MoneySkill Mods 19-27 Flashcards

Rate of Return

• Calculated using the formula: Profit or Loss / Investment

Vacation Weeks

• Initial job offers typically provide 2 weeks of vacation
• After 5 years, vacation entitlement increases to 3 weeks
• After 25 years, employees receive 4 weeks of vacation

Family Spending

• Families allocate approximately 10% of their income to vacation and recreation

Annual Percentage Yield (APY)

• To estimate years needed to double investment, use the formula: 72 / APY
• APY is calculated as Interest / Investment

Consumer Goods

• Consumer durables are also known as capital goods

Young Families' Debt

• Most young families primarily use installment loans for debt management

Voluntary Savings

• Examples include 401(k) plans, bonds, and savings accounts

Entrepreneurial Wealth

• Entrepreneurs have a net worth that is typically 4 times greater than that of others

Business Longevity Statistics

• Approximately 50% of new businesses survive past 5 years
• About 33% of new businesses last beyond 15 years

Long-Term Savings

• Forms of long-term forced savings include purchasing an asset, mortgage payments, social security, and pension payments

Liquid Investments

• Liquid investments can easily be converted to cash, such as a savings account
• Certificates of deposit are not classified as liquid accounts

Annuities and Taxes

• Taxes on annuities are payable when funds are withdrawn, especially if in a lower tax bracket

Bank Insurance Coverage

• Individual accounts are insured for up to $250,000, while joint accounts for married couples are insured up to $500,000

Annuity Definition

• An annuity refers to insurance payments designated for retirement savings

Taxability of Investment Interest

• Interest earned from investments is considered taxable income

Dividend Tax Rates

• Minimum tax rate for dividends is 5%
• Maximum tax rate for dividends is 15%

Money Market Accounts

• Interest rates for money market accounts can fluctuate

Mutual Funds

• Closed-end funds are types of mutual funds that are not open to new investors and trade shares on the stock market

Money Market Account Features

• It is possible to write checks against your money market account

Types of Stocks

• Penny stocks are characterized as cheap but involve high risks
• Income stocks represent companies that distribute large dividends
• Blue chip stocks refer to established companies with consistent dividend payments
• Growth stocks reinvest earnings into the company instead of issuing substantial dividends

Investment Horizon

• The term investment horizon refers to the duration of years one plans to invest

Fixed Income Asset Example

• A certificate of deposit serves as an example of a fixed income asset

Municipal Bonds

• Municipal bonds are issued by states and cities, and their interest is not subject to federal taxation
• They are considered not the safest investment option and are not backed by the U.S. Treasury

Equities

• Equities represent ownership shares in a business and do not mature, providing no guaranteed returns

Treasury Securities

• Among Treasury securities, bonds take the longest to mature, whereas Treasury bills mature the quickest.

Test your knowledge with these flashcards covering the key concepts from MoneySkill Mods 19-27. These cards focus on financial terms such as the rate of return and vacation time policies that impact workplace expectations and investment understanding. Perfect for reinforcing basic financial literacy skills.