April was Financial Literacy month. And as we head full fledged into the summer months, let’s take a look at what we learned. Before we recap some important terms, lets go over the history of Financial Literacy month. Financial Literacy recognition first started in 2000 when the National Endowment of Financial Education introduced Youth Financial Literacy Day. Three years later, in 2003, the United States Senate designated April as Financial Literacy for Youth Month and one year after that, in 2004, the United States Senate passed Resolution 316 that newly recognized April as Financial Literacy Month. In 2005, under a Bush controlled White House, the U.S. House of Representatives passed a bill supporting the goals and ideals of Financial Literacy Month. This bill issued a proclamation that called on the Federal Government, States, localities, schools, nonprofit organizations,
businesses, and the people of the United States to observe the month with programs and educational opportunities that promote financial literacy.
Given that Financial Literacy month was only a few months ago, let’s recap some obscure terms. If you know all these terms, you’re financially literate! If not, well, you’re on your way!
1. Mutual Fund
A Mutual Fund is a professionally managed collection of money from a group of investors. A mutual fund manager invests your money into some combination of stocks, bonds, or other products.
2. Individual Development Account (IDA)
A matched savings account in which an organization like a foundation, corporation, or government entity agrees
to add money to your account to match the money you save in it.
An APR helps evaluate the cost of the loan. If you have an APR of 10%, then you pay $100 for every $1,000 borrowed annually.
5. Annual Percentage Yield (APY)
The APY is the actual amount of return on an investment. To calculate the APY, take 1 plus the ‘periodic’ rate and raise that to the number of periods in a year. So a 5% per quarter rate would be (1.05^4), 21.6%.
Now that you know the difference between an APR and an APY, you may have questions regarding some of these other terms like IDA and IRA. Speak with your financial advisor on how to get the most out of your financial literacy.
– Written by Chris Gitre