Money Fit financial education
Financial Glossary
Find plain-language definitions for 149 common terms related to credit, debt, banking, insurance, taxes, investing, housing, and retirement.
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149 definitions
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Explore terms related to retirement income, Social Security, Medicare, estate planning, long-term care, and financial fraud.
Financial terms for seniorsA-C
- Adjustable-Rate Mortgage (ARM)
- A home loan with an interest rate that may change periodically based on market conditions.
- Allowance
- A set amount of money given regularly, often by parents, to teach budgeting and saving.
- Amortization
- The process of gradually paying off a loan through regular payments that include principal and interest.
- Annual Fee
- A yearly charge for using certain financial products, like credit cards or investment accounts.
- Annuity
- A financial product that provides regular income payments, often used in retirement, either for a fixed period or for life.
- APR (Annual Percentage Rate)
- The cost of borrowing money on a yearly basis, expressed as a percentage. Depending on the credit product, APR may include interest and certain fees.
- Asset
- Anything of value that you own, such as cash, property, or investments.
- Asset Allocation
- The way investments are divided among asset classes like stocks, bonds, and cash to balance risk and reward.
- Assisted Living
- A residential facility that provides personal care, meals, and limited medical services for seniors.
- ATM (Automated Teller Machine)
- A machine that lets you withdraw, deposit, or check account balances using a debit card.
- Auto Insurance
- Insurance that covers damages or liabilities from operating a vehicle; often required by law.
- Balance Transfer
- Moving debt from one credit card to another, often to take advantage of lower interest rates.
- Bank Account
- A financial account held at a bank that allows deposits, withdrawals, and money management.
- Bankruptcy
- A federal legal process that may help a person or business address debts under court protection. The effects depend on the type of case and the person's circumstances.
- Beneficiary
- The person(s) designated to receive assets, insurance payouts, or retirement funds upon the account holder's death.
- Bond
- A fixed-income investment where you loan money to an entity (corporate or government) in exchange for periodic interest payments and return of principal.
- Budget
- A spending plan that tracks income and expenses to manage money effectively.
- Budget Deficit
- When expenses exceed income over a given time period.
- Buy Now, Pay Later (BNPL)
- A financing option that divides a purchase into multiple payments. Interest, fees, payment schedules, and credit reporting practices vary by provider and plan.
- Capital Gain
- Profit from the sale of an asset such as stocks, real estate, or other investments.
- Capital Preservation
- An investment strategy focused on protecting the original amount invested, rather than growth.
- Cash Flow
- The total amount of money being transferred in and out of your household or business.
- CD (Certificate of Deposit)
- A deposit account that generally pays a stated interest rate for a set term. Early withdrawals may result in a penalty.
- Certificate of Deposit (CD)
- The full name for a CD, a deposit account that generally pays a stated interest rate for a set term.
- Charitable Remainder Trust (CRT)
- An irrevocable trust that can provide income to named beneficiaries for a period and then transfer the remaining assets to a qualified charity. Tax treatment depends on the arrangement.
- Checking Account
- A type of bank account that allows frequent withdrawals and deposits; often used for daily expenses.
- Child Tax Credit
- A tax benefit for parents with dependent children.
- Compound Interest
- Interest calculated on both the initial principal and any previously earned interest.
- Continuing Care Retirement Community (CCRC)
- A retirement community offering independent living, assisted living, and skilled nursing care under one contract.
- Cost of Living Adjustment (COLA)
- An increase in income (usually Social Security) to keep pace with inflation.
- Credit
- The ability to borrow money now and pay it back later, usually with interest.
- Credit Card
- A card that allows you to borrow funds up to a limit for purchases, with the agreement to pay back with interest if not paid in full.
- Credit Limit
- The maximum amount a person can charge on a credit card.
- Credit Report
- A detailed record of your credit history, used by lenders to evaluate borrowing risk.
- Credit Score
- A number calculated from information in a credit report to estimate credit risk. Scoring models and number ranges vary.
- Credit Utilization Ratio
- The percentage of available revolving credit currently being used. It can be a factor in credit scoring.
- Custodial Account
- A financial account managed by an adult for a minor, typically for savings or investment.
D-F
- Debt
- Money owed to others, typically as a result of borrowing.
- Debt-to-Income Ratio (DTI)
- A measure of how much debt you have compared to your income, used by lenders to assess creditworthiness.
- Deductible
- The amount you pay out-of-pocket on insurance claims before coverage kicks in.
- Deduction (Tax)
- An expense that can be subtracted from gross income to reduce taxable income.
- Default
- Failure to repay a loan according to agreed terms.
- Direct Deposit
- A way for employers to electronically transfer your paycheck into your bank account.
- Discretionary Spending
- Non-essential spending (e.g., eating out, streaming services).
- Diversification
- Spreading money across different investments to manage risk. Diversification does not prevent all losses.
- Down Payment
- An initial payment made when buying something expensive, like a home.
- Drawdown
- The process of withdrawing funds from retirement accounts.
- Durable Power of Attorney
- A legal document granting someone the authority to make financial decisions on your behalf if you become incapacitated.
- Earned Income
- Money received from employment or self-employment.
- Emergency Fund
- Savings set aside for unexpected expenses like car repairs or medical bills.
- Entrepreneur
- Someone who starts and runs their own business, often taking on financial risks.
- Escrow
- A financial arrangement where a third party holds funds until a transaction is completed (often used in home buying).
- Estate Plan / Estate Planning
- Preparing legal documents and strategies to manage a person's assets after death or incapacitation.
- Executor
- A person legally appointed to manage a deceased individual's estate.
- FICO Score
- A type of credit score widely used by lenders to assess credit risk.
- Fees
- Charges for services such as overdrafts, late payments, or account maintenance.
- Fiduciary
- A person legally obligated to act in the best interests of another, such as a financial advisor or trustee.
- Financial Abuse
- The illegal or improper use of an older adult's money or assets, often by someone in a position of trust.
- Financial Aid
- Money to help pay for education expenses, which can come in the form of grants, loans, or scholarships.
- Financial Planner
- A professional who helps clients manage finances, plan for retirement, and achieve financial goals.
- Final Expenses
- Costs associated with end-of-life, such as funeral services, burial, and medical bills.
- Fixed Expenses
- Regular, predictable expenses (e.g., rent, phone bill).
- Fixed Income
- Income that does not change, such as Social Security, pensions, or annuity payments.
- Flexible Spending Account (FSA)
- A pre-tax account used for medical or dependent care expenses.
- Foreclosure
- The legal process of a lender taking control of a property after a borrower fails to make mortgage payments.
- Fraud Alert
- A notice on a credit file that tells businesses to take steps to verify identity before opening new credit or making certain account changes.
G-L
- Grace Period
- A period when certain credit card purchases may avoid interest if the required balance is paid by the due date. Not every transaction or account has a grace period.
- Grant
- Financial aid for education that does not need to be repaid.
- Grantor
- A person who creates a trust or donates property to it.
- Gross Estate
- The total value of a deceased person's assets before liabilities and taxes are deducted.
- Gross Income
- Total earnings before taxes and other deductions.
- Guardianship
- A legal relationship where a court grants one person the authority to care for another (often used in cases of mental incapacity).
- Healthcare Proxy
- A legal document appointing someone to make medical decisions for you if you're unable to do so.
- Health Savings Account (HSA)
- A tax-advantaged savings account for people with high-deductible health plans, used for medical expenses.
- Home Equity
- The portion of your property you truly own; calculated as the home's value minus the mortgage balance.
- Home Equity Conversion Mortgage (HECM)
- The most common type of reverse mortgage, insured by the FHA.
- Income Tax
- A tax levied by the government on income earned by individuals and businesses.
- Index Fund
- A mutual fund or ETF that tracks a specific market index, like the S&P 500.
- Individual Retirement Account (IRA)
- A tax-advantaged account for retirement savings.
- Inflation
- The rate at which the general level of prices for goods and services rises, reducing purchasing power.
- Inflation Risk
- The risk that the cost of goods and services will increase faster than your income or savings.
- Inheritance
- Assets passed down from one person to another after death.
- Installment Loan
- A loan repaid over time with a set number of scheduled payments.
- Interest
- The cost of borrowing money or the reward for saving it.
- Internship
- A short-term job or training opportunity that offers work experience, often unpaid or low-paid.
- Investment
- An asset or activity intended to produce income or growth over time. Investments can gain or lose value.
- Irrevocable Trust
- A trust that cannot be modified or revoked once it's been created, often used to remove assets from an estate.
- Liability
- A financial obligation or debt.
- Liability Insurance
- Coverage that protects against claims resulting from injuries and damage to people or property.
- Liquidity
- How easily an asset can be converted into cash without loss of value.
- Living Trust
- A trust created during your lifetime to hold and manage your assets; it may help avoid probate.
- Living Will
- A legal document stating a person's wishes regarding medical treatment if they become incapacitated.
- Loan
- Money borrowed that must be repaid with interest, typically over a set period of time.
- Long-Term Care Insurance
- Insurance that covers services such as nursing home care, assisted living, and home health care.
M-R
- Margin Account
- A brokerage account that allows investors to borrow money to buy securities.
- Medicaid
- A joint federal and state program providing health coverage for low-income individuals, including long-term care services.
- Medicare
- A federal health insurance program for people age 65 and older or with certain disabilities.
- Medigap
- Supplemental insurance that helps cover out-of-pocket costs not covered by Medicare Parts A and B.
- Minimum Payment
- The smallest amount you must pay on a credit card balance each month.
- Minimum Required Distribution (MRD/RMD)
- An older or alternate label for a required minimum distribution (RMD). See Required Minimum Distribution below.
- Mobile Banking
- Accessing bank accounts through a smartphone app to check balances, transfer money, or pay bills.
- Mortgage
- A loan used to purchase a home, typically repaid over 15 to 30 years.
- Net Income
- Earnings after taxes and deductions; also known as "take-home pay."
- Net Worth
- Your total assets minus your total liabilities.
- Online Banking
- Using the internet to manage your bank accounts and perform financial transactions.
- Overdraft
- When you spend more than what's in your account, often leading to fees unless you have overdraft protection.
- Pay-As-You-Go (PAYG)
- A tax withholding system where taxes are taken from each paycheck.
- Paycheck
- A regular payment for work done, typically issued biweekly or monthly.
- Pension
- An employer-sponsored retirement plan that may provide regular income based on the plan's rules, such as pay and years of service.
- Peer-to-Peer Payment Apps
- Apps like Venmo or Cash App used to send money directly to others.
- Power of Attorney (POA)
- A legal document granting someone the power to manage your affairs, either financial or medical.
- Pre-Tax Contributions
- Money contributed to retirement or healthcare accounts before taxes are deducted.
- Principal / Principal Balance
- The amount of a loan or investment without interest.
- Probate
- The legal process of distributing a deceased person's estate.
- Refinance
- Replacing an old loan with a new one, usually with better terms.
- Required Minimum Distribution (RMD)
- The minimum amount an account owner or beneficiary may be required to withdraw each year from certain retirement accounts. The starting rules depend on the account and the person's circumstances.
- Renters Insurance
- A policy that covers personal belongings in a rental property and liability protection.
- Reverse Mortgage
- A loan that allows eligible older homeowners to borrow against home equity. The balance generally becomes due when the borrower sells the home, moves out permanently, or dies, subject to the loan terms.
- Roth IRA
- An individual retirement account funded with after-tax contributions. Qualified withdrawals are generally tax-free, subject to IRS rules.
S-Z
- Savings Account
- A bank account that earns interest and is used to store money for future goals.
- Scholarship
- Financial aid for education that does not need to be repaid, usually based on merit or need.
- Scam
- A fraudulent scheme designed to steal money or personal information.
- Secured Loan
- A loan backed by collateral (e.g., mortgage or auto loan).
- Self-Employed
- Working for oneself rather than an employer; includes freelancers, contractors, and small business owners.
- Simplified Employee Pension (SEP IRA)
- A retirement account often used by self-employed individuals, also accessible in retirement.
- Social Security
- A government program providing monthly payments to retirees and eligible dependents.
- Spousal Benefit (Social Security)
- A Social Security benefit that may be available based on a spouse's work record. Eligibility and the amount depend on factors such as age, claiming time, and the person's own benefit record.
- Standard Deduction
- A fixed dollar amount that reduces taxable income, available to most taxpayers.
- Step-Up in Basis
- A tax rule that adjusts the value of an inherited asset to its market value at the time of inheritance, potentially reducing capital gains tax.
- Stock
- A share of ownership in a company.
- Student Loan
- Borrowed money to pay for education expenses that must be paid back with interest.
- Subsidized Loan
- A federal student loan for eligible students where the government pays interest during certain periods, including qualifying enrollment and deferment periods.
- Supplemental Security Income (SSI)
- A needs-based government program that provides cash assistance to elderly or disabled people with low income.
- Taxes
- Mandatory payments to the government, often deducted from your paycheck or charged on purchases.
- Tax Credit
- A direct reduction in the amount of taxes owed.
- Tax-Deferred
- A tax treatment that postpones taxes on certain contributions or earnings until money is withdrawn or another taxable event occurs.
- Term Life Insurance
- Life insurance coverage for a specific period of time with fixed premiums.
- Testamentary Trust
- A trust created upon death through a will, used to manage and distribute assets.
- Trust
- A legal entity that holds assets on behalf of a beneficiary.
- Trustee
- A person or institution responsible for managing the assets in a trust for the benefit of the beneficiaries.
- Unsecured Loan
- A loan not backed by collateral, typically based on creditworthiness.
- Variable Expenses
- Costs that change from month to month, like groceries or gas.
- Wants vs. Needs
- The difference between essential expenses (needs) and non-essential items or experiences (wants).
- Will
- A legal document that outlines how your assets should be distributed after your death.
- Withdrawal Rate
- The percentage of your retirement savings you take out annually to cover expenses.
- Withholding
- Money taken out of your paycheck for taxes before you receive it.
- Withholding Allowance
- A number used on older federal Forms W-4 to help determine income tax withholding. The redesigned federal Form W-4 no longer uses withholding allowances.
- W-2 Form
- A tax form employers provide to employees showing earnings and tax withholdings.
- W-4 Form
- A form employees submit to indicate how much tax to withhold from their paychecks.
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