Glossary
401(k) Plan
A retirement savings account offered by employers where employees can contribute pre-tax income, often with employer matching.
529 Plan
A tax-advantaged savings plan designed to encourage saving for future education costs.
Adjustable Rate
An interest rate that can change over time, usually based on market conditions.
Adjustable-Rate Mortgage (ARM)
A home loan with an interest rate that adjusts periodically after a fixed initial period.
Amortization
The gradual repayment of a loan over time through regular payments of principal and interest.
Annual Fee
A yearly charge for owning a credit card or financial product.
Annuity
A financial product that provides regular payments over a set period, often used for retirement income.
APR (Annual Percentage Rate)
The total yearly cost of borrowing, including interest and fees, shown as a percentage.
Asset
Anything you own that has value, such as cash, real estate, or investments.
ATM Fee
A fee charged for using an ATM not owned by your bank.
Bear Market
A market condition where prices fall by 20% or more, often due to negative investor sentiment.
Beneficiary
A person or entity designated to receive money or assets from a financial account or insurance policy.
Bond
A fixed-income investment where you lend money to a government or corporation in return for regular interest payments.
Budget
A plan that tracks your income and expenses to help manage money wisely.
Bull Market
A market condition where prices are rising or expected to rise, showing investor confidence.
Capital
Money or assets used to fund a business or investment.
Capital Gain
Profit earned from selling an asset for more than you paid for it.
Capital Loss
The loss incurred when selling an asset for less than its purchase price.
Cash Flow
The movement of money into and out of your accounts—positive if more comes in than goes out.
Certificate of Deposit (CD)
A savings product with a fixed interest rate and maturity date; usually offers higher returns than regular savings accounts.
Checking Account
A bank account used for everyday transactions like deposits, withdrawals, and payments.
Collateral
An asset you offer to secure a loan, which the lender can take if you default.
Contribution Limit
The maximum amount you can deposit into a tax-advantaged account like a 401(k) or IRA in a year.
Co-signer
A person who agrees to repay a loan if the primary borrower cannot.
Credit Limit
The maximum amount you’re allowed to charge on a credit card.
Credit Report
A record of your credit history, including loans, payment history, and credit accounts.
Credit Score
A number (typically between 300–850) that shows your creditworthiness to lenders.
Custodial Account
An account managed by an adult for a minor until the child reaches a legal age.
Debt-to-Income Ratio (DTI)
A percentage showing how much of your income goes toward debt payments; lower is better.
Deductible
The amount you pay out of pocket before insurance starts covering expenses.
Default
Failure to repay a loan or meet financial obligations.
Depreciation
The decrease in an asset’s value over time due to wear and tear or obsolescence.
Dividend
A portion of a company’s profits distributed to shareholders.
Dow Jones Industrial Average (DJIA)
A stock market index that tracks 30 large U.S. companies, used to gauge market performance.
Emergency Fund
Savings set aside for unexpected expenses like car repairs or medical bills.
Employer Match
When an employer contributes to your retirement plan based on your contributions.
Equity
Ownership value in an asset, such as a home or stock.
Estate
Everything a person owns at death, including property, money, and possessions.
ETF (Exchange-Traded Fund)
A fund that holds a variety of assets and is traded on stock exchanges like a stock.
Expense Ratio
The annual fee expressed as a percentage for managing a mutual fund or ETF.
FAFSA (Free Application for Federal Student Aid)
A form used to apply for federal financial aid for college.
FICO Score
A widely used type of credit score created by the Fair Isaac Corporation.
Financial Advisor
A professional who helps you make decisions about budgeting, investing, and saving.
Financial Literacy
The ability to understand and use various financial skills like budgeting and investing.
Fiscal Year
A 12-month period companies or governments use for accounting and budgeting.
Fixed Rate
An interest rate that stays the same throughout the loan or investment term.
Forbearance
An agreement to temporarily reduce or suspend loan payments due to hardship.
Foreclosure
The legal process where a lender takes ownership of a property due to missed mortgage payments.
Grace Period
The time after a due date when no penalties are charged if payment is made.
Gross Income
Your total earnings before taxes and other deductions.
Health Savings Account (HSA)
A tax-advantaged account for medical expenses, available to those with high-deductible health plans.
Home Equity
The portion of your home’s value that you own outright, calculated as home value minus mortgage balance.
Income Tax
A tax levied by governments on your earnings.
Index Fund
A type of mutual fund or ETF that tracks a specific market index like the S&P 500.
Inflation
The rise in prices over time, reducing the purchasing power of money.
Inflation Hedge
An investment that helps protect against the loss of value due to inflation.
Inflation Rate
The percentage at which the general level of prices for goods and services rises.
Installment Loan
A loan repaid with fixed payments over time, like auto or student loans.
Interest
The cost of borrowing money or the return earned on savings or investments.
IRA (Individual Retirement Account)
A retirement savings account with tax advantages for individual savers.
Joint Account
A bank or investment account shared between two or more individuals, usually with equal access.
Liability
Something you owe—such as a loan, mortgage, or other debt.
Line of Credit
A flexible loan that allows you to borrow up to a set limit and pay interest only on what you use.
Liquidity
How quickly and easily an asset can be converted to cash without losing value.
Loan Term
The length of time you agree to repay a loan, often in months or years.
Long-Term Investment
An investment intended to be held for several years or more, often to grow in value over time.
Market Capitalization
The total value of a company’s outstanding shares of stock.
Market Index
A measurement of a section of the stock market, like the S&P 500 or NASDAQ.
Minimum Payment
The smallest amount you must pay on a credit card bill to remain in good standing.
Money Market Account
A savings account that usually offers higher interest rates with limited check-writing ability.
Mortgage
A loan used to buy real estate, typically repaid in monthly installments over many years.
Mutual Fund
A pooled investment managed by professionals, consisting of stocks, bonds, or other assets.
NASDAQ
A major stock exchange focusing heavily on technology companies.
Net Income
The amount of money you take home after taxes and other deductions.
Net Worth
What you own (assets) minus what you owe (liabilities).
Overdraft
When you spend more than what’s in your bank account, often resulting in a fee.
Passive Income
Earnings generated with minimal effort, such as from rental property or investments.
Pension
A retirement plan that provides a fixed income after retirement, usually funded by an employer.
Portfolio
A collection of investments held by an individual or institution.
Premium
The amount you pay for insurance coverage, typically monthly or annually.
Principal
The original amount of money borrowed or invested, not including interest or earnings.
Profit
The financial gain after subtracting expenses from revenue.
Rate of Return
The percentage of gain or loss on an investment over time.
Refinance
Replacing an existing loan with a new one, usually to get a better interest rate or terms.
Revolving Credit
A type of credit that lets you borrow up to a limit and carry a balance, like a credit card.
Risk Tolerance
Your personal comfort level with the potential for losing money on an investment.
Robo-Advisor
An automated online service that provides financial planning and investment management.
Roth IRA
A retirement savings account with tax-free withdrawals in retirement, funded with after-tax dollars.
Savings Account
A bank account that earns interest on your deposits while keeping your money accessible.
Secured Loan
A loan backed by collateral, which the lender can take if the loan isn’t repaid.
Share
A unit of ownership in a company or investment fund.
Simple Interest
Interest calculated only on the original principal, not on interest earned.
Stock
A share in the ownership of a company, giving you a claim on part of its assets and profits.
Subsidized Loan
A student loan where the government pays the interest while you’re in school or during deferment.
Tax Bracket
A range of income taxed at a specific rate, part of a progressive tax system.
Tax Credit
An amount that directly reduces the tax you owe, potentially increasing your refund.
Tax Deduction
An amount subtracted from your taxable income to lower your tax bill.
Term Life Insurance
A life insurance policy that provides coverage for a specific period, such as 10 or 20 years.
Traditional IRA
A retirement savings account where contributions may be tax-deductible and taxes are paid on withdrawals.
Treasury Bond
A long-term, low-risk debt security issued by the U.S. government.
Trust Fund
A legal entity that holds assets for a person or organization, managed by a trustee.
Underwriting
The process lenders or insurers use to assess the risk of providing a loan or coverage.
Unsecured Loan
A loan not backed by collateral, typically with a higher interest rate due to greater risk.
Variable Interest Rate
An interest rate that can go up or down over time based on market changes.
Volatility
The degree to which an investment’s price fluctuates over time.
W-2 Form
A tax form employers give employees showing income earned and taxes withheld.
W-4 Form
A tax form employees fill out to tell employers how much tax to withhold from paychecks.
Will
A legal document that states how you want your assets distributed after your death.
Yield
The income earned from an investment, usually shown as a percentage of the investment’s cost.