Showing all 30 terms
Financial Dictionary · 30 beginner-friendly terms
Understand investing, retirement, saving, taxes, and borrowing through straightforward definitions and practical examples. Browse the terms below alphabetically, or use your browser’s Find in Page feature to locate a specific term.
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401(k) Plan
Category: Retirement
An employer-sponsored retirement savings plan that may offer tax advantages and employer matching contributions.
Example: A worker contributes part of each paycheck to investments in a 401(k).
Annual Percentage Rate
Category: Debt & Credit
The yearly cost of borrowing money, expressed as a percentage, generally including certain fees.
Example: A loan with a lower APR may cost less than one with a higher APR, assuming comparable terms.
Annual Percentage Yield
Category: Saving
The annual rate of return on savings after accounting for compounding.
Example: A 4% APY indicates how much interest a balance can earn over a year if the rate stays unchanged.
Asset Allocation
Category: Investing
How you divide investments among stocks, bonds, cash and other assets.
Example: A portfolio might hold 70% stocks and 30% bonds.
Bear Market
Category: Investing
A sustained market decline, commonly defined as 20% or more from a recent peak.
Example: A stock index falling 22% from its peak is in bear-market territory.
Bond
Category: Investing
A debt investment that typically pays interest and returns principal at maturity, subject to issuer risk.
Example: Buying a Treasury bond means lending money to the U.S. government.
Budget
Category: Saving
A plan for how you will earn, spend and save your money.
Example: Allocate part of each paycheck to housing, food, savings and debt payments.
Capital Gain
Category: Taxes
The profit earned when you sell an asset for more than its cost basis.
Example: Buying shares for $500 and selling for $650 creates a $150 gain before fees and taxes.
Compound Interest
Category: Saving
Interest earned on both the original principal and previously accumulated interest.
Example: Your savings earn interest, and later that earned interest can earn interest too.
Credit Utilization
Category: Debt & Credit
The share of your available revolving credit you are using.
Example: A $1,000 card balance against a $5,000 limit equals 20% utilization.
Debt Avalanche
Category: Debt & Credit
A repayment approach that prioritizes the debt with the highest interest rate while maintaining minimum payments on others.
Example: Pay extra toward a 24% APR card before one charging 12%.
Debt Snowball
Category: Debt & Credit
A repayment approach that prioritizes the smallest balance first while maintaining minimum payments on others.
Example: Pay off a $400 balance before tackling larger balances.
Diversification
Category: Investing
Spreading investments across different assets to reduce dependence on any one holding.
Example: Owning broad stock and bond funds reduces reliance on a single company.
Dividend
Category: Investing
A distribution a company or fund may pay to shareholders, usually in cash.
Example: A fund distributing $0.25 per share pays $25 if you own 100 shares.
Dividend Yield
Category: Investing
Annual dividends per share divided by the share price, expressed as a percentage.
Example: $2 in annual dividends on a $50 share represents a 4% yield.
Emergency Fund
Category: Saving
Money set aside for unexpected expenses or income interruptions.
Example: Savings can cover an unplanned car repair without relying on high-interest debt.
Exchange-Traded Fund (ETF)
Category: Investing
An investment fund whose shares trade on an exchange, often holding a basket of stocks, bonds or other assets.
Example: One broad-market ETF can provide exposure to hundreds of companies.
Expense Ratio
Category: Investing
An investment fund’s annual operating costs expressed as a percentage of fund assets.
Example: A 0.10% expense ratio works out to about $10 a year per $10,000 invested, excluding market effects.
FICO Score
Category: Debt & Credit
A credit score calculated using a FICO model to help lenders assess credit risk.
Example: A lender may consider your FICO score when evaluating a mortgage application.
High-Yield Savings Account (HYSA)
Category: Saving
A savings account that generally pays a higher interest rate than a typical savings account.
Example: An HYSA can be a place to hold emergency savings while earning interest.
Index Fund
Category: Investing
A fund designed to track the performance of a particular market index.
Example: An S&P 500 index fund aims to follow the S&P 500.
Inflation
Category: Saving
A general rise in prices over time that reduces purchasing power.
Example: At 3% inflation, many everyday items cost more one year later.
Liquidity
Category: Investing
How quickly an asset can be converted to cash without substantially affecting its price.
Example: Cash is highly liquid; real estate is generally less liquid.
Net Worth
Category: Saving
The value of what you own minus what you owe.
Example: $150,000 in assets minus $60,000 in liabilities equals $90,000 net worth.
Roth Individual Retirement Account
Category: Retirement
A retirement account funded with after-tax contributions in which qualified withdrawals can be tax-free.
Example: Eligible investors may invest Roth IRA contributions in stocks or funds.
Rule of 72
Category: Investing
A quick estimate of how long an amount may take to double at a constant annual rate.
Example: At 8% annual growth, 72 divided by 8 suggests about nine years.
S&P 500
Category: Investing
A stock market index tracking about 500 large U.S. companies.
Example: An S&P 500 ETF seeks exposure to companies in that index.
Tax-Deferred
Category: Taxes
A tax treatment that generally postpones taxes until money is withdrawn or gains are realized.
Example: Traditional retirement-account investments can grow tax-deferred.
Traditional Individual Retirement Account
Category: Retirement
A retirement account in which contributions may be deductible depending on circumstances and withdrawals generally are taxable.
Example: An eligible taxpayer may deduct a contribution subject to IRS rules.
Volatility
Category: Investing
The degree to which an investment’s price changes over time.
Example: An investment with large daily price swings has high volatility.
Explore related free tools: Compound Interest Calculator, Debt Snowball Calculator, Dividend Income Calculator, and Emergency Fund Calculator.
Educational information only; not personalized financial or tax advice. Rates, rules and eligibility can change.