Personal finance glossary
Plain-English definitions for the most common money terms you will encounter.
401(k)
An employer-sponsored retirement plan that lets you save pre-tax income, often with a match.
CreditAPR (Annual Percentage Rate)
The yearly cost of borrowing, including interest and most fees, expressed as a percentage.
Saving MoneyAPY (Annual Percentage Yield)
The real annual return on a deposit, accounting for compounding within the year.
Financial LiteracyAsset
Anything of value you own that could be sold or used to generate income.
InvestingBear Market
A sustained decline in prices, typically 20% or more from recent highs, across a broad market.
BudgetingBudget
A written plan that matches expected income to expenses and savings goals.
InvestingBull Market
A sustained period of rising prices in a market, typically defined as a 20%+ recovery from a low.
TaxesCapital Gain
The profit from selling an investment for more than you paid for it.
TaxesCapital Loss
The loss from selling an investment for less than you paid, often deductible against gains.
InvestingCompound Interest
Interest calculated on both the original principal and previously earned interest.
CreditCosigner
A person who agrees to repay a loan if the primary borrower defaults.
CreditCredit Score
A three-digit number that summarises how reliably you have repaid borrowed money.
CreditDebt-to-Income Ratio
Monthly debt payments divided by monthly gross income, used by lenders to assess borrowing capacity.
InsuranceDeductible
The amount you pay out of pocket before insurance coverage begins for a claim.
InvestingDiversification
Spreading investments across different assets to reduce risk from any single one.
InvestingDividend
A share of a company's profits paid to its shareholders, usually quarterly.
Saving MoneyEmergency Fund
Cash set aside specifically for unexpected expenses like medical bills or job loss.
InvestingEquity
Ownership in a company (stocks) or the value of a home minus the mortgage owed.
Financial LiteracyEscrow
Money held by a third party until contractual obligations are met, often used in real estate transactions.
InvestingETF (Exchange-Traded Fund)
A basket of investments that trades on an exchange like a single stock.
InvestingExpense Ratio
The yearly fee a fund charges, shown as a percentage of money invested.
TaxesFICA
Federal Insurance Contributions Act taxes funding Social Security and Medicare, split between employer and employee.
CreditHard Inquiry
A credit check that occurs when you apply for credit, which can temporarily lower your score.
InsuranceHSA (Health Savings Account)
A tax-advantaged account paired with a high-deductible health plan, with triple tax benefits.
Financial LiteracyInflation
The gradual rise in prices that reduces what each dollar can buy over time.
Estate PlanningIntestate
Dying without a valid will, leaving asset distribution to state default laws.
RetirementIRA (Individual Retirement Account)
A tax-advantaged personal retirement account with annual contribution limits.
Financial LiteracyLiability
Money you owe to others, such as loans, credit card balances, or mortgages.
InvestingLiquidity
How quickly an asset can be converted to cash without losing value.
CreditLoan-to-Value Ratio
The loan amount divided by the asset's value, used in mortgage underwriting.
InvestingMarket Capitalisation
Total market value of a company's outstanding shares, calculated as share price times shares outstanding.
Financial LiteracyNet Worth
Total assets minus total liabilities — a snapshot of overall financial health.
Financial LiteracyOpportunity Cost
The value of the next-best alternative given up when making a choice.
InvestingPortfolio
The complete collection of investments owned by an individual or institution.
InsurancePremium
The amount paid to an insurance company for coverage, typically monthly or annually.
CreditPrincipal
The original amount of money borrowed or invested, before interest is added.
Estate PlanningProbate
The court-supervised process of validating a will and distributing a deceased person's estate.
InvestingRebalancing
Periodically restoring a portfolio to its target asset allocation by buying and selling holdings.
Financial LiteracyRecession
A significant decline in economic activity lasting more than a few months.
CreditRefinance
Replacing an existing loan with a new one, typically at better terms or a lower rate.
RetirementRequired Minimum Distribution
The minimum amount you must withdraw annually from certain retirement accounts starting at a specified age.
RetirementRoth IRA
A retirement account funded with after-tax dollars; qualified withdrawals are tax-free.
InsuranceTerm Life Insurance
Life insurance that pays out only if you die during a fixed coverage period.
Estate PlanningTrust
A legal entity that holds assets for the benefit of named beneficiaries under specified terms.
InvestingYield
The income return on an investment, expressed as a percentage of price or cost.