Accounts: A way an organization, such as a bank, manages and holds on to your money.
- Savings: An account that is meant to be held for a longer period of time without spending it. This account generally earns a small amount of interest the longer you keep the money in the account.
- Checking: An account that is meant to be used for regular spending. Unlike savings, you won’t earn any interest if you don’t spend the money.
Annual Percentage Rate (APR): The interest rate for a loan’s balance that you will pay at the due date. The lower the APR the better.
- Fixed rate: An APR that stays the same the entire length of time you take to pay off of the loan.
- Variable rate: An APR that changes during the time you take to pay off of the loan.
Assets: Anything you own that may be worth money. This term usually refers to the cash in your wallet, bank accounts, and expensive items you own, such as cars – or even an antique from your grandmother.
Balance: Two possible definitions:
- 1. The amount of money owed to a lender, or
- 2. The amount of money you currently have in an account.
Bankruptcy: A very extreme legal move made when you can no longer pay off your debts.
Bond: An investment in which you loan an organization (such as a bank or business) money over a period of time during which they pay you interest.
Borrower: The person who requests and receives a loan or takes on a debt.
Budget: A way of organizing your money that looks at how much you earn versus how much you spend over a period of time (usually a week or a month). A good budget should be able to tell you how much you can spend or save after your money is spent on required items, such as a car payment
Consolidate: This usually refer to taking all of your debts from different investors and combining them into one, new account.
Cosigner: A person who vouches for another person by signing for her when she takes on debts, such as a student loan. The cosigner becomes responsible for the loan or the debt if the original person does not pay.
Credit card: A card that allows the credit card holder to borrow money immediately. They then charge fees and interest on the balance.
Credit score (FICO): A three- digit score ranging from 300 to – 850 that grades you on how you have managed your money so far. The higher the score, the more likely you will get approved on a loan or be able to pay lower interest on a credit card. The lower the score, the riskier it is for a bank or lender to loan you money.
- Credit report: This is like a report card that factors in your credit score (such as your payment and borrowing history), the amount you owe, the length of time you have been borrowing, and the number of applications you have out there. You can request a free copy of your credit report once a year through annualcreditreport.com.
Currency: Money issued by a government, such as a U.S. dollar, British pound, or European Euro.
Debt: Amount of money you owe a person, bank, or company.
Debit card: Card from a bank that gives you instant access to the money in your bank accounts. In most cases, you cannot borrow money with a debit card.
Default: Failing to pay back what you owe over a long period of time.
Delinquent: Failing to meet a due date on a bill.
Emergency fund: Typically a savings account that is used specifically for unplanned, unforeseen emergencies, such as a necessary car repair or an unexpected medical bill.
Frugal: The way you might describe a person or a way of reducing regular costs, such as using coupons while grocery shopping or walking instead of driving to work.
Income: Money that you earn.
- Gross Income: Money that you earn before taxes and other deductions are taken out.
- Net Income: Money that you earn, minus the cost it takes you to earn that money. For example, a bake sale has a gross income of $500. Supplies cost $200. The net income is $500 – $200, or = $300.
Income tax: A tax on your income paid to the local, state, and/or federal government, depending on where you earn that money.
Insurance: A contract with a company or bank that protects you in exchange for you paying into the system. For example, if you pay for car insurance, the company would pay for damages if you were in an accident. Other types of insurance include home or rental insurance and life insurance.
- 1. The regular (usually monthly) cost of borrowing money from a bank or company.
- 2. Regular money paid back to you for lending your money.
Investment: Giving money to a company, bank, or project with the expectation that you will, over a long period of time, receive back more than what you committed originally. There are several types of investments:
- Business: Business investments are given directly to the business owner in return for a part of the profit.
- Lending or Peer-to-Peer: With you acting as the bank, your investment goes to an individual who then pays off the balance in addition to fees and interest.
- Mutual Funds: Many investors coming together to invest in items such as bonds or stocks. It is managed and overseen by a company or professional who decides where the money should go to.
- Real Estate: Owning a property that can be sold or rented for more money than originally paid.
- Stocks: Ownership of a very small portion of a business. When the company makes more money, the value of your stock rises and you profit.
Mortgage: Money loaned for the purpose of purchasing a property such as a home.
Net worth: The total of all of your assets, minus all of your debts. If you have $5,000- worth of assets, but owe $500 for a credit card, your net worth would be $4,500.
Promissory note: A signed contract in which you agree to pay back the balance of a loan, plus any fees, to the lender.
Return: The actual amount of profit made from an investment (usually written in a percentage).
Retirement plan: A roadmap to saving up for retirement that may include specific investments.
- 401k or 403b: Retirement savings plan set up by an employer in which the employee can invest money from their paycheck before taxes. It’s then invested so that it earns interest until the employee reaches retirement age.
- IRA or Roth IRA: A personal retirement account where you can place your money and it earns interest. There are several types of IRAs that differ between taxes you pay on the investments and if/when you can withdraw your money before a certain age.
Will: A document that states what should happen to your assets after you have died.
Yield: The anticipated profit made from an investment.
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Team CentSai Education