Finance glossary
40 money terms in plain English — no jargon defining jargon. Each entry links to the calculator or guide where the concept actually shows up.
401(k)
A tax-advantaged, employer-sponsored retirement account.
Adjustable-Rate Mortgage (ARM)
A mortgage whose rate can change after an initial fixed period.
Amortization
Paying off a loan through fixed payments split between interest and principal.
APR (Annual Percentage Rate)
The yearly cost of borrowing, before compounding is counted.
APY (Annual Percentage Yield)
The yearly return on savings, after compounding is included.
Asset
Anything you own that has monetary value.
Balance Transfer
Moving debt to a new card, often at a low promotional rate.
Capital Gains
The profit from selling an investment for more than you paid.
Certificate of Deposit (CD)
A savings product with a fixed rate for locking money up a set time.
Closing Costs
One-time fees paid to finalize a real-estate purchase or loan.
Compound Interest
Earning interest on your interest, so growth accelerates over time.
Compounding Frequency
How often interest is added to a balance, e.g. monthly or daily.
Credit Score
A number lenders use to estimate how likely you are to repay.
Credit Utilization
The share of your available credit you are currently using.
Debt Avalanche
Paying off your highest-rate debt first to minimize interest.
Debt Snowball
Paying off your smallest debt first for quick, motivating wins.
Debt-to-Income Ratio (DTI)
Your monthly debt payments as a share of your gross income.
Diversification
Spreading investments to reduce risk from any single one.
Dividend
A share of a company's profits paid to shareholders.
Down Payment
The upfront cash you pay toward a purchase, reducing the loan.
Emergency Fund
Cash set aside for unexpected expenses, kept safe and liquid.
Employer Match
Free retirement money your employer adds to your contributions.
Escrow
A neutral holding account for funds, common in mortgages.
Fixed-Rate Mortgage
A home loan whose interest rate never changes.
High-Yield Savings Account (HYSA)
A savings account that pays much more interest than a standard one.
Home Equity
The share of your home you actually own — value minus mortgage.
Index Fund
A fund that tracks a market index at very low cost.
Inflation
The gradual rise in prices that erodes the value of money.
Interest Rate
The price of borrowing money, or the reward for saving it.
Liability
Any debt or financial obligation you owe.
Liquidity
How quickly an asset can be turned into cash without losing value.
Loan Term
How long you have to repay a loan, e.g. 15 or 30 years.
Minimum Payment
The smallest amount you can pay on a debt to stay current.
Net Worth
Everything you own minus everything you owe.
Opportunity Cost
The value of the best alternative you give up by making a choice.
PMI (Private Mortgage Insurance)
Insurance that protects the lender when your down payment is under 20%.
Principal
The amount you originally borrowed (or invested), before interest.
Refinancing
Replacing an existing loan with a new one, usually at a better rate.
Roth IRA
A retirement account funded with after-tax money that grows tax-free.
Simple Interest
Interest charged only on the original principal, never on itself.