Money glossary

Plain-English meanings for every term on this site.

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Earning & taxes

Gross pay
Money you earn before taxes and deductions are taken out.
Net pay (take-home)
What is left after taxes and deductions — the money you can actually spend or save.
Withholding
Tax your employer takes out of each paycheck and sends to the government for you.
W-2
The form your employer sends every January showing your wages and the tax withheld — you use it to file your tax return.
FICA
The payroll tax that funds Social Security (6.2%) and Medicare (1.45%). Employers pay a matching amount.
Tax refund
Money back after filing your return when more tax was withheld during the year than you actually owed.
Self-employment tax
The 15.3% tax (both halves of FICA) owed on side-hustle income when there is no employer.

Saving & banking

Budget
A plan that gives every dollar a job before you spend it.
50/30/20 rule
A starting map for a budget: about 50% needs, 30% wants, 20% savings or debt payoff.
Pay yourself first
Moving money to savings the moment you are paid, before any other spending.
Emergency fund
Three to six months of essential expenses kept somewhere safe and easy to reach.
Checking account
A bank account for everyday spending — easy access, but little or no interest.
High-yield savings account
A savings account that pays far more interest (often 4–5%) than the 0.01% at many big banks.
Interest
Money a bank pays you for keeping funds there — or the cost you pay to borrow.
APR
Annual Percentage Rate: the yearly cost of borrowing money. Higher APR means more interest paid.
Cash back
A percentage of card spending returned to you. Only a win if you pay the full balance every month.

Investing

Stock (share)
A small piece of ownership in one company. If a company has 1 million shares and you own one, you own one-millionth of that business. You make money when the share price rises or the company pays dividends — but if the company fails, shares can become worthless.
Dividend
A slice of company profit paid out to shareholders.
Bond
A loan you make to a government or company; they repay it with interest. Steadier than stocks, but not risk-free.
Mutual fund
A basket of many investments you buy in one purchase. Money from thousands of investors is pooled to buy stocks, bonds, or both — so even a small amount buys tiny slices of hundreds of companies instead of a bet on just one.
Index fund
A low-fee fund that simply tracks a market index, like the S&P 500, instead of picking stocks.
Diversification
Spreading money across many investments so one failure hurts less. It reduces risk but does not remove it.
Brokerage account
The account you open to buy stocks, bonds, and funds.
Compound interest
Earning on your money and on the interest it already earned — the reason starting early wins.
Rule of 72
Divide 72 by your yearly return percentage to estimate how many years money takes to double.
Inflation
Prices rising over time. Money that grows slower than inflation buys less each year.
Crypto
Digital assets like Bitcoin with no company earnings behind them — highly speculative.

Credit, debt & protection

Credit card
A card that borrows the bank’s money every time you buy something. Pay the full balance by the due date and the borrowing is free; carry a balance and interest — often 20%+ APR — starts piling onto what you owe.
Credit score
A 300–850 number showing how reliably you repay. Payment history counts most (~35%).
Credit utilization
The share of your card limit you are using. Try to keep it under 30%.
Secured credit card
A beginner credit card backed by a refundable deposit (often $200), which becomes your spending limit. It’s easy to get at 18 — use it for small purchases, pay in full every month, and it builds real credit history. You get the deposit back when you close or upgrade the card.
Minimum payment
The smallest card payment allowed each month. Paying only this stretches debt out for years.
Co-signer
A person equally responsible for someone else’s loan. Missed payments hurt both credit scores.
Credit freeze
A free lock at all three credit bureaus that blocks new accounts from being opened in your name.
Premium
The regular amount you pay to keep an insurance policy active.
Deductible
What you pay out of pocket before insurance starts paying.
Coverage limit
The maximum an insurance policy will ever pay.
Renters insurance
Cheap coverage (about $10–20/month) for your belongings — a landlord’s policy covers only the building.
Phishing
Fake messages that pretend to be real companies to steal passwords or account information.
Identity theft
Someone using your personal information, like your Social Security number, to open accounts in your name.