Knowledge builds freedom
Glossary A–Z
Learn financial terms in simple language, so you can make smarter decisions with confidence.
Featured Terms
Browse all terms →Compound interest
How money can grow over time—and why compounding matters.
Learn more about Compound interestDiversification
Spread your investments to reduce dependence on any one asset.
Learn more about DiversificationCredit score
Understand one number lenders use to assess credit risk.
Learn more about Credit scoreInflation
Why prices rise and what that means for your money.
Learn more about InflationAll Terms
101 terms| Term | Definition | Category | Lesson |
|---|---|---|---|
| Amortization | The gradual repayment of a loan through scheduled payments that cover interest and reduce the principal over time. | Credit & Debt | Learn more → about Amortization |
| Annual percentage rate (APR) | The yearly cost of borrowing, expressed as a percentage. It usually includes interest and may include certain fees. | Credit & Debt | Learn more → about Annual percentage rate (APR) |
| Annual percentage yield (APY) | The yearly return on a deposit after accounting for compound interest. It helps compare savings products more fairly. | Banking & Saving | Learn more → about Annual percentage yield (APY) |
| Annuity | A financial product designed to provide payments over time, often during retirement. Fees, guarantees, and risks vary by contract. | Retirement | Learn more → about Annuity |
| Asset | Something you own that has financial value, such as cash, property, savings, or investments. | Investing | Learn more → about Asset |
| Asset allocation | How an investment portfolio is divided among asset types, such as cash, bonds, and stocks, based on goals and risk. | Investing | Learn more → about Asset allocation |
| Balance | The amount of money currently held in an account or still owed on a debt. | Banking & Saving | Learn more → about Balance |
| Bankruptcy | A legal process for people or businesses unable to repay debts. Rules and consequences differ by country. | Credit & Debt | Learn more → about Bankruptcy |
| Beneficiary | A person or organization named to receive money or assets from insurance, an account, a trust, or an estate. | Insurance | Learn more → about Beneficiary |
| Bond | A debt investment in which an investor lends money to a government or company in exchange for interest and repayment. | Investing | Learn more → about Bond |
| Budget | A plan for how income will be used for needs, goals, debt payments, savings, and flexible spending. | Budgeting | Learn more → about Budget |
| Bull market | A period when investment prices generally rise and confidence is strong. It does not guarantee that every asset will gain. | Investing | Learn more → about Bull market |
| Capital gain | The profit made when an asset is sold for more than its purchase cost. Tax treatment varies by location. | Investing | Learn more → about Capital gain |
| Cash flow | The movement of money into and out of a household or business during a period. | Budgeting | Learn more → about Cash flow |
| Collateral | An asset pledged to secure a loan. The lender may claim it if the borrower does not repay as agreed. | Credit & Debt | Learn more → about Collateral |
| Compound interest | Interest calculated on the original amount and on interest already added, causing savings or debt to grow faster over time. | Banking & Saving | Learn more → about Compound interest |
| Consumer price index (CPI) | A measure tracking changes in the prices of a selected basket of consumer goods and services. | Economy | Learn more → about Consumer price index (CPI) |
| Credit report | A record of a person’s borrowing and repayment history, compiled by a credit-reporting organization where such systems exist. | Credit & Debt | Learn more → about Credit report |
| Credit score | A number used by some lenders to estimate credit risk, based on information such as payment history and debt levels. | Credit & Debt | Learn more → about Credit score |
| Debit card | A payment card that normally takes money directly from a linked bank account. | Banking & Saving | Learn more → about Debit card |
| Debt | Money or value owed to another person or organization under agreed repayment terms. | Credit & Debt | Learn more → about Debt |
| Deductible | The amount a policyholder must pay toward a covered loss before an insurer begins paying, subject to the policy. | Insurance | Learn more → about Deductible |
| Default | Failure to meet a financial obligation, such as missing required loan payments or breaking repayment terms. | Credit & Debt | Learn more → about Default |
| Diversification | Spreading money across different assets or investments to reduce dependence on any single one. | Investing | Learn more → about Diversification |
| Dividend | A payment a company may make to shareholders from profits or reserves. Dividends are not guaranteed. | Investing | Learn more → about Dividend |
| Emergency fund | Money kept safe and accessible for urgent, unexpected expenses or a temporary loss of income. | Banking & Saving | Learn more → about Emergency fund |
| Equity | Ownership value. For property, it is usually the asset’s value minus related debt; for companies, it represents ownership shares. | Investing | Learn more → about Equity |
| Estate planning | Preparing how assets, responsibilities, and wishes should be handled during incapacity or after death. | Retirement | Learn more → about Estate planning |
| Exchange rate | The price of one currency measured in another. Fees and provider margins can affect the rate a customer receives. | Banking & Saving | Learn more → about Exchange rate |
| Exchange-traded fund (ETF) | An investment fund traded on an exchange that can hold stocks, bonds, commodities, or other assets. | Investing | Learn more → about Exchange-traded fund (ETF) |
| Expense ratio | The annual operating cost of a fund, shown as a percentage of the money invested. | Investing | Learn more → about Expense ratio |
| Fee | A charge for a product, service, transaction, account, or professional activity. | Banking & Saving | Learn more → about Fee |
| Financial goal | A specific money result you want to achieve, ideally with a target amount and time frame. | Budgeting | Learn more → about Financial goal |
| Fixed interest rate | An interest rate that stays unchanged for an agreed period, making scheduled payments more predictable. | Banking & Saving | Learn more → about Fixed interest rate |
| Foreclosure | A legal process through which a lender may take and sell property after serious mortgage default. | Credit & Debt | Learn more → about Foreclosure |
| Fraud | Intentional deception used to obtain money, property, data, or another benefit unlawfully. | Scams | Learn more → about Fraud |
| Gross income | Income before taxes, pension contributions, insurance, or other deductions are removed. | Budgeting | Learn more → about Gross income |
| Growth investing | An approach focused on companies expected to grow revenue or profits faster than average, usually with higher uncertainty. | Investing | Learn more → about Growth investing |
| Guarantor | A person or organization that agrees to repay a debt if the main borrower fails to do so. | Credit & Debt | Learn more → about Guarantor |
| Hedge | An investment or action intended to reduce the effect of a specific financial risk, though it may add cost or new risks. | Investing | Learn more → about Hedge |
| High-yield savings account | A savings account offering a relatively high interest rate compared with standard accounts available in the same market. | Banking & Saving | Learn more → about High-yield savings account |
| Household expenses | The costs of daily life, including housing, utilities, food, transport, care, and other shared needs. | Budgeting | Learn more → about Household expenses |
| Income tax | A tax charged on income under the laws of a country or local authority. | Taxes | Learn more → about Income tax |
| Index fund | A fund designed to track a selected market index rather than relying mainly on active security selection. | Investing | Learn more → about Index fund |
| Inflation | A broad increase in prices over time that reduces how much the same amount of money can buy. | Economy | Learn more → about Inflation |
| Installment loan | A loan repaid through scheduled payments over an agreed period, such as a personal, vehicle, or home loan. | Credit & Debt | Learn more → about Installment loan |
| Insurance | A contract that transfers specified financial risks to an insurer in exchange for premiums, subject to terms and exclusions. | Insurance | Learn more → about Insurance |
| Interest rate | The percentage charged for borrowing money or paid for keeping money in a savings product. | Banking & Saving | Learn more → about Interest rate |
| Joint account | An account owned or controlled by more than one person, with rights and responsibilities set by the provider and law. | Banking & Saving | Learn more → about Joint account |
| Junk bond | A bond with a lower credit rating and higher default risk, usually offering a higher potential yield. | Investing | Learn more → about Junk bond |
| Know Your Customer (KYC) | Identity and verification checks financial providers use to understand customers and meet legal requirements. | Banking & Saving | Learn more → about Know Your Customer (KYC) |
| Late fee | A charge imposed when a required payment is not made by its due date. | Credit & Debt | Learn more → about Late fee |
| Liability | A financial obligation or amount owed, such as a loan, unpaid bill, or other debt. | Budgeting | Learn more → about Liability |
| Life insurance | Insurance designed to pay a benefit after the insured person’s death, subject to the policy’s terms. | Insurance | Learn more → about Life insurance |
| Liquidity | How quickly an asset can be converted into usable cash without a major loss in value. | Banking & Saving | Learn more → about Liquidity |
| Loan-to-value ratio (LTV) | A loan amount divided by the value of the asset securing it, commonly used in mortgage lending. | Credit & Debt | Learn more → about Loan-to-value ratio (LTV) |
| Market capitalization | The market value of a company’s outstanding shares, calculated by multiplying share price by shares outstanding. | Investing | Learn more → about Market capitalization |
| Minimum payment | The smallest amount a lender requires by a due date. Paying only this amount can greatly extend repayment. | Credit & Debt | Learn more → about Minimum payment |
| Money market account | A deposit account that may offer interest and limited transaction features. Protection and rules vary by country and provider. | Banking & Saving | Learn more → about Money market account |
| Mortgage | A long-term loan normally used to buy property, with the property serving as security for the loan. | Credit & Debt | Learn more → about Mortgage |
| Mutual fund | A pooled investment vehicle that collects money from many investors to buy a portfolio managed under a stated strategy. | Investing | Learn more → about Mutual fund |
| Net income | Income remaining after applicable taxes, deductions, and expenses are removed. | Budgeting | Learn more → about Net income |
| Net worth | The value of assets minus liabilities; a financial snapshot, not a measure of personal worth. | Budgeting | Learn more → about Net worth |
| Nominal return | An investment return before adjusting for inflation. | Economy | Learn more → about Nominal return |
| Opportunity cost | The value of the best alternative given up when money, time, or resources are used for another choice. | Budgeting | Learn more → about Opportunity cost |
| Origination fee | A charge a lender may collect for processing or setting up a new loan. | Credit & Debt | Learn more → about Origination fee |
| Overdraft | A negative account balance created when payments exceed available funds, sometimes resulting in fees or interest. | Banking & Saving | Learn more → about Overdraft |
| Payday loan | A short-term, high-cost loan usually due around the borrower’s next payday. Costs can be extremely high. | Credit & Debt | Learn more → about Payday loan |
| Pension | A retirement arrangement designed to provide income after employment, funded according to plan or government rules. | Retirement | Learn more → about Pension |
| Portfolio | The collection of investments owned by a person, fund, or organization. | Investing | Learn more → about Portfolio |
| Premium | The amount paid for insurance coverage, usually monthly, quarterly, or annually. | Insurance | Learn more → about Premium |
| Principal | The original amount saved, invested, or borrowed before interest and fees are added. | Banking & Saving | Learn more → about Principal |
| Purchasing power | The amount of goods and services money can buy; inflation generally reduces it over time. | Economy | Learn more → about Purchasing power |
| Qualifying income | Income a lender accepts when deciding whether a borrower meets requirements for a loan. | Credit & Debt | Learn more → about Qualifying income |
| Quarterly review | A financial check-in every three months to assess progress, correct problems, and update goals. | Budgeting | Learn more → about Quarterly review |
| Recession | A broad and significant decline in economic activity lasting more than a brief slowdown. | Economy | Learn more → about Recession |
| Refinancing | Replacing an existing loan with a new one, often to change the rate, term, payment, or lender. | Credit & Debt | Learn more → about Refinancing |
| Remittance | Money sent to another person or place, often across borders. Exchange rates and transfer fees affect the amount received. | Banking & Saving | Learn more → about Remittance |
| Retirement account | An account or plan intended for long-term retirement saving, often with special tax or withdrawal rules. | Retirement | Learn more → about Retirement account |
| Return | The gain or loss from an investment over a period, including price changes and income such as interest or dividends. | Investing | Learn more → about Return |
| Risk | The possibility that an actual financial result will differ from what was expected, including the possibility of loss. | Investing | Learn more → about Risk |
| Savings | Income set aside for future needs, goals, or emergencies instead of being spent now. | Banking & Saving | Learn more → about Savings |
| Savings rate | The percentage of income saved during a period. | Banking & Saving | Learn more → about Savings rate |
| Secured debt | Debt backed by collateral that a lender may claim if the borrower fails to repay. | Credit & Debt | Learn more → about Secured debt |
| Simple interest | Interest calculated only on the original principal, not on previously added interest. | Banking & Saving | Learn more → about Simple interest |
| Solvency | The ability to meet long-term financial obligations because assets and income are sufficient relative to debts. | Banking & Saving | Learn more → about Solvency |
| Stock | A unit of ownership in a company. Its price can rise or fall, and shareholder returns are not guaranteed. | Investing | Learn more → about Stock |
| Tax | A compulsory payment collected by a government under local laws to fund public services and activities. | Taxes | Learn more → about Tax |
| Term life insurance | Life insurance that provides coverage for a fixed period and normally pays only if death occurs during that term. | Insurance | Learn more → about Term life insurance |
| Time value of money | The idea that money available today can be worth more than the same amount received later because it can be used or invested. | Banking & Saving | Learn more → about Time value of money |
| Transaction fee | A charge for completing a payment, transfer, trade, withdrawal, or other financial transaction. | Banking & Saving | Learn more → about Transaction fee |
| Treasury bond | A longer-term debt security issued by a national government. Terms, risks, and names vary by country. | Investing | Learn more → about Treasury bond |
| Underwriting | The process of evaluating risk before approving insurance, a loan, or a securities issue. | Insurance | Learn more → about Underwriting |
| Unsecured debt | Debt not backed by a specific asset, often carrying a higher interest rate because the lender has less protection. | Credit & Debt | Learn more → about Unsecured debt |
| Unit trust | A pooled investment structure in which investors own units representing a share of the underlying portfolio. | Investing | Learn more → about Unit trust |
| Variable interest rate | An interest rate that can change according to an agreed benchmark or the provider’s terms. | Banking & Saving | Learn more → about Variable interest rate |
| Venture capital | Investment in young, high-growth businesses, usually involving substantial risk and limited liquidity. | Investing | Learn more → about Venture capital |
| Volatility | The degree to which an asset’s price moves up and down over time. | Investing | Learn more → about Volatility |
| Wealth | Assets and resources that support security, choices, and future goals after liabilities are considered. | Budgeting | Learn more → about Wealth |
| Yield | Income produced by an asset, usually shown as a percentage of its price or value. A higher yield can involve higher risk. | Investing | Learn more → about Yield |
| Zero-based budget | A budgeting method that gives every unit of expected income a purpose so planned income minus planned uses equals zero. | Budgeting | Learn more → about Zero-based budget |
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Educational note: These definitions provide general financial education. Laws, taxes, products, protections, and terminology vary by country, provider, and personal situation.