Ten Important Financial Literacy Terms and Meanings
Financial literacy isn’t just a nice to have, it’s critical for anyone who wants to take charge of their finances instead of having their finances take charge of them. The foundation for a solid understanding of financial literacy is speaking the language. To help we put together this post of financial terms and their meanings.
APR — The Annual Percentage Rate (APR) is the finance charge, the cost of borrowing money, for an entire year. This is typically seen in reference to credit cards, loans and mortgages.
APY — The Annual Percentage Yield (APY) is the interest you earn when you put your money in certain types of accounts, like a certificate of deposit or traditional savings account.
Certificate of Deposit — a certificate of deposit (CD) is a type of savings product in which both the maturity rate (how long you have to keep your money in the account) and the interest rate are both fixed.
Checking account — A bank account that keeps your funds safe while providing you easy access through checks, debit cards, and various apps.
Credit report — This is a statement given by a credit reporting agency detailing an individual's credit worthiness. It includes credit history and is a record of a potential borrower's repayment of debts.
Credit score — Different from a credit report, a credit score is a three-digit number that is used to express an individual's credit risk and is based on credit history and other factors.
Interest — Interest is the fee paid by someone borrowing money that is above the repayment amount of what was originally borrowed. Deposit account holders can also earn interest, paid to them by banks for accounts like certificates of deposit or savings.
Interest rate — This is the interest due by the borrower expressed as a percentage during a certain period of time, normally one-year. Similarly, deposit interest rate is the rate paid by banks to their clients for accounts like a certificate of deposit or savings.
Loan — A loan is a sum of money borrowed by one entity from another with the expectation that it be paid back, normally with interest.
Savings account — This is a deposit account that provides security and interest on money that is not intended for immediate use.
To learn more about financial literacy, please take a look at these blog posts.
This publication does not constitute legal, accounting or other professional advice. Although it is intended to be accurate, neither the publisher nor any other party assumes liability for loss or damage due to reliance on this material.