Finance is full of jargon. Use this glossary to look up common terms you will find in our guides.
APR (Annual Percentage Rate)
The yearly cost of borrowing money, including interest and certain fees, shown as a percentage.
APY (Annual Percentage Yield)
The real yearly return on savings, including the effect of compound interest.
Asset
Anything you own that has value, such as cash, investments or property.
Budget
A plan for how you will spend and save your income each month.
Compound interest
Interest earned on both your original money and the interest it has already earned.
Credit score
A number that shows lenders how likely you are to repay borrowed money.
Diversification
Spreading money across many investments to reduce the impact of any single one falling in value.
Dividend
A share of a company’s profits paid to its shareholders.
Emergency fund
Cash set aside to cover unexpected costs, usually three to six months of essential expenses.
ETF (Exchange-Traded Fund)
A fund that holds many investments and trades on a stock exchange like a single share.
Expense ratio
The yearly fee a fund charges, shown as a percentage of the amount you invest.
Index fund
A low-cost fund that aims to match the performance of a market index.
Inflation
The general rise in prices over time, which reduces what your money can buy.
Liability
Money you owe, such as a loan, mortgage or credit card balance.
Net worth
Everything you own minus everything you owe.