Financial glossary

401(k) is a retirement savings plan offered by many employers in the United States, allowing employees to save and invest a portion of their paycheck before taxes are deducted.

50/30/20 Rule is a simple budgeting framework that helps you allocate your income into three categories: 50% for needs, 30% for wants, and 20% for savings or debt repayment.

ACH Transfer refers to the electronic movement of money between banks in the United States, facilitated by the Automated Clearing House Network. It's primarily used for transactions like direct deposits, payroll, and bill payments.

Amortization refers to the process of paying off a loan through regular installments over time, where each payment covers interest expense and reduces the principal balance.

Annual Fee refers to the amount you pay each year for the privilege of using certain credit cards. It is a form of maintenance cost for keeping your credit account open and active.

APR (Annual Percentage Rate) is the yearly cost of a loan expressed as a percentage, including interest and fees, helping you understand the true cost of borrowing.

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

Balance Transfer refers to the process of moving an outstanding credit card balance from one card to another, often to take advantage of lower interest rates.

Bitcoin is a digital currency that operates without a central authority, allowing users to send and receive value through a decentralized network using blockchain technology.

Blockchain is a digital ledger that records transactions across multiple computers in a way that makes the records secure and unchangeable.

Bond refers to a loan made by an investor to a borrower, typically a corporation or government, that pays interest over a fixed period before returning the principal amount.

Budgeting is the process of creating a plan to manage your money by allocating future income towards expenses, savings, and debt repayment.

Capital Gains refers to the increase in value of an asset or investment upon selling it for more than the original purchase price, resulting in a profit.

Capital Gains Tax is a tax on the profit you make when you sell an asset like stocks, bonds, or real estate for more than you paid for it.

Cash Back refers to a benefit where a credit card company returns a small percentage of the amount you spend on purchases as a reward, typically in the form of a statement credit or deposit into your bank account.

Certificate of Deposit (CD) is a savings account that holds a fixed amount of money for a fixed period, paying a higher interest rate than a regular savings account in exchange for leaving the money there until maturity.

Checking Account is a bank account that allows easy access to your money for daily transactions like deposits, withdrawals, and writing checks, often using a debit card.

Coinsurance refers to a percentage of costs that a consumer pays out-of-pocket after meeting their deductible, before their insurance covers the remaining balance.

Cold Wallet is a type of cryptocurrency wallet that stores private keys in a secure, offline environment, protecting them from online threats like hacking or theft.

Compound Interest refers to the process of earning interest on both the initial principal and the accumulated interest from previous periods, resulting in exponential growth over time.

Copay is a fixed amount you pay for a healthcare service, typically at the time of the visit, as part of your health insurance plan.

A Cosigner is a person who agrees to take legal responsibility for repayment of a loan if the primary borrower fails to make payments.

CPI (Consumer Price Index) is a measure that examines the average change over time in the prices paid by consumers for goods and services, like food, housing, clothing, and transportation.

Credit Limit refers to the maximum amount of money you can borrow with a credit card before exceeding the card’s contractual terms.

Credit Score is a numerical representation of a person's creditworthiness, often used by lenders to evaluate the risk of lending money to an individual.

Credit Utilization Ratio refers to the percentage of your total available credit that you're currently using. It is a key component in determining your credit score.

Debt-to-Income Ratio (DTI) is a financial metric that compares the total amount of your monthly debt payments to your monthly gross income, expressed as a percentage. Lenders use it to assess how well you manage monthly debts and gauge your ability to repay a loan.

Deductible refers to the amount of money you pay out of pocket for an insurance claim before the insurance company covers the remaining expenses.

Default refers to the failure to repay a loan according to a contract's terms. This typically occurs after missing one or more scheduled payments.

DeFi (Decentralized Finance) refers to a financial ecosystem built on blockchain technology that allows users to conduct financial transactions without intermediaries like banks or brokers.

Dividend refers to a distribution of a portion of a company's earnings paid to its shareholders, usually in the form of cash payments or additional shares.

Dividend Yield refers to the ratio of a company's annual dividend compared to its share price, indicating how much cash an investor is getting back for each dollar invested in the form of dividends.

Dow Jones Industrial Average is a stock market index that tracks 30 large, publicly-owned companies listed on stock exchanges in the United States.

Down Payment refers to the initial upfront portion of the total cost of a loan-financed purchase that a buyer pays out-of-pocket at the time of buying.

Earnings Per Share (EPS) is a metric that measures a company's profit allocated to each outstanding share of common stock, indicating its profitability and financial health.

Emergency Fund refers to money set aside specifically to cover unexpected expenses or financial emergencies, like car repairs or medical bills, to avoid financial stress or debt.

ETF (Exchange-Traded Fund) is a type of investment fund that holds a collection of assets, such as stocks or bonds, and is traded on stock exchanges, much like individual stocks.

Ethereum is a decentralized platform that enables developers to build and deploy smart contracts and decentralized applications (dApps) without any downtime, fraud, control, or interference from a third party.

Expense Ratio refers to the annual fee expressed as a percentage of your investment, which mutual funds and ETFs charge to cover their management costs.

FDIC Insurance refers to protection offered by the Federal Deposit Insurance Corporation, which insures deposits in banks and savings institutions up to a certain limit per depositor, per bank, in the event of a bank failure.

FICO Score is a numerical representation of a person's creditworthiness, commonly used by lenders to assess the risk of lending money or offering credit.

Foreign Transaction Fee is a charge applied by your credit card issuer for purchases made in a foreign currency or through a foreign bank.

Gas Fee is the charge paid by cryptocurrency users to process transactions on the blockchain network. It's essentially a reward for the miners who conduct this work, ensuring the network runs smoothly.

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

Hot Wallet refers to an online wallet used to store cryptocurrency that is connected to the internet, making it easy to access for transactions but potentially more vulnerable to cyber threats.

Index Fund is a type of mutual fund or exchange-traded fund (ETF) designed to match or track the components of a financial market index, such as the S&P 500.

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

Interest Rate refers to the percentage of a loan amount that a lender charges a borrower for the use of the money, typically expressed on an annual basis.

Liability Coverage refers to the part of an insurance policy that pays for injuries or damages that you are legally responsible for in an accident or incident.

Marginal Tax Rate refers to the percentage of tax applied to your income for each tax bracket in which you qualify. It indicates the rate at which your next dollar of taxable income would be taxed.

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

Mortgage refers to a loan specifically used for purchasing real estate, where the property itself serves as the collateral securing the debt.

Mutual Fund refers to a pooled investment vehicle that collects money from multiple investors to buy a diversified portfolio of stocks, bonds, or other securities.

NASDAQ is a global electronic marketplace for buying and selling securities, primarily known for featuring technology stocks like Apple, Google, and Microsoft.

Net Worth refers to the total value of all your assets minus your liabilities. It's a snapshot of your financial health at a particular moment in time.

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

P/E Ratio (Price-to-Earnings) refers to a financial metric used to evaluate the valuation of a company's stock relative to its earnings. It is calculated by dividing the current share price by the earnings per share (EPS).

PMI (Private Mortgage Insurance) is insurance that a homebuyer might be required to purchase if their down payment is less than 20% of the home's value. It protects the lender in case the borrower defaults on the loan.

Premium refers to the amount of money you pay periodically to an insurance company to keep your insurance policy active.

Principal refers to the original sum of money borrowed in a loan, or the amount of your loan balance that still needs to be paid, excluding interest.

Refinancing is the process of replacing an existing loan with a new one, usually to get better terms or a lower interest rate.

Rewards Points refers to the loyalty program credits you earn from using a credit card, which can be redeemed for various benefits like travel, gift cards, or cash back.

Roth IRA refers to a retirement savings account where contributions are made with after-tax dollars, allowing for tax-free withdrawals in retirement.

Routing Number is a nine-digit code used in the United States to identify a specific financial institution in transactions like checks and electronic payments.

Savings Account refers to a bank account designed for storing money that earns interest over time. It's a secure place for funds you don't need immediately, often offering higher interest rates than checking accounts.

Simple Interest is the amount of interest charged or earned on the original principal amount over a set period of time, without compounding.

SIPC Insurance refers to the protection offered by the Securities Investor Protection Corporation to investors in case their brokerage firm fails or assets are missing, covering up to $500,000, including a maximum of $250,000 for cash claims.

Smart Contract is a self-executing contract with the terms of the agreement directly written into lines of code on a blockchain, ensuring transactions occur automatically when certain conditions are met.

S&P 500 refers to an index of 500 of the largest publicly traded stocks in the U.S., designed to reflect the performance of the overall market.

Stablecoin refers to a type of cryptocurrency designed to maintain a stable value by being pegged to a reserve asset like the US dollar or gold.

Staking refers to the process of participating in a cryptocurrency network by holding and locking funds to support network operations, typically earning rewards in return.

Standard Deduction refers to a set amount of income not subject to tax that you can subtract from your taxable income on your tax return.

Stock refers to a type of security that gives holders a share of ownership in a company, granting them potential dividends and voting rights.

Tax Bracket refers to a range of incomes that are taxed at a particular rate by the federal government. Your tax rate increases or decreases depending on where your income falls within these distinct brackets.

Traditional IRA refers to a retirement savings account where contributions may be tax-deductible, and investment earnings grow tax-deferred until withdrawal during retirement.

Transfer Partners refers to airlines, hotels, and other companies where you can transfer points or miles you earn from your credit card rewards program to get perks like flights or hotel stays.

Treasury Bond is a long-term debt security issued by the U.S. Department of the Treasury to support government spending, with a maturity period typically ranging from 10 to 30 years.

W-2 Form is a tax document used in the United States that reports an employee's annual wages and the amount of taxes withheld from their paycheck by their employer.

Wire Transfer refers to an electronic method of transferring money between people or businesses, usually using bank networks or a transfer service company like Western Union.

Yield refers to the earnings generated and realized on an investment over a particular period, expressed as a percentage or ratio.