Money glossary

59 money words you'll meet in the US, in plain English.

4

401(k): A retirement account through your employer. You pay in from your paycheck, before or after tax, and many employers add a match.; Read: How much should I save for retirement? (401(k) guide)

A

Amortization: Paying a loan off in regular payments of interest plus part of the balance. In Canada, the amortization period is how long the whole mortgage takes to repay.
Annuity: A product you buy with your savings, usually at retirement, that pays you an income for life or for a set time.
APR: Annual percentage rate: the yearly cost of borrowing, including the interest and, for most loans, the main fees. The fairest way to compare loans and cards.
APY: Annual percentage yield: what a savings account really pays in a year, including interest on your interest. Compare savings accounts by APY.; Read: US banking basics: checking, savings and FDIC insurance

B

Bond: A loan you make to a government or company, which pays you interest and gives your money back at the end. Usually steadier than shares, with lower long-run returns.; Read: Investing basics: how to start with index funds
Budget: A plan for your money: what comes in, what has to go out, and what’s left to save or spend.; Read: How to make a budget in the US (the 50/30/20 rule)
Buy now, pay later (BNPL): Splitting a purchase into instalments, often 4 payments over 6 weeks, usually with no interest if you pay on time. Missed payments can bring fees and harm your credit.; Read: Buy now, pay later in the US: costs, credit and the rules

C

Capital gain: The profit when you sell something, such as shares or a property, for more than you paid. It may be taxed.; Read: Capital gains tax explained: rates, losses and your home
Central bank: The Federal Reserve (“the Fed”). It sets the interest rate that other US rates follow, raising it to slow inflation and cutting it to support the economy.; Read: Inflation and interest rates in the US, explained
Closing costs: The fees you pay to complete a home purchase on top of the down payment, such as lender fees, the appraisal, title insurance and recording fees.; Read: First-time home buyer guide: down payment, loans and costs
Compound interest: Interest on your interest as well as on the money you put in. Over many years it makes savings grow faster, and unpaid debts too.; Read: Inflation and interest rates in the US, explained
Credit report: The record of your loans, cards and repayments that lenders check before lending. You can see your own report for free.; Read: US credit scores: what affects yours and how to raise it
Credit score: A number that sums up how reliably you’ve repaid credit. Lenders use it to decide whether to lend to you, and at what rate.; Read: US credit scores: what affects yours and how to raise it
Credit utilization: How much of your card limits you’re using. Keeping it low, well under a third, helps your credit score.; Read: US credit scores: what affects yours and how to raise it

D

Debt avalanche: Paying off debts with the highest interest rate first, while making the minimum payments on the rest. It costs the least in interest.; Read: How to pay off debt in the US: avalanche or snowball?
Debt snowball: Paying off your smallest debts first, while making the minimum payments on the rest. Quick wins keep you going, though it can cost more in interest.; Read: How to pay off debt in the US: avalanche or snowball?
Debt-to-income ratio: Your debts, or your monthly debt payments, compared with your income. Lenders use it to judge how much more you can afford to borrow.
Diversification: Spreading your money across many investments, so one doing badly doesn’t sink the lot.; Read: Investing basics: how to start with index funds
Dividend: A share of a company’s profit, paid to the people who own its shares.; Read: Investing basics: how to start with index funds
Down payment: The part of a home’s price you pay upfront. The rest is borrowed with a mortgage.

E

Effective tax rate: Your total tax as a share of your total income. It’s lower than your top rate, because the lower slices of your income are taxed less.
Emergency fund: Money set aside for surprises, such as losing your job or a big repair, so you don’t have to borrow. A common goal is three to six months of essential spending.; Read: Emergency fund: how much you need and where to keep it
Employer match: Money your employer adds to your retirement savings when you pay in yourself. It’s extra pay you only get if you contribute.
ETF: Exchange-traded fund: a fund you buy and sell on the stock market like a share. Many ETFs are low-cost index funds.; Read: Investing basics: how to start with index funds

F

FDIC insurance: Protection for money in US bank accounts: if an insured bank fails, the FDIC pays back deposits up to a limit per person, per bank.; Read: US banking basics: checking, savings and FDIC insurance
FHA loan: A mortgage insured by the Federal Housing Administration. It accepts smaller down payments and lower credit scores than most loans, but you pay mortgage insurance (MIP), usually for the life of the loan.; Read: First-time home buyer guide: down payment, loans and costs
FICA: The Social Security and Medicare taxes taken from almost every US paycheck.; Read: What is FICA? Social Security and Medicare tax explained
FICO score: The most widely used US credit score, on a scale from 300 to 850.; Read: US credit scores: what affects yours and how to raise it
Filing status: How you file your tax return: single, married filing jointly, married filing separately or head of household. It sets your brackets and standard deduction.
Fixed rate: An interest rate that stays the same for a set time, so your payments don’t change.
Fund fees: The yearly charge a fund takes, as a percentage of what you have in it. Small differences add up to a lot over decades.; Read: Investing basics: how to start with index funds

G

Gross pay: Your pay before tax and anything else is taken off.

H

Home equity: The part of your home you own outright: its value minus what you still owe on it.
HSA: Health savings account: tax-free savings for medical costs, for people with a high-deductible health plan. Unused money stays yours and can be invested.; Read: HSA explained: limits for 2026 and 2027

I

Identity theft: When someone uses your personal details to borrow money, open accounts or claim refunds in your name.; Read: How to spot and report money scams in the US
Index fund: A fund that buys every company in a market index, such as a country’s biggest companies, instead of picking a few. It spreads your risk and usually has low fees.; Read: Index funds vs picking stocks in the US: why go passive
Inflation: The rise in prices over time. With inflation at 3%, what cost 100 a year ago costs 103 now, so the same money buys a little less.; Read: Inflation and interest rates in the US, explained
Interest rate: The price of borrowing money, or the reward for saving it, as a percentage of the amount each year.; Read: Inflation and interest rates in the US, explained
IRA: Individual retirement account: retirement savings you open yourself, outside work, with tax breaks. There are traditional and Roth IRAs.; Read: Roth vs traditional: 401(k) and IRA explained

L

Loan-to-value (LTV): Your mortgage as a share of the home’s value. A lower LTV, from a bigger deposit, usually gets a lower interest rate.

M

Marginal tax rate: The tax rate on the next bit of income you earn: your top bracket’s rate. It’s what matters when you get a raise or a bonus.
Minimum payment: The smallest amount you must pay on a credit card each month. Paying only this keeps you in debt for years and costs a lot in interest.

N

Net worth: Everything you own (savings, investments, your home) minus everything you owe (mortgage, loans, cards).

O

Overdraft: Spending more than you have in your bank account. The bank covers the gap, usually for a fee or a high rate of interest.; Read: US banking basics: checking, savings and FDIC insurance

P

Phishing: Emails, texts or calls pretending to be from your bank, the tax office or a delivery firm, trying to get your passwords, codes or card details.; Read: How to spot and report money scams in the US
PMI: Private mortgage insurance: protects the lender when your down payment on a conventional loan is under 20%. You pay it monthly, and can ask to cancel it once you owe 80% of the home’s original value.; Read: First-time home buyer guide: down payment, loans and costs

R

Real return: What your money earns after inflation. A 5% return when prices rise 3% is a real return of about 2%.; Read: Inflation and interest rates in the US, explained
Roth: A retirement account you pay into after tax. The money then grows, and comes out in retirement, tax-free.; Read: Roth vs traditional: 401(k) and IRA explained

S

Self-employment tax: Social Security and Medicare tax for the self-employed, covering both the employee’s and the employer’s share.; Read: Quarterly estimated taxes: dates and how much to pay
Standard deduction: A set amount of income the IRS doesn’t tax, which you get unless you itemize your deductions instead.; Read: Marginal vs effective tax rate: how tax brackets work (2026)

T

Take-home pay: What you actually receive after tax and other deductions. Also called net pay.
Tax bracket: A slice of income taxed at one rate. Only the income inside each slice is taxed at that slice’s rate, so moving into a higher bracket never lowers your take-home pay.
Tax credit: An amount taken straight off your tax bill. A credit of 100 cuts your tax by 100, so it’s worth more than a deduction of the same size.
Tax deduction: An amount taken off your taxable income before your tax is worked out. It saves you tax at your top rate.

V

Variable rate: An interest rate that can go up or down, usually following the central bank’s rate, so your payments can change.

W

W-4: The form you give your employer so they know how much federal tax to withhold from your pay.; Read: How to fill out a W-4 (2026)
Wash sale: Selling an investment at a loss and buying the same one back within 30 days. The loss can’t be used to cut your tax.; Read: Capital gains tax explained: rates, losses and your home
Withholding: The tax your employer takes from each paycheck and sends to the IRS, and your state, for you. Your W-4 sets how much.; Read: How to fill out a W-4 (2026)