Financial glossary

401(k) is a retirement savings plan offered by many American employers that allows employees to save and invest a portion of their paycheck before taxes are taken out.

50/30/20 Rule refers to a budgeting method that allocates 50% of your income to needs, 30% to wants, and 20% to savings and debt repayment.

ACH Transfer refers to the electronic movement of money between banks through the Automated Clearing House network. It's commonly used for things like direct deposit or automatic bill payments.

Amortization refers to the gradual reduction of debt through regular, scheduled payments over a specified period of time, which cover both the loan principal and the interest on the loan.

Annual Fee refers to a charge that a credit card issuer imposes on a cardholder every year just for having the card, independent of any spending or other fees incurred.

APR (Annual Percentage Rate) is the annualized interest rate that reflects the cost of borrowing over a year, including any fees or additional costs associated with the loan.

APY (Annual Percentage Yield) is the annual rate of return on an investment or savings account, which includes the effect of compounding interest over a year.

Balance Transfer refers to the process of moving an outstanding debt from one credit card to another, typically to take advantage of a lower interest rate on the new card.

Bitcoin is a type of digital currency that allows people to transfer value over the internet without the need for a central authority such as a bank or government.

Blockchain is a digital database that stores information in a way that makes it difficult to change or hack, using a distributed ledger technology.

Bond is a loan where you, as an investor, lend money to a company or government in exchange for periodic interest payments and the return of the bond's face value when it matures.

Budgeting is a method for managing money by tracking income and expenses, allowing individuals to plan their finances and make informed spending decisions.

Capital Gains refers to the profit made from selling an asset for more than its purchase price, commonly encountered with stocks, real estate, or other investments.

Capital Gains Tax is a tax on the profit realized when you sell an asset for more than its purchase price, such as stocks, real estate, or bonds.

Cash Back refers to a reward program offered by credit card issuers where a percentage of the amount spent on purchases is returned to the cardholder, typically as a credit on their statement or as cash back in their account.

Certificate of Deposit (CD) refers to a savings account with a fixed interest rate and fixed date of withdrawal, known as the maturity date. It's offered by banks where you deposit money for a specified term to earn interest.

Checking Account is a type of bank account that allows you to deposit and withdraw money easily through checks, ATMs, and debit cards, often without interest but offering high liquidity for everyday transactions.

Coinsurance refers to the percentage of costs of a covered healthcare service you pay after you've paid your deductible. It's a cost-sharing agreement between you and your insurer.

Cold Wallet refers to an offline storage method for cryptocurrency that keeps digital assets safe from online threats like hacking or malware.

Compound Interest is a method of calculating interest where the interest earned also earns interest on subsequent periods, leading to growth over time.

Copay is a fixed amount you pay for a healthcare service at the time of the service, with the rest covered by your insurance.

Cosigner refers to a person who agrees to take equal responsibility for repaying a loan if the primary borrower fails to do so, providing additional assurance to the lender.

CPI (Consumer Price Index) is a measurement that examines the average change in prices paid by consumers for goods and services over time, providing an indication of inflation or deflation in an economy.

Credit Limit refers to the maximum amount of money you can borrow on a credit card before you need to pay back some of the borrowed money to continue using the card.

Credit Score is a numerical rating that represents a person's creditworthiness based on their credit history, typically ranging from 300 to 850.

Credit Utilization Ratio is the percentage of your total credit limit that you are currently using on your credit cards.

Debt-to-Income Ratio (DTI) is a financial measurement that compares the total of a consumer's monthly debt payments to their gross monthly income, used by lenders to assess borrowing risk.

Deductible refers to the amount you pay out-of-pocket for an insurance claim before your insurance coverage kicks in.

Default refers to the failure to meet the legal obligations of a loan, implying a borrower has not made the due payments on time or at all.

DeFi (Decentralized Finance) refers to a financial system built on blockchain technology that removes traditional intermediaries like banks, allowing for direct peer-to-peer transactions.

Dividend refers to a payment made by a corporation to its shareholders, usually as a distribution of profits or reserves.

Dividend Yield refers to a financial ratio that shows how much a company pays out in dividends each year relative to its stock price. It helps investors understand the return they're earning through dividends from their investment in a stock.

Dow Jones Industrial Average is a stock market index that measures the stock performance of 30 large companies in the United States.

Down Payment refers to the initial payment made upfront when purchasing something expensive, like a house or a car, instead of financing the entire cost through a loan.

Earnings Per Share (EPS) is a financial metric that measures the amount of a company's profit allocated to each outstanding share of common stock, indicating the company's profitability on a per-share basis.

Emergency Fund refers to cash savings set aside for unexpected expenses or financial emergencies, like medical bills or car repairs, to avoid debt or financial insecurity.

ETF (Exchange-Traded Fund) is a type of investment fund that is traded on stock exchanges, much like stocks. It holds a collection of assets like stocks, bonds, or other securities, providing investors with diversified exposure at a relatively low cost.

Ethereum is a decentralized platform that enables the creation of smart contracts and decentralized applications (dApps) using blockchain technology.

Expense Ratio refers to the annual fee that mutual funds and ETFs charge their shareholders, expressed as a percentage of assets under management.

FDIC Insurance is a protection offered by the Federal Deposit Insurance Corporation (FDIC) that safeguards your bank deposits against bank failures, ensuring you don't lose your insured funds up to a certain limit.

FICO Score is a three-digit number that represents a person's creditworthiness, used by lenders to assess the risk of lending money to a borrower.

Foreign Transaction Fee is a charge by your credit card issuer for transactions made in a foreign currency or country outside your own.

Gas Fee refers to the cost required to perform a transaction or execute a contract on a blockchain network. It's a fundamental part of using cryptocurrencies like Ethereum, covering the computational expense to process network operations.

High-Yield Savings Account is a type of savings account that offers a higher interest rate than traditional savings accounts, allowing your money to grow more quickly over time.

Hot Wallet refers to a cryptocurrency wallet that is connected to the internet, allowing for easy and quick access to your digital assets for transactions or trading.

Index Fund refers to a type of mutual fund or exchange-traded fund (ETF) that aims to replicate the performance of a specific financial market index, such as the S&P 500, by holding a similar portfolio of investments.

Inflation refers to the rate at which the general level of prices for goods and services rises, eroding purchasing power.

Interest Rate refers to the percentage charged on a loan or paid on savings, indicating the cost of borrowing or the reward for saving money.

Liability Coverage is insurance that provides protection against claims resulting from injuries and damage to other people or property.

Marginal Tax Rate refers to the percentage of tax applied to your income for each tax bracket in which you qualify. It’s the rate you pay on an additional dollar of income, affecting your take-home pay most noticeably when your income moves into a higher bracket.

Market Capitalization is the total value of a company's outstanding shares of stock, calculated by multiplying the current share price by the total number of outstanding shares.

Mortgage is a type of loan used to buy a home, where the home itself serves as collateral for the loan.

Mutual Fund refers to an investment vehicle that pools money from many investors to buy a diversified portfolio of stocks, bonds, or other securities managed by a professional fund manager.

NASDAQ is a global electronic marketplace for buying and selling securities, primarily known for listing technology and internet-based companies.

Net Worth is the total value of all your assets minus all your liabilities, showing what you own compared to what you owe.

Overdraft is a situation where you withdraw more money from your bank account than you have deposited, resulting in a negative balance.

P/E Ratio (Price-to-Earnings) is a financial metric that compares a company's share price to its per-share earnings, commonly used to evaluate if a stock is over or under-valued.

PMI (Private Mortgage Insurance) is a type of insurance that lenders require from homebuyers who put down less than 20% on a home purchase, protecting the lender against losses if the borrower defaults on the loan.

Premium refers to the amount you pay an insurance company regularly to maintain coverage and extend protection against potential risks or losses.

Principal refers to the initial amount of money borrowed or the amount of the loan that remains unpaid, not including interest or fees.

Refinancing refers to the process of replacing an existing loan with a new loan that typically offers better terms, such as lower interest rates or reduced monthly payments.

Rewards Points are a type of incentive offered by credit card companies, where cardholders earn points for each dollar spent which can be redeemed for various rewards like travel, gift cards, or cash back.

Roth IRA is a type of retirement savings account that offers tax-free growth and tax-free withdrawals in retirement, given certain conditions are met.

Routing Number is a nine-digit code used to identify a financial institution within the United States, especially for the purpose of processing paper checks and electronic transactions.

Savings Account is a type of bank account where you can store your money safely while earning a small amount of interest over time.

Simple Interest is the cost of borrowing money or the return on an investment, calculated only on the original principal amount over a set period at a specified interest rate.

SIPC Insurance refers to the protection offered by the Securities Investor Protection Corporation to investors if their brokerage firm fails, covering up to $500,000 per customer, including a $250,000 limit for cash claims.

Smart Contract refers to a self-executing program on a blockchain that automatically enforces and executes terms of a contract without the need for intermediaries.

S&P 500 refers to a stock market index that tracks the 500 largest publicly traded companies in the United States, providing a broad snapshot of the U.S. economy's health and investor sentiment.

Stablecoin refers to a type of cryptocurrency designed to have a stable value by being pegged to a reserve of assets like fiat currency or precious metals.

Staking is the process of participating in a cryptocurrency network by locking up crypto assets to support the network's operations, often earning rewards in return.

Standard Deduction refers to the fixed dollar amount that reduces the amount of income on which you are taxed, and it varies depending on your taxpayer status (single, married, etc.).

Stock refers to ownership shares in a corporation, providing holders with a claim on part of the company's assets and earnings.

Tax Bracket refers to a range of income that is taxed at a particular rate in a progressive tax system.

Traditional IRA refers to a retirement savings account that allows individuals to contribute pre-tax income, with investments growing tax-deferred until withdrawal during retirement.

Transfer Partners refers to the alliance between a credit card issuer and other travel or loyalty programs, allowing customers to transfer rewards points to these connected programs.

Treasury Bond is a long-term debt security issued by the U.S. government with a fixed interest rate and maturity period of more than 10 years.

W-2 Form is a tax document that employers in the U.S. are required to send to each employee and the IRS at the end of the year showing total earnings and taxes withheld from paychecks.

Wire Transfer is a method of electronically transferring money from one bank to another using a secure system operated by banks and similar financial institutions.

Yield refers to the income returned on an investment, such as interest or dividends, usually expressed as a percentage of the investment’s cost or current market value.