Financial glossary

A 401(k) is an employer-sponsored retirement plan that allows employees to save and invest a portion of their paycheck before taxes.

The 50/30/20 rule is a budgeting guideline: 50% of income to needs, 30% to wants, and 20% to savings and debt.

ACH is an electronic bank-to-bank transfer processed through the Automated Clearing House network, usually taking 1-3 business days.

APR is the annual cost of borrowing money, expressed as a percentage, including fees and interest.

APY is the total amount of interest earned on a deposit over one year, including compound interest.

Amortization is the process of spreading loan payments over time, with each payment covering interest and principal.

An annual fee is a yearly charge imposed by a credit card issuer for the privilege of using the card.

A balance transfer moves debt from one credit card to another, usually to take advantage of a lower interest rate.

Bitcoin is the first and largest cryptocurrency, a decentralized digital currency that enables peer-to-peer transactions without intermediaries.

A blockchain is a decentralized digital ledger that records transactions across a network of computers.

A bond is a fixed-income debt instrument where an investor loans money to a borrower for a defined period at a fixed interest rate.

Budgeting is the process of creating a plan for how to spend and save your money.

The CPI measures changes in the average prices paid by consumers for a basket of goods and services over time.

Capital gains are profits from selling an asset (stock, real estate, etc.) for more than its purchase price.

Capital gains tax is the tax owed on the profit from selling investments, with rates depending on how long you held the asset.

Cash back is a credit card reward that returns a percentage of your spending as cash or statement credits.

A CD is a savings product that earns interest on a lump sum for a fixed period, usually with a penalty for early withdrawal.

A checking account is a bank account used for everyday transactions like deposits, withdrawals, and bill payments.

Coinsurance is the percentage of medical costs you share with your insurer after meeting your deductible.

A cold wallet is an offline cryptocurrency storage device that protects digital assets from online hacking.

Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods.

A copay is a fixed amount you pay for a covered healthcare service, like a doctor visit.

A cosigner is someone who agrees to repay a loan if the primary borrower cannot, helping the borrower qualify.

A credit limit is the maximum amount a lender allows you to borrow on a credit card or line of credit.

A credit score is a three-digit number that represents your creditworthiness, based on your credit history.

Credit utilization is the percentage of your available credit that you are currently using.

DeFi refers to financial services built on blockchain technology that operate without traditional intermediaries like banks.

DTI compares your total monthly debt payments to your gross monthly income, used by lenders to assess borrowing risk.

A deductible is the amount you pay out of pocket before your insurance coverage begins to pay.

A loan default occurs when a borrower fails to make required payments, triggering penalties and credit damage.

A dividend is a payment made by a company to its shareholders, usually from profits.

Dividend yield measures how much a company pays in dividends relative to its stock price.

The Dow Jones is a stock market index that tracks 30 large publicly owned US companies.

A down payment is the upfront cash you pay when buying a home, typically 3-20% of the purchase price.

An ETF is a basket of securities that trades on a stock exchange like a single stock.

EPS is the portion of a company profit allocated to each outstanding share of common stock.

An emergency fund is a cash reserve set aside to cover unexpected expenses, typically 3-6 months of living expenses.

Ethereum is a blockchain platform that enables smart contracts and decentralized applications, with ETH as its native cryptocurrency.

The expense ratio is the annual fee that mutual funds and ETFs charge shareholders as a percentage of assets.

FDIC insurance protects depositors by insuring bank deposits up to $250,000 per depositor per bank.

A FICO score is the most widely used credit score model, ranging from 300 to 850.

A foreign transaction fee is a surcharge charged by credit cards for purchases made in a foreign currency.

A gas fee is the transaction cost paid to validators for processing operations on the Ethereum blockchain.

A high-yield savings account offers a significantly higher interest rate than a traditional savings account.

A hot wallet is a cryptocurrency wallet connected to the internet, used for active trading and transactions.

An index fund is a mutual fund or ETF designed to track the performance of a market index like the S&P 500.

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

An interest rate is the percentage a lender charges a borrower for the use of money, or that a bank pays on deposits.

Liability coverage pays for damages you cause to others in an accident, including bodily injury and property damage.

The marginal tax rate is the percentage of tax applied to the last dollar of your taxable income.

Market cap is the total market value of a company outstanding shares of stock.

A mortgage is a loan used to buy real estate, where the property serves as collateral.

A mutual fund pools money from multiple investors to buy a diversified portfolio of stocks, bonds, or other securities.

The NASDAQ is a stock exchange and market index that is heavily weighted toward technology companies.

Net worth is the difference between what you own (assets) and what you owe (liabilities).

An overdraft occurs when you spend more than your available balance, and the bank covers the difference — usually for a fee.

The P/E ratio measures a stock price relative to its earnings per share, helping assess valuation.

PMI is insurance required by lenders when a borrower makes a down payment of less than 20% on a home.

An insurance premium is the recurring payment you make to keep your insurance policy active.

The principal is the original amount of money borrowed or invested, before interest.

Refinancing replaces an existing loan with a new one, typically to get a lower interest rate or different terms.

Rewards points are loyalty credits earned on credit card purchases that can be redeemed for travel, merchandise, or cash.

A Roth IRA is a retirement account where contributions are made with after-tax dollars, and qualified withdrawals are tax-free.

A routing number is a nine-digit code that identifies which bank holds your account, used for direct deposits and transfers.

The S&P 500 is a stock market index tracking the performance of 500 large US companies.

SIPC protects investors if a brokerage firm fails, covering up to $500,000 in securities and $250,000 in cash.

A savings account is a bank deposit account that earns interest on the balance.

Simple interest is interest calculated only on the original principal amount.

A smart contract is a self-executing program stored on a blockchain that automatically enforces the terms of an agreement.

A stablecoin is a cryptocurrency designed to maintain a stable value by pegging it to a reserve asset like the US dollar.

Staking is the process of locking up cryptocurrency to support a blockchain network and earn rewards.

The standard deduction is a fixed dollar amount that reduces the income you are taxed on, and most filers use it instead of itemizing.

A stock represents a share of ownership in a company, giving the holder a claim on part of the company assets and earnings.

A tax bracket is a range of income taxed at a specific rate under the progressive US federal income tax system.

A Traditional IRA is a retirement account where contributions may be tax-deductible, and withdrawals in retirement are taxed as income.

Transfer partners are airline and hotel loyalty programs that accept point transfers from credit card rewards programs.

Treasury bonds are long-term government debt securities issued by the US Treasury with maturities of 20 or 30 years.

A W-2 is a tax form employers send to employees summarizing annual wages and taxes withheld.

A wire transfer is an electronic transfer of funds between banks that typically settles within 24 hours.

Yield is the income returned on an investment, usually expressed as an annual percentage.