Financial Terms Glossary

A form that the employee completes and the employer uses to determine the amount of income tax to withhold.

An illegal act that occurs when people try to trick you out of your personal information and your money.

Wealth that is transferred from parents or relatives to children or other members of their family. This may take the form of cash, property, or anything else that has financial value, as well as investments in children’s education, like paying for college or vocational training. Also referred to as intergenerational wealth.

A single project or task for which a worker is hired to work on demand. Some gigs are a type of short-term job, and some workers pursue gigs as a self-employment option.

Generally, an informal term for situations where people are hired for single projects or tasks or for short-term jobs, often through a digital marketplace.

Total pay before taxes and other deductions are taken out.

A hedge fund is a private investment fund that employs various strategies to earn active returns for its investors.

Trade ideas are sent to the client with a recommendation to buy or sell, an investment value (e.g. $2 million) and often a timeframe and an indication of level of conviction. The most active consumers of Trade Ideas are funds using quantitative or systematic strategies.

Using your personal information — such as your name, Social Security number, or credit card number — without your permission.

A fee charged if you don’t use your card for a certain period of time. The length of time that triggers an inactivity fee varies. Not all prepaid cards charge inactivity fees.

Money earned or received such as wages or salaries, tips, commissions, contracted pay, government transfer payments, dividends on investments, tax refunds, gifts, and inheritances.

Federal, state, and local taxes on income, both earned (salaries, wages, tips, commissions) and unearned (interest, dividends). Includes both personal and business or corporate income taxes. Not all states and localities have income taxes.

A mutual fund or ETF designed to track the performance of a specific market index

Inflation occurs when the prices of goods and services increase over time.

Insider trades involve transactions of securities by individuals who have access to non-public, material information about a company.

The practice or arrangement in which a company or government agency provides a guarantee of compensation for specified loss, damage, illness, or death in return for payment of a premium.

A person or company offering insurance policies in return for premiums; person or organization that insures.

A fee charged by a lender, and paid by a borrower, for the use of money. A bank or credit union may also pay you interest if you deposit money in certain types of accounts.

Interest capitalization occurs when unpaid interest is added to the principal amount of your student loan. When the interest on your federal student loan is not paid as it accrues (during periods when you are responsible for paying the interest), your lender may capitalize the unpaid interest. This increases the outstanding principal amount due on the loan. Interest is then charged on that higher principal balance, increasing the amount of interest charged and the overall cost of the loan.

A percentage of a sum borrowed that is charged by a lender or merchant for letting you use its money. A bank or credit union may also pay you an interest rate if you deposit money in certain types of accounts.

Investing in stocks means buying shares of ownership in a public company. Those shares are called stock. If a stock you own becomes more valuable, you could earn a profit if you decide to sell it to another investor. Most people invest in stocks online, through a brokerage account.

Something you spend your money on that you expect will earn a financial return.

What you pay to use investment products and services.

Something that is a disadvantage, money owed, or a debt or obligation according to law.

A measure of the ability and ease with which you can access and use your money.

Money that needs to be repaid by the borrower, generally with interest.

Goals that can take more than five years to achieve.

The total value of a company’s outstanding shares, calculated by multiplying the share price by the number of shares

The date that an investor’s investment is to be paid back in full in accordance with its agreement. A certificate of deposit (CD) contains a maturity date provision obligating the financial institution to repay an investor sums invested plus interest on a specified date.

A federal law that provides special protections for active duty servicemembers, like capping interest rates on many loan products. MLA includes servicemembers on active Guard or active Reserve duty, as well as spouses and certain dependents.

The minimum dollar amount that must be paid each month on a loan, line of credit, or other debt.

You can use money to buy goods and services. Money looks different in different places around the world.

Federally insured account at a bank or credit union that offers a higher rate of interest than a savings account, allows for a limited number of transactions monthly, and may require a minimum deposit or minimum account balance.

A money order can be used instead of a check. You can buy a money order to pay a business or other party.

Mortgage loans are used to buy a home or to borrow money against the value of a home you already own.

A company that pools money from many investors and invests the money in securities such as stocks, bonds, and short-term debt. The combined holdings of the mutual fund are known as its portfolio. Investors buy shares in mutual funds. Each share represents an investor’s part ownership in the fund and the income it generates.

The Nasdaq stock market comprises two separate markets, namely the Nasdaq National Market, which trades large, active securities and the Nasdaq Small Cap Market that trades emerging growth companies.

Amount of money you receive in your paycheck after taxes and other deductions are taken out; also called take-home pay.

Material news is news that a company releases that might affect the value of its securities or influence investors' decisions. It is any type of news that directly relates to the company's business, and depending on the news, it will move the company's share price up or down.

A service that allows you to use a secure website to manage your bank or credit union account without the aid of a teller. While you can transfer money between accounts using this service, you generally cannot deposit checks or cash.

A bill-paying method you set up with your bank or credit union. You use online banking to give your bank the merchant or service provider’s information, and your bank makes the payment according to the amount and schedule you set up. Online bill paying may or may not also be offered on a bank’s or credit union’s mobile application.

This type of card has a network logo on it. Examples of networks are Visa, MasterCard, American Express, and Discover. These cards can be used at any location that accepts that card type. Most prepaid cards are open-loop cards.

Cost of the next best use of your money or time when you choose to buy or do one thing rather than another.

Options are contracts that offer investors the potential to make money on changes in the value of, say, a stock without actually owning the stock. Of course, one can also lose money trading options.

The term option refers to a financial instrument that is based on the value of underlying securities such as stocks, indexes, and exchange traded funds (ETFs). An options contract offers the buyer the opportunity to buy or sell—depending on the type of contract they hold—the underlying asset. Unlike futures, the holder is not required to buy or sell the asset if they decide against it.

The expenses and losses that are not reimbursed by insurance. This cost includes deductibles, copayments, and amounts paid for services or repairs that are excluded from coverage. It’s the amount paid before insurance coverage kicks in.

An overdraft occurs when you don’t have enough money in your account to cover a transaction, but the bank pays the transaction anyway.

A type of prepaid card you get from your employer that you receive your paycheck on.

Taxes taken from your paycheck, including Social Security and Medicare taxes.

A side pocket is a type of account utilized in hedge funds to segregate riskier or illiquid assets from more liquid investments. Usually, once a position enters a side pocket account, only the current participants in the hedge fund are entitled to a share of it. Future investors will not receive a share of the proceeds should the asset's returns become realized.

In the insurance context, it is a written contract between the insured and the insurer.

A collection of investments owned by an individual or institution

A fee lenders can charge borrowers if they pay off a loan early.

A valuation measure that compares the price of a stock to the company’s earnings per share

In the lending context, principal is the amount of money that you originally received from the lender and agreed to pay back on the loan with interest. In the investment context, it is the amount of money you contribute with the expectation of receiving income.

A professional investor is an individual or legal entity, that possesses the experience, knowledge and expertise to make its own investment decisions and properly assess the risks that it incurs

Money that is made in a business after all the costs and expenses are paid.

Taxes on property, especially real estate, but also can be on boats, automobiles (often paid along with license fees), recreational vehicles, and business inventories.

A stock quote is the price of a stock as quoted on an exchange. A basic quote for a specific stock provides information, such as its bid and ask price, last traded price, and volume traded.

The profit or loss on an investment expressed as a percentage.

A rebate reduces the price of consumer goods. Most rebates require consumers to pay the full cost of an item at the time of purchase, then to send documentation to the manufacturer or retailer to receive a rebate by mail.

A set amount of money you receive at the same time each week or month.

Paying back money you borrowed.

The profit or loss on an investment.

Exposure to danger, harm, or loss.

An investor's ability to endure losses in their investments

The Standard and Poor's 500, or simply the S&P 500 is a stock market index tracking the stock performance of 500 of the largest companies listed on stock exchanges in the United States.

Goals that are specific, measurable, attainable, relevant, and timebound.

A tax on retail products based on a set percentage of the retail price.

Saving is putting aside money to reach your goals. Investing is putting your money into something specific with the expectation that its value will grow over time, providing you with the opportunity to create more wealth.

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Money you have set aside in a secure place, such as in a bank account, that you can use for future emergencies or to make specific purchases.

The amount of money you plan to put aside for a specific purpose.

A stock screener is an instrument that traders and investors use for choosing stocks based on search criteria. Stock screeners can be used to separate stocks based on price, market capitalization, dividend ratio, P/E ratio, and debt-to-equity ratio, among others.

Credit card that typically requires a cash security deposit. The larger the security deposit, the higher the credit limit. Secured cards are often used to build credit history.

Loans in which your property (a thing you own) is used as collateral; if you cannot pay back the loan, the lender takes your collateral to get their money back. The lender can also engage in debt collection, can file negative information on your credit report, and might sue you.

Financial instruments that hold value and can be traded, like stocks, bonds, and options.

An investment product such as a stock or bond.

A unit of ownership, often in a company’s stock or in a mutual fund.

Goals that can take a short time, or up to five years, to reach.

Provides benefits for retired workers and people with disabilities, as well as the unmarried children, surviving spouses, or former spouses (in certain cases) of both.

The nine-digit number on a Social Security card, an important piece of identification issued by the federal government that you'll need to get a job and collect government benefits.

Most states and some local municipalities require their residents to pay a personal income tax. Generally, states use one of two methods to determine income tax: the graduated income tax or the flat rate income tax. Both methods first require you to figure your taxable income.

A type of investment that gives people a share of ownership in a company.

How much of a product is available to buy at any given time.

A tax on products imported from foreign countries. This tax can increase the costs of those products, which ultimately can be passed on to consumers as higher prices.

A dollar-for-dollar reduction in a tax. It can be deducted directly from taxes owed. Tax credits can reduce the amount of tax you owe or increase your tax refund, and some credits may result in a refund even if you don't owe any tax.