Back to the Basics: Learning the Vocabulary

Kavya Ravikanti
Apr 17, 2019 · 3 min read

When you’re learning something for the first time, introduction to the vocabulary is key, especially in the world of finance. Below are some keywords you should know before you get started!

General Lingo

budget: organized plan for managing your money by matching outputs with your inputs

compound interest: super powerful phenomenon where interest is paid on the original amount plus the interest you have accumulated so far

interest: money paid for the use of money (credit or loans) OR earnings on a savings account

Types of Accounts

checking account: a banking service where money is deposited into an account and checks or a debit card can be used to withdraw and spend money

savings account: a banking service where money deposited into an account can earn interest, sometimes has a limit on withdrawals and may have slight fees associated with it

IRA account: a type of retirement account (more on IRAs below)

brokerage account: specialized account where you can invest in the stock market without using an IRA or utilizing a 401K account — companies like Charles Schwab, E*Trade, Vanguard, etc. provide these accounts

Credit and Credit Cards

amount due: the minimum monthly payment you must make, may or may not be the total amount you owe

annual fee: annual membership fee that comes with some credit cards

annual percentage rate (APR): the cost of credit for one year expressed as a percentage

annual percentage yield (APY): the true or effective rate of interest when compounding is taken into effect

available credit: credit cards come with a credit limit (the maximum amount you are eligible for), the available credit is the unused portion of that credit limit

billing cycle: the number of days between your last bill and current bill

co-sign: adding your signature to a loan made by someone else, promising that you will repay if the other person does not (ex. parents co-signing for their kid’s credit card)

credit card: a card that allows you to buy items on credit and pay off your debt over time

credit limit: maximum amount of credit you can use

credit score/scoring system: a statistical system used to rate credit applications based on various characteristics, where applicants are granted a number between 300–850

debit card: a card that people use to make purchases, withdrawals and transfer — results in an immediate transfer of funds unlike a credit card

Retirement

401(k) plan: an employer-based plan whereby employees set aside money for retirement that is sometimes matched by employers

individual retirement account (aka Traditional IRA): a government-sponsored, tax-deferred personal retirement plan— taxes are deferred until the account owner withdraws money from it and money deposited is tax-deductible

Roth IRA: retirement account funded with post-tax income, with withdrawals being tax-free, however, there are no tax deductions with Roth IRA contributions

*There are a number of other nuances between a Traditional IRA and a Roth IRA.

More Exhaustive Vocabulary Lists

We’ve limited some of the sections to the bare bone vocabulary so this is by no means an exhaustive list. Here is a much bigger list of vocabulary that you might be interested in learning: https://lifesmarts.org/personal-finance-glossary/

If you want to know the definition of every possible term related to finance I would check out Investopedia’s financial dictionary: https://www.investopedia.com/dictionary/

Young, Not Broke

Kavya Ravikanti

Written by

Founder @ Young, Not Broke | Student @ UVA | Previously @ Apple, Microsoft | Aspiring Product Manager

Young, Not Broke

A look into how people like you are managing their money, the challenges they face, and what worked for them. Covering the basics and telling realistic MoneyStories.

Kavya Ravikanti

Written by

Founder @ Young, Not Broke | Student @ UVA | Previously @ Apple, Microsoft | Aspiring Product Manager

Young, Not Broke

A look into how people like you are managing their money, the challenges they face, and what worked for them. Covering the basics and telling realistic MoneyStories.

Medium is an open platform where 170 million readers come to find insightful and dynamic thinking. Here, expert and undiscovered voices alike dive into the heart of any topic and bring new ideas to the surface. Learn more

Follow the writers, publications, and topics that matter to you, and you’ll see them on your homepage and in your inbox. Explore

If you have a story to tell, knowledge to share, or a perspective to offer — welcome home. It’s easy and free to post your thinking on any topic. Write on Medium

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store