Glossary
Money glossary
- APR
- Annual percentage rate: the yearly cost of borrowing, including most fees.
- APY
- Annual percentage yield: what savings earn in a year, including compounding.
- Barter
- Trading goods or services directly without money.
- Budget
- A plan for how you'll use your income.
- Compound interest
- Interest earned on both your original money and past interest.
- Credit score
- A number lenders use to judge how likely you are to repay.
- Diversification
- Spreading money across many investments to reduce risk.
- Emergency fund
- Savings set aside for unexpected expenses.
- Expense ratio
- The yearly fee a fund charges, as a percentage of what you invest.
- FDIC
- Federal Deposit Insurance Corporation, which insures deposits at member banks up to legal limits.
- Fiat money
- Currency that has value because a government declares it legal tender, not because it's backed by a commodity.
- Index fund
- A fund that tracks a market index, usually at low cost.
- Inflation
- A general rise in prices over time.
- Net pay
- Take-home pay after taxes and deductions.
- Purchasing power
- What your money can actually buy.
- Rule of 72
- Divide 72 by a growth rate to estimate the years it takes money to double.