal law that requires financial institutions to disclose specific information about the terms and cost of credit, including the finance charge and the annual percentage rate (APR).
Truth in Savings Act – a federal law that requires financial institutions to disclose specific information about the terms and costs of interest-earning accounts—such as annual percentage yield (APY)—and certain other financial services.
W
Will – a legal declaration of a person’s wishes for the disposition of his or her estate after death.
Withholding – employer deductions from employees’ earnings to pay employees’ taxes.
Work-study – the Federal Work-Study Program provides part-time jobs for undergraduate and graduate students with financial need, allowing them to earn money to help pay educational expenses.
