Financial Dictionary

APR (Annual Percentage Rate)

The yearly cost of borrowing money, including most fees, shown as a percentage.

APY (Annual Percentage Yield)

The total amount of interest you'll earn on savings in a year, including the effect of compounding.

Asset

Something you own that has value, like cash, a house, or an investment account.

Beneficiary

The person or entity designated to receive money or benefits from an account or policy, such as after the account holder's death.

Capital Gain

The profit made when you sell an investment for more than you paid for it.

Compound Interest

Interest calculated on both the original amount and the interest that's already been added — growth on growth.

Credit Score

A number that estimates how likely you are to repay borrowed money, based on your credit history.

Diversification

Spreading money across different investments so that one bad outcome doesn't sink your whole portfolio.

Emergency Fund

Money set aside specifically for unexpected expenses, kept somewhere easy to access.

Inflation

The general rise in prices over time, which means each dollar buys a little less than it used to.

Liability

Something you owe to someone else, like a loan or a credit card balance.

Liquidity

How quickly and easily something can be turned into cash without losing much value.

Net Worth

What you own minus what you owe — a snapshot of your overall financial position.

Premium (Insurance)

The amount you pay, usually on a regular schedule, to keep an insurance policy active.

Roth IRA

A retirement account funded with after-tax money, where qualified withdrawals in retirement are generally tax-free.

Tax-Deferred

Taxes on this money are postponed until it's withdrawn later, usually in retirement.

Underwriting

The process a lender or insurer uses to evaluate risk before approving a loan or policy.