Consumer Economics Glossary

Is used to prepare for future educational costs by parents or caregivers for their children. It comes in two forms, a 529 prepaid tuition plan or a 529 savings plan. A 529 Prepaid Tuition Plan is just that. You pay tuition for a particular institution at the current rate. If you gave birth to a child today, you would pay today’s rate, no matter what the college or university charges in 18 years. Even if today the rate is 100 dollars a credit hour, but in 18 years it jumps up to 300 dollars an hour, you still pay the 100 dollars because you technically paid for four years of college at that rate ahead of time; you’re just “using” it later. A 529 savings plan is a savings plan that acts as an investment account. It is comparable to a 401K, as it fluctuates based on market performance and is only used for its intended purpose, educational expenses. It can also be used to pay tuition for children kindergarten through 12th grade attending private schools.

The gains or losses on investment over one year.

The annual cost of borrowing money.

Any item or resource with economic value, e.g., jewelry, consumer goods, stocks, bonds, real estate, cash, a home, a car, investments, CDs, etc.

This is when the stock market is consistently down with prolonged price declines.

A private nonprofit organization that promotes and monitors ethical.

A certificate issued by a government or corporation where the issuer agrees to pay the holder an agreed-upon amount with interest. A type of debt comparable to an IOU. Making a bond purchase is providing a loan to its issuer (a corporation, government, or municipality). The bond has a specified interest rate, so you will receive the principal paid with interest at the bond’s maturity date. Selling bonds is a common way for governments and businesses to raise capital.

When you document your expected income and your expenses for a specified period to determine the amount of money remaining.

When the average share price increases over an extended period causing the market indexes to increase. Expectations of future profits drive stock prices. Assume a growing economy has increased consumer demand, and companies are expanding to keep pace. Employment is rising. People feel confident and purchase items they have put off, such as a new house or car. Profits are expected to increase because the future is bright. Stock prices are rising, and few expect the trend to end soon. This is a bull market because there is an extended period of rising stock prices.

The money a business receives for selling its goods and services.

This is your purchasing power, the number of goods or services that can be purchased by a given unit of currency, considering the effect of inflation. Basically, how much money you have available to buy things.

An asset is either in the form of money or equipment used to produce goods or services.

The profit comes from selling an investment for more than you paid. You will often hear this term used after a consumer sells their house for a profit. The capital gains are the remaining money after paying off the mortgage(s) and the real estate seller fees. People often use this to buy a new house to avoid paying higher taxes.

The loss resulting from selling an investment for less than you paid.

An economic system where the production and distribution of goods and services is the responsibility of individuals or entities, a free market. Capitalism is usually associated with a market economy and relies on a for-profit motive. America is a capitalist society, meaning we practice capitalism.

A type of savings-based investment where you pay a set amount and get a return with a preset interest rate at a fixed maturity date.

A bank account where you make deposits pay bills, and withdrawals.

An insured person’s submission for compensation due to loss incurred and protected under the policy.

It is a percentage of a medical invoice that the insured pays after the insurance policy’s deductible is surpassed up to the policy’s stop loss.

A specified amount of incurred medical expenses the insurer pays at the time of service.

A pledged asset used to secure a loan.

Interest-earning interest is when you earn interest on both the money you save and the interest you earn. The interest paid on the principal amount invested continues to compound because it makes interest when reinvested. Comparing two equal investments clarifies compound interest’s power. One earns simple interest, while the other is compound interest. Simple interest only pays on the invested principal. For example, bonds pay simple interest. A ten-year $10,000 bond earning five percent annually will pay $500 ($10,000*.05) each year until it matures. The principal investment remains $10,000. Over ten years, the bond will earn $5,000 interest.

An individual who purchases goods or services for personal needs or use, not for resale.

An item sold for direct use by customers is also referred to as final goods.

The most standard measure of inflation. A change measurement in the prices for goods and services.

When consumers pay less for a good or service, they are willing to pay—the difference between their willingness versus the actual price.

Activities designed to protect the rights of shoppers.

A secondary person who signs a loan, credit account, or promissory note becoming jointly responsible for the debt obligation along with the primary signer. A cosigner is often required if the primary obligator does not have the desired credit score or assets for the creditor to approve them alone.

The amount of money needed to buy a consumer good or service.

Spending minimal money to produce a good creating a higher value-to-cost ratio.

Borrowing money to make a purchase.

An open-ended loan that allows you to borrow money up to a specific limit and carry over an unpaid balance from month to month. There is no fixed time to repay the loan if you make the minimum payment due each month. You pay interest on any outstanding credit card loan balance.

A detailed, written summary of how you’ve used your credit card for a billing period.

A boundary set by the credit issuer on how much you can charge on credit issued.

Numbers created by mathematical algorithms that use your credit history to calculate a score at a moment in time.

A cooperative bank chartered by the National Credit Union Administration or a state government that its members own.

The percentage of the total amount of credit a person has available compared with the amount they’ve used. If you have one 1,000-dollar credit card and carry a Five-Hundred-dollar balance, you have a 50% credit utilization.

A measure of a consumer’s ability to obtain and pay back extended credit.

Often referred to as just crypto. It is encrypted digital currency, meaning there is no physical coin or bill. However, you can use a service that allows you to cash in cryptocurrency for a physical token. You usually exchange cryptocurrency online without using an intermediary like a bank, as crypto is not government-backed. Cryptocurrency values change constantly.

The unauthorized retrieval or disclosure of sensitive information that may be used for identity theft, to embarrass a company, or other nefarious intent.

A plastic card linked directly to your banking account (normally your checking) that is used to make purchases. It may look like a credit card, but your account must be funded with the amount of the purchase to be approved.

The capital owed to another person or a business.

The consumer who owes capital to a creditor.

A portion of the insured loss paid by the policyholder. The expenses the insured must pay before the insurance kicks in.

A shortage or deficiency.

A simultaneous decrease in the price of goods and services while the value of money increases.

A measure of how popular or necessary a commodity is and how many consumers want to purchase it.

A measure of an item’s use due to wear and tear or its potential of becoming obsolete.

Your earnings are electronically sent to your banking account(s).

The amount of money remaining after paying all of your household expenses.

The share of profits paid by a company to its shareholders.

The most cited stock index measuring price changes on the stock markets. It comprises 30 large publicly traded companies on the New York Stock Exchange and NASDAQ.

A good that is expected to last a minimum of three years.

A cash reserve expressly set aside for unplanned expenses or emergencies.

A person who organizes, operates, and assumes the risks of a business or enterprise.

Occurs when the quantity of a good or service provided equals the quantity demanded. Or when all willing buyers are satisfied, and producers do not have any wasted inventory—also referred to as market equilibrium. In a supply and demand graph, it is where the supply and demand curves intersect.

Could be the value of shares, stocks, and shares with no fixed interest or the difference between assets and liabilities. In relation to a mortgage, it is the difference between the home’s value and what you owe.

A federal or, at times, state tax levied on everything you own or have interests, such as property or businesses, at the time of a person’s death.

Comparing the difference in the value of two currencies. If you were traveling to a European country, you would exchange your dollars for euros. The exchange rate would determine how many euros you would get for one dollar. If the euro is valued at a higher rate, you will receive fewer euros than your dollar.