FINANCIAL LITERATURE

FINANCIAL LITERATURE

SAVINGS-- Savings refers to the money that a person has left over after they subtract out their consumer spending from their disposable income over a given time period. Savings, therefore, represents a net surplus of funds for an individual or household after all expenses and obligations have been paid.

Savings are kept in the form of cash or cash equivalents (e.g., as bank deposits), which are exposed to no risk of loss but also come with correspondingly minimal returns. Savings can be grown through investing, which requires that the money be put at risk, however [ Retrieved from https://www.investopedia.com/terms/s/savings.asp].

MONEY-- Money is commonly referred to as currency. Economically, each government has its own money system. Cryptocurrencies are also being developed for financing and international exchange across the world.

Money is a liquid asset used in the settlement of transactions. It functions based on the general acceptance of its value within a governmental economy and internationally through foreign exchange.

The current value of monetary currency is not necessarily derived from the materials used to produce the note or coin. Instead, value is derived from the willingness to agree to a displayed value and rely on it for use in future transactions.

This is money's primary function: a generally recognized medium of exchange that people and global economies intend to hold and are willing to accept as payment for current or future transactions.

Economic money systems began to be developed for the function of exchange. The use of money as currency provides a centralized medium for buying and selling in a market. This was first established to replace bartering.

Monetary currency helps to provide a system for overcoming the double coincidence of wants. The double coincidence of wants is a ubiquitous problem in a barter economy, where in order to trade, each party must have something that the other party wants.

When all parties use and willingly accept an agreed-upon monetary currency, they can avoid this problem [ Retrieved from https://www.investopedia.com/terms/m/money.asp ].

CREDIT CARD-- A credit card is a thin rectangular piece of plastic or metal issued by a bank or financial services company, that allows cardholders to borrow funds with which to pay for goods and services with merchants that accept cards for payment.

Credit cards impose the condition that cardholders pay back the borrowed money, plus any applicable interest, as well as any additional agreed-upon charges, either in full by the billing date or over time.

In addition to the standard credit line, the credit card issuer may also grant a separate cash line of credit (LOC) to cardholders, enabling them to borrow money in the form of cash advances that can be accessed through bank tellers, ATMs or credit card convenience checks.

Such cash advances typically have different terms, such as no grace period and higher interest rates, compared to those transactions that access the main credit line. Issuers customarily pre-set borrowing limits, based on an individual's credit rating.

A vast majority of businesses let the customer make purchases with credit cards, which remain one of today's most popular payment methodologies for buying consumer goods and services [ Retrieved from https://www.investopedia.com/terms/c/creditcard.asp].

CERTIFICATE OF DEPOSIT [CD]-- A certificate of deposit (CD) is a product offered by banks and credit unions that provides an interest rate premium in exchange for the customer agreeing to leave a lump-sum deposit untouched for a predetermined period of time.

Almost all consumer financial institutions offer CDs, although it’s up to each bank which terms it wants to offer, how much higher the rate will be compared to the bank’s savings and money market products, and what penalties it applies for early withdrawal.

Shopping around is crucial to finding the best CD rates because different financial institutions offer a surprisingly wide range. Your brick-and-mortar bank might pay a pittance on even long-term CDs, for example, while an online bank or local credit union might pay three to five times the national average.

Meanwhile, some of the best rates come from special promotions, occasionally with unusual durations such as 13 or 21 months, rather than the more common terms based on three, six, or 18 months or full-year increments [Retrieved from Certificate of Deposit (CD) Definition (investopedia.com)].

Effective Date: This informative insert is effective and was last updated on October 19, 2021.