Terms About Financial Education

Bank

Where most Americans keep most of their money – a financial institution that keeps and distributes a customer’s money. Customers typically have a checking or savings account (or both), which can earn interest on the money customers put into the accounts. Banks also lend money through loans.

Investment bank

A financial institution that makes money by issuing and selling “securities,” like stocks and bonds. If you choose to keep your money in an investment bank, it is usually invested in various stocks and bonds, and your total amount in the bank varies based on which stocks you have invested in and how the stock market is doing.

Recession

A period of economic downturn – can be on a local or national scale

Inflation

A persistent and substantial rise in the level of prices – can happen when the nation’s economy is weak and the value of the dollar decreases

Debt

Something that is owed – if you are “in debt,” you owe a person or company

Interest

A sum of money paid or charged for borrowing money. So if you have to pay a company or person back “with interest,” you have to pay them the money you borrowed plus an extra percentage of money

Security

A security is something representing financial value, other than actual money. Securities are usually either a stock or a bond. You can invest in securities through the stock market

Stock

Buying a stock signifies ownership in a corporation – so if you buy a stock, you buy part of that company’s earning.  As earning go up and down, the amount the stock is worth changes too

Share

Similar to a stock, it indicates owning a piece of the company by buying stocks in that company. A “shareholder” probably has invested in several stocks in a certain company

Bond

A bond is the other kind of “security” that is traded on the stock market. Unlike a stock, it does not give the owner a stake in the company, but is actually a form of buying debt. The buyer is giving the company a loan, which the company must then pay back with interest.

Public Company

A public company or corporation is a company that is not owned just by it’s CEO’s or owners, but it publicly owned by many shareholders. This means you can buy the company’s stock and have a share in the company. Large shareholders can help control how the company is run. Public companies are traded on the stock market.

Stock Exchange

A corporation of organization which provides facilities to trade for stock brokers and traders, so that they can trade stocks and bonds

Bull Market

In a bull market, investors are confident and increase their investment activity, leading to increased financial gains and a generally “up” market

Bear Market

In a bear market, investors are typically pessimistic, which leads to selling stocks and market downturn

Dow Jones (Dow Jones Industrial Average)

An index which shows the average of how the 30 largest and most widely held public companies in the U.S. 

Nasdaq (National Association of Securities Dealers Automated Quotations)

An American stock exchange company – largest electronic screen-based trading market in the U.S. This is where most of the trading of stocks goes on.

S & P (Standard and Poor)

A company that publishes financials research and analysis on stocks and bonds. It is called Standard and Poor because it represents the merging of Henry Poor’s company with a company called the Standard Statistics Bureau – the two companies merged in 1941

S & P 500

An index that averages how the stocks of 500 American corporations are performing. Like the Dow Jones, it is an indication of how the American stock market is doing.

Free trade

Trade between countries that is free from government restrictions and duty taxes

Pork barrel

Refers to government spending that will only benefit particular citizens, not necessarily in the majority. Often, “pork” will be added to a Congressional bill that is unrelated (for example, with a bill about gun regulation, a clause about funding for farmers in Kansas could be tacked on). “Pork barrel politics” refers to spending that is meant to benefit supports of a politician in return for political support (such as campaign contributions or votes). Some politicians have spoken out against this kind of politics, saying that is makes bills less likely to pass and too expensive.

Earmark

The pet projects described above as the unrelated add-ons to Congressional bills. Earmarks are the “pork”

Sources:

Investopedia.com

Dictionary.com

Wall Street Journal

Washington Post

H&R Block Dollars and Sense