Read the small print
64 money terms, explained
From APR to net pay, in words that make sense the first time.
Money glossary
Money words, in plain language.
The words that come up in NestiFi’s lessons, each explained in a sentence or two. Look one up here, or tap an underlined word in any lesson.
Definitions explain what words mean. They are not financial advice.
64 terms, A to Z
Terms starting with A
- AllowanceEveryday money
Money a child gets regularly from family, sometimes for doing chores at home.
Called pocket money in Ireland and the UK.
Related: Income, Savings goal
- APRBorrowing and credit
Short for annual percentage rate: the yearly cost of borrowing, shown as a percentage. For most loans it counts interest and some fees, but for a credit card it is just the yearly interest rate.
Related: Interest, Loan, Credit card
- APYBanking
Short for annual percentage yield: how much interest a savings account would pay over a year, counting interest earned on interest. It makes savings accounts easy to compare.
Called AER (annual equivalent rate) in Ireland and the UK.
Related: Savings account, Compound interest, APR
- Automatic paymentBanking
Permission for a company to collect a bill from a bank account automatically, usually on the same date each month.
Called a direct debit in Ireland and the UK.
Related: Checking account, Expenses
Terms starting with B
- BankBanking
A business that keeps people's money in accounts, lets them pay and get paid, and lends money to others.
Related: Checking account, Savings account, Credit union
- BudgetEveryday money
A plan for the money coming in: how much goes to bills and everyday spending, how much is saved, and what is left over.
A monthly budget lists income at the top, then each expense underneath it.
Related: Income, Expenses, Savings goal
Terms starting with C
- Checking accountBanking
A bank account for everyday money: getting paid, paying bills and spending with a debit card. It usually pays little or no interest.
Called a current account in Ireland and the UK.
Related: Savings account, Debit card, Overdraft
- Compound interestSaving and investing
Interest earned on interest. Each time interest is added, the next amount is worked out on the bigger total, so savings grow faster over time. Debts can grow the same way.
At 10% a year, 100 becomes 110 after one year, then 121 after two, because the second year's interest is on 110.
- Cooling-off periodBorrowing and credit
A short time after some purchases or agreements when the buyer can cancel without giving a reason. In the US it applies only in some cases, such as certain sales made at a person's home.
- CreditBorrowing and credit
Borrowing money, or buying something now and paying for it later. Whoever gives the credit expects to be paid back, usually with interest.
Related: Loan, Credit card, Credit report
- Credit cardBorrowing and credit
A card for borrowing up to a set limit to pay for things. Any amount not paid back by the due date usually starts costing interest.
Related: Credit, Minimum payment, APR, Debit card
- Credit reportBorrowing and credit
A record of someone's borrowing and repayments, including any missed payments. Lenders check it before agreeing to lend. In the US, companies called credit bureaus keep these records, and each of the three main ones has its own report on a person.
Related: Credit score, Loan
- Credit scoreBorrowing and credit
A three-digit number, worked out from a credit report, that sums up how someone has handled borrowing. Lenders use it to decide whether to lend and at what rate.
Related: Credit report, Credit
Terms starting with D
- Debit cardBanking
A card that pays for things using money already in a bank account. The money leaves the account right away.
Related: Checking account, Credit card, PIN
- DebtBorrowing and credit
Money owed to someone else, such as a loan, an unpaid credit card balance or an overdue bill.
Related: Loan, Minimum payment, Credit
- DeductibleStaying protected
The amount the policyholder pays first, before the insurer starts to pay. With health insurance it usually counts over a whole year, not per claim.
Called an excess in Ireland and the UK.
- DeductionsWork, pay and tax
Amounts taken out of gross pay before it is paid, such as income tax, Social Security tax and retirement savings.
Related: Gross pay, Net pay, Income tax
- Deposit protectionBanking
A government-backed promise to pay savers back if their bank or credit union fails. Savings at most banks are covered by the FDIC, and at most credit unions by the NCUA, up to $250,000 per person at each one.
Related: Bank, Savings account
- DiversificationSaving and investing
Spreading money across many different investments, so one doing badly has less effect on the total.
Related: Investing, Index fund
Terms starting with E
- Emergency fundSaving and investing
Money set aside for surprise costs, like a broken phone or a sudden bill, so they can be paid without borrowing.
Related: Savings account, Budget
- ETFSaving and investing
Short for exchange-traded fund: one investment that holds many shares or bonds at once, and is bought and sold on a stock exchange like a single share.
Related: Index fund, Stocks, Diversification
- Exchange rateBanking
How much of one country's money it takes to buy another country's money. Exchange rates change every day.
Terms starting with G
- Gross payWork, pay and tax
Pay before anything is taken out. Income tax and other deductions come off gross pay to leave net pay.
Related: Net pay, Deductions, Pay stub
Terms starting with I
- Identity theftStaying protected
When someone steals another person's details, such as their name, date of birth or account numbers, and uses them to borrow money or buy things in that person's name.
Related: Scam, Phishing, Credit report
- Impulse buyEveryday money
Something bought on the spot, without planning, because it looked good in the moment.
Related: Needs and wants, Budget
- IncomeEveryday money
Money that comes in, such as pay from a job, money from family, or money earned by selling things.
- Income taxWork, pay and tax
Tax paid on money earned, such as pay from a job. In many countries, including Ireland and the US, employers take it out of each payment before the money arrives.
Related: Tax credit, Deductions, Tax return
- Index fundSaving and investing
A fund that follows a market index, a list of companies standing for part of the market, so its value rises and falls with that whole group.
Called a tracker fund in Ireland and the UK.
Related: ETF, Diversification
- InflationSaving and investing
Prices rising over time, so the same amount of money buys a little less each year.
- InsuranceStaying protected
Paying a regular amount to an insurer, so that if something covered goes wrong, like a car accident or a burst pipe, the insurer helps pay the cost.
Related: Premium, Deductible
- InterestBorrowing and credit
The price of borrowing money, or the reward for saving it. Borrowers pay interest to lenders, and banks pay interest to savers.
Related: Compound interest, APR, APY
- InvestingSaving and investing
Putting money into something, such as shares or a fund, hoping it grows in value over time. Unlike savings in a bank, the value can go down as well as up.
Related: Stocks, Diversification, Compound interest
- IRASaving and investing
Short for individual retirement account: a US retirement account a person opens for themselves, outside of work, with tax advantages.
Related: Retirement account, 401(k)
Terms starting with L
Terms starting with M
- Minimum paymentBorrowing and credit
The smallest amount a borrower must pay each month on a credit card or loan. Paying only the minimum makes a debt last longer and cost more in interest.
Related: Credit card, Debt
- Minimum wageWork, pay and tax
The lowest hourly pay the law allows an employer to pay most workers. The federal minimum is $7.25 an hour, and many states set a higher rate.
Related: Wage
Terms starting with N
- Needs and wantsEveryday money
Needs are things people must have to live safely, like food, a home and warm clothes. Wants are things that are nice to have but not essential.
Related: Budget, Opportunity cost
- Net payWork, pay and tax
The pay that actually reaches someone's bank account, after income tax and other deductions.
Also called take-home pay.
Related: Gross pay, Deductions, Pay stub
Terms starting with O
- Opportunity costEveryday money
What is given up when choosing one thing over another. Money spent on one thing cannot also be spent on something else.
Buying a new game now might mean waiting longer for a bike.
Related: Needs and wants, Budget
- OverdraftBanking
Spending more than is in a bank account, so the balance goes below zero. It is a form of borrowing, and it usually costs interest, fees or both.
Related: Checking account, Credit, Interest
Terms starting with P
- Pay stubWork, pay and tax
The record that comes with each payment from an employer, showing gross pay, each deduction and the net pay left.
Called a payslip in Ireland and the UK.
Related: Gross pay, Net pay, Deductions
- PhishingStaying protected
A scam message, by email or text, made to look like it comes from a trusted company, that tries to get someone to click a link or share passwords or bank details.
Related: Scam, Identity theft
- Piggy bankEveryday money
A container for keeping money at home, often shaped like a pig. Watching it fill up shows how saving adds up over time.
Related: Savings goal, Bank
- PINBanking
A secret number, usually four digits, that proves a card belongs to the person using it. It stands for personal identification number.
Related: Debit card, Scam
Terms starting with R
- RefundEveryday money
Money paid back, for example when a shop takes back an item, or when someone has paid more tax than they owed.
Related: Tax return
- Retirement accountSaving and investing
An account for saving during working life to live on after stopping work. Most come with tax advantages, and employers may add money too.
In the US, a pension usually means a plan where an employer pays a set amount each month after retirement.
Related: Compound interest, Investing
Terms starting with S
- SalaryWork, pay and tax
A fixed amount of pay for a year's work, paid in regular, equal amounts.
- Sales taxWork, pay and tax
A tax added to the price of many things at the checkout in most US states. Each state and local area sets its own rate, and a few states have no statewide sales tax.
- Savings accountBanking
A bank account for money being kept rather than spent. It usually earns interest on the balance.
Related: Interest, APY, Checking account
- Savings goalEveryday money
Something a person is saving up for, with a target amount and often a date to reach it by.
Related: Budget, Piggy bank, Savings account
- ScamStaying protected
A trick to get someone's money or personal details, often by pretending to be a bank, a delivery company or someone the person knows.
Related: Phishing, Identity theft, PIN
Terms starting with T
- Tax creditWork, pay and tax
An amount taken straight off the tax a person owes, so they pay less tax.
Related: Income tax
- Tax returnWork, pay and tax
A form sent to the tax authority listing a year's income, so the right amount of tax can be worked out. If too much was paid, the difference comes back as a refund; if too little, the rest is owed.
Related: Income tax, Refund
Terms starting with W
- W-2Work, pay and tax
A US tax form an employer gives each employee after the year ends, showing what they were paid and how much tax was taken out.
Related: Tax return, Income tax
- WageWork, pay and tax
Pay worked out by the hour, so more hours worked means more pay.
Related: Salary, Minimum wage
Terms starting with a number
- 401(k)Saving and investing
A US retirement account offered through an employer. Money goes in straight from each paycheck, and many employers add extra, called a match.
Related: Retirement account, IRA
The US government system that pays monthly benefits to retired workers, disabled workers and some families, funded by a tax on pay. Full retirement age is 67 for anyone born in 1960 or later.
Related: Deductions, Retirement account