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Money Vocabulary
Financial terms glossary
Financial literacy starts with the language. Here are plain-English definitions of the terms you will run into most often.
- APR (Annual Percentage Rate)
- The yearly cost of borrowing money, including interest and certain fees, expressed as a percentage.
- Asset
- Anything of value that you own, such as cash, savings, a car, or a home.
- Budget
- A plan that compares your income to your expenses so you can decide how to spend and save.
- Compound interest
- Interest calculated on both your original amount and previously earned interest, helping savings grow faster over time.
- Credit
- The ability to borrow money or access goods and services now with a promise to pay later.
- Credit bureau
- A company that collects and maintains consumer credit information and produces credit reports.
- Credit report
- A detailed record of your borrowing and repayment history, maintained by credit bureaus.
- Credit score
- A number that summarizes your credit history and helps lenders assess lending risk.
- Credit utilization
- The percentage of your available credit you are currently using. Lower is generally better.
- Debt
- Money that you owe to another person or institution, often with interest.
- Emergency fund
- Money set aside to cover unexpected costs, often three to six months of essential expenses.
- Fixed expense
- A regular cost that stays roughly the same each month, such as rent or insurance.
- Interest
- The cost of borrowing money, or the return you earn on savings, usually shown as a percentage.
- Liability
- A financial obligation or debt that you owe, the opposite of an asset.
- Liquidity
- How quickly and easily an asset can be turned into cash without losing value.
- Net worth
- What you own (assets) minus what you owe (liabilities). A snapshot of your financial position.
- Principal
- The original amount of money borrowed or invested, before interest is added.
- Variable expense
- A cost that changes from month to month, such as groceries or utility bills.
Put these terms to work
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