bear market
A stock market with a prolonged period of falling share prices.
Big Board
The New York Stock Exchange (NYSE), oldest and largest stock exchange in the U.S., located on Wall Street in New York. Responsible for setting policy, supervising member activities, listing securities, overseeing the transfer of member seats, and evaluating applicants.
blue chip stock
Stock of a large, national company with a solid record of stable earnings and/or dividend growth and a reputation for high quality management and/or products.
bond
A certificate of debt issued by a government or corporation that offers payment of the original principal plus interest by a specified future date.
bull market
A stock market with a prolonged rise in stock prices.
capital gain
Profit from selling or transferring assets at a higher price than their initial cost. For most investments sold at a profit, the IRS is owed capital gains tax. Capital loss is a decrease in the value of an investment or asset.
certificate of deposit
A CD is a form of time deposit at a bank or other savings institution. A time deposit cannot be withdrawn before a specified maturity date without being subject to an interest penalty for early withdrawal. Small-denomination CDs are often purchased by individuals. Large CDs of $100,000 or more are often in negotiable form, meaning they can be sold or transferred among holders until maturity.
compound interest
Interest that is calculated not only on the initial principal but also the accumulated interest of prior periods.
diversification
A variety in the investments in a portfolio, such as stocks, bonds, and real estate. The goal of diversification is to reduce the risk in a portfolio.
dividend
The portion of a company’s profits that the firm pays out each period to shareholders. Also called distributed profits.
Dow Jones Industrial Average
A figure indicating the weighted average value of shares in thirty companies listed on the New York Stock Exchange at a particular time.
Federal Deposit Insurance Corporation
An independent agency of the federal government that insures accounts up to $250,000 per depositor at almost all United States depository institutions. This deposit limit was increased from $100,000 by the FDIC in October, 2008, in response to the banking system crisis. The insured amount of $250,000 is effective through December 2009. The FDIC has primary federal supervisory authority over insured institutions that are not members of the Federal Reserve System.
growth income
Income from stock which grows earnings and/or revenue faster than its industry or the overall market. Companies with growth stock usually pay little or no dividends, preferring to use the income instead to finance further expansion.
investment
Property or other possession acquired for future financial return or benefit; also a commitment of time (e.g., to education or training).
liquidity
The degree to which an investment or assets of a company can easily be sold or converted into cash.
money market
A savings account that pays variable interest rates based on current conditions in the market for very short-term securities. These accounts are safe and easily liquidated and offer a higher interest rate than ordinary savings accounts.
municipal bond
A "muni" is a long-term, interest-bearing security issued by county, city, or state governments, having a maturity of at least ten years. Owners of municipal bonds pay no federal income tax on the interest.
mutual fund
Funds from many investors pooled together to establish a diversified portfolio of investments. Mutual funds raise money by selling shares of the fund to the public. Shareholders are free to sell their shares at any time. Many employees invest in mutual funds through their employers, by setting aside some of their wages to invest in one or more funds on a regular basis.
opportunity costs
The cost of passing up the next best alternative when making a decision.
over the counter (OTC)
Procedure for trading any equity (stock) that is not listed or traded on a national securities exchange or NASDAQ (National Association of Securities Dealers Automated Quotations).
portfolio
A list of the financial assets held by an individual, bank, or other financial institution
rate of return
A percentage amount of the return on an investment or loan.
Rule of 72
A rule used to calculate the doubling of money (72 divided by the anticipated interest rate gives the number of years it would take to double one’s money). For example, at 4 percent interest it would take 18 years to double one’s money.
savings account
An account at a financial institution that earns interest and allows regular deposits and withdrawals. The minimum required deposit, fees charged, and interest rate paid vary among providers.
Securities Investor Protection Corporation
The SIPC protects investors’ cash and securities when a brokerage firm goes out of business, up to $500,000, including a $100,000 limit for cash. The SIPC does not protect against losses caused by a decline in the market value of securities. And it does not provide protection for investment contracts not registered with the SEC.
stock
The capital raised by a corporation by issuing shares of ownership; a certificate documenting a proportional share in the corporation’s assets and profits. (Also known as an equity.)
Treasury bill
A T-bill is a short-term debt security issued by the U.S. government, having a maturity of one year or less. The interest earned is estimated by taking the difference between the price paid and the face value of the bond, and calculating that rate of return on an annual basis. Considered the safest securities available to the U.S. investor. Minimum investment is $100.
Treasury bond
A T-bond is a long-term interest-bearing security issued by the U.S. government. Interest is paid semiannually. These securities mature in 10 to 30 years. Minimum investment is $100.
Treasury note
A T-note is a government debt security issued with maturities of two to ten years and traded in the capital markets. Treasury notes bear a fixed interest, paid semiannually.
U.S. savings bond
A nontransferable bond issued by the U.S. government. Savings bonds cannot be bought and sold after they are purchased, except to redeem them to the government. All federal taxes may be deferred until the bond is redeemed. Face values range from $50 to $10,000.
wealth
The total accumulated value of the assets a person possesses. Financial assets include savings, stocks, and bonds. Physical assets can include real estate, rental property, gold, antiques, and other collectibles.
Wealth-creating assets
Possessions that increase in value over time or provide income or dividends.

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