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Glossary of Key Terms

401(k): A defined contribution plan that is a cash or deferred arrangement. Employees can elect to defer receiving a portion of their salary which is instead contributed on their behalf, before taxes, to the 401(k) plan. Sometimes the employer may match these contributions.

 

Advance health care directive: Official document that lets your physician, family, and friends know your health care preferences, including the types of special treatment you want or don't want at the end of life, your desire for diagnostic testing, surgical procedures, cardiopulmonary resuscitation and organ donation. 

APR (Annual Percentage Rate): The cost of borrowing money on a yearly basis, expressed as a percentage rate.

Apprenticeship: Type of job where the employee receives training as they work under the direction of a senior worker.

Asset: Any item that has value in an exchange. A bank account, a home, or shares of stock are all examples of assets.

Associate’s degree: A degree usually awarded for at least two years of full-time academic study beyond high school.

 

Bachelor’s degree: A degree usually awarded for at least four years of full-time academic study beyond high school.

Bank: A financial institution and business that accepts deposits, makes loans, and handles other financial transactions.

Benefit: Something that an employer, the government, or an insurance company provides that’s often used only for a particular purpose, such as food or medical costs. Also: An advantage; something that is good.

Borrow: To receive something on loan with the understanding that you will return it.
Business income: The money a business receives for selling its goods and services is its income.

 

CDFI: Private financial institutions dedicated to delivering responsible, affordable lending to help low-income, low-wealth, and other disadvantaged people and communities join the economic mainstream.

Checking account: An account at a bank (sometimes called a share draft account at a credit union) that allows you to make deposits, pay bills, and make withdrawals.

Claim: Notice to an insurer that under the terms of a policy, a loss may be covered.

Contractor: A licensed individual or company who performs work on a contract basis.  

Cosigner: An individual who signs a loan, credit account, or promissory note of another person as support for the credit of the primary signer and who becomes responsible for the debt obligation.

Cost of attendance (COA): The total amount it will cost you to go to school — usually stated as a yearly figure. COA includes tuition and fees; room and board (or a housing and food allowance); and allowances for books, supplies, transportation, loan fees, and dependent care. It also includes miscellaneous and personal expenses.

Credit: Borrowing money, or having the right to borrow money, to buy something. Usually it means you are using a credit card, but it might also mean that you got a loan.

Credit limit: A limit set by the credit card company on how much you can charge on the card it issued to you. You can use your credit card to make purchases up to your credit limit.

Credit score: Numbers created by mathematical formulas that use key pieces of your credit history to calculate your score at a moment in time.

Credit union: A cooperative financial institution that is chartered by the National Credit Union Administration (a federal independent agency) or a state government and is owned by its individual members.

 

Data breach: The unauthorized movement or disclosure of sensitive information to a party, usually outside the organization, that is not authorized to have or see the information. Someone who gets the data might use it for identity theft.

Debit card: A plastic card used to make purchases at businesses (like grocery stores and gas stations) with money in your checking account.

Debt: Money you owe another person or a business.

Deductible: The amount of expenses an insured person must pay before the insurance company will contribute toward the covered item. For example, the amount you pay for covered health care services before your insurance plan starts to pay is your deductible.

Defined benefit: Defined benefit pension plans provide employees with guaranteed retirement benefits based on benefit formulas. An employee’s retirement age, length of service, and preretirement earnings may affect the benefits received.

Defined contribution: the employee or the employer (or both) contribute to the employee's individual account under the plan, sometimes at a set rate, such as 5 percent of earnings annually. These contributions generally are invested on the employee's behalf. The employee will ultimately receive the balance in their account, which is based on contributions plus or minus investment gains or losses. The value of the account will fluctuate due to the changes in the value of the investments. 

Dispute: Occurs when the borrower believes a charge has been made to their credit in error. The borrower has the right to dispute the charge to the credit card company. 

Direct deposit: Money electronically sent to your bank account, credit union account, or prepaid card. 

 

Entrepreneur: Someone who organizes, manages, and assumes the risks of a business or enterprise.
Expected family contribution (EFC): The index number schools use to determine your eligibility for federal financial aid. This number results from the financial information you provide in your Free Application for Federal Student Aid (FAFSA) form. Your EFC index number is reported to you on your Student Aid Report. It is not the amount of money your family will have to pay for college nor is it the amount of federal student aid you will receive. It is a number your school uses to calculate the amount of federal student aid you are eligible to receive.

 

FAFSA: The Free Application for Federal Student Aid (FAFSA) form is used to determine how much a student and his or her family are eligible to receive in federal financial aid. The FAFSA may also be used to determine a student’s eligibility for state and school-based aid and also may influence how much private aid a student receives.

FDIC-insured: An FDIC insured account is a bank or thrift account covered by the Federal Deposit Insurance Corporation (FDIC), an independent federal agency responsible for safeguarding customer deposits in the event of bank failures. 

Federal income tax: The federal government collects taxes based on the earnings of individuals and businesses, called an income tax. The federal income tax pays for national programs such as defense, foreign affairs, law enforcement, and interest on the national debt.

Federal minimum wage: The lowest national wage as established by law in the Fair Labor Standards Act (FLSA).
Federal student loans: These loans are funded by the federal government and have terms and conditions that are set by law. Federal loans also include benefits that private student loans don’t usually offer. These benefits could include lower interest rates, repayment plans based on income, and possible loan forgiveness for people who choose to work for a certain amount of time in government or for certain not-for-profit organizations or teach in a low-income school.

Federal work-study: A program that provides part-time jobs to help you earn money to pay for college expenses.

Fellowship: Short-term opportunities that last from a few months to several years and focus on the professional development of the fellow. They are typically sponsored by a specific organization seeking to expand leadership in their field

FICA (Federal Insurance Contributions Act): A tax deducted from your pay to contribute to Social Security and Medicare; your employer contributes the same amount on your behalf.

Financial aid: Money given in the form of grants, work-study, loans, and scholarships to help pay for post-secondary tuition and fees, as well as related expenses such as room and board, books, supplies, and transportation.

Financial institution: A company engaged in the business of dealing with financial and monetary transactions such as deposits, loans, investments, and currency exchange (e.g., banks, insurance companies).

Fixed expenses: Expenses, like bills, that must be paid each month and generally cost around the same amount (such as rent, utilities, car payment, car insurance, etc.). 
Form W-4: A form that the employee completes and the employer uses to determine the amount of income tax to withhold.

Fraud: An illegal act that occurs when people try to trick you out of your personal information and your money.

 

Gig: A single project or task for which a worker is hired to work on demand. Some gigs are a type of short-term job, and some workers pursue gigs as a self-employment option.

Gig economy: Generally, an informal term for situations where people are hired for single projects or tasks or for short-term jobs, often through a digital marketplace.

Gig work: A single project or task for which a worker is hired to work on demand. Some gigs are a type of short-term job, and some workers pursue gigs as a self-employment option.

Grace period: The number of days you have to pay your bill in full before finance charges start. Without this period, you may have to pay interest from the date you use your card or when the purchase is posted to your account.

Grant: A type of financial aid that does not have to be repaid, unless, for example, you withdraw from school and you need to pay back some of the tuition money; often need-based.

Gross income: Total pay before taxes and other deductions are taken out.

 

Health insurance: A contract that requires your health insurer to pay some or all of your health care costs in exchange for a premium.

Homeowner’s insurance: An elective combination of coverages for the risks of owning a home. This can include losses due to fire, burglary, vandalism, earthquake, and other perils.

 

Identity theft: Using your personal information — such as your name, Social Security number, or credit card number — without your permission.

Imposter scams: An attempt to get you to send money by pretending to be someone you know or trust, like a sheriff; local, state, or federal government employee; a family member; or charity organization.

Income: Money you earn or receive. This can include wages or salaries, tips, commissions, contracted pay, government transfer payments, dividends on investments, tax refunds, gifts, and inheritances. 

Income tax: Federal, state, and local taxes on income, both earned (salaries, wages, tips, commissions) and unearned (interest, dividends). Includes both personal and business or corporate income taxes. Not all states and localities have income taxes.

Income tax credit: A credit on your taxes that reduces the amount of tax you owe.
Independent Contractor:  A person performing work who has the right to control or direct only the result of the work and not what will be done and how it will be done. If you are an independent contractor, then you are self-employed.

Insurance: The practice or arrangement in which a company or government agency provides a guarantee of compensation for specified loss, damage, illness, or death in return for payment of a premium.

Insured: The policyholder - the person(s) protected in case of a loss or claim. 
Insurer: The insurance company.

Internship: A form of experiential learning that integrates knowledge and theory learned in the classroom with practical application and skills development in a professional setting. Internships can be paid or unpaid.

IRS: The Internal Revenue Service (IRS) is a U.S. government agency responsible for the collection of taxes and enforcement of tax laws

 

Landlord: A person who owns land, housing, or building space and rents it to a tenant. 

Lease: A lease is a contract that you sign to rent an apartment or house.

Lender: An organization or person that lends money with the expectation that it will be repaid, generally with interest.

Liability (a.k.a.: debt): An amount owed to a person or organization for borrowed funds. Loans, notes, bonds, and mortgages are forms of debt. These different forms all call for borrowers to pay back the amount they owe, typically with interest, by a specific date, which is set forth in the repayment terms.

Limited Liability Corporation (LLC): An (LLC) blends partnership and corporate structures. Individuals can form an LLC to run a business or to hold assets. The owners of an LLC are members. LLCs protects its members against personal liabilities.

Long-term care: A variety of services designed to meet a person's health or personal care needs during a short or long period of time. These services help people live as independently and safely as possible when they can no longer perform everyday activities on their own. 

Lump sum payout: The participant may opt for a full lump sum, with no further benefits received from the plan. If a plan provides for a partial lump-sum payment, the participant receives a reduced annuity as well.

 

Mail fraud scam: Letters that look real but contain fake promises. A common warning sign is a letter asking you to send money or personal information now to receive something of value later.

Master’s degree: A degree usually awarded for one or two years of full-time academic study beyond a bachelor’s degree.

Mortgage: Mortgage loans are used to buy a home or to borrow money against the value of a home you already own.

 

Net income: Amount of money you bring home in your paycheck after taxes and other deductions are taken out; also called take-home pay.

 

Payday loans: A small-dollar, short-term loan that a borrower promises to repay out of their next paycheck or deposit of funds.

Payroll tax: Taxes taken from your paycheck, including Social Security and Medicare taxes.

Pension: Generally, any plan, fund, or program that an employer and/or employee organization establishes or maintains to provide retirement income to employees.

Phishing scam: When someone tries to get you to give them personal information, such as through an email or text message, often by impersonating a business or government agency. This can be thought of as “fishing for confidential information”

Premium: The amount you pay for your health insurance that may be billed annually, semi-annually, quarterly, or monthly.

Principal: In the lending context, principal is the amount of money that you originally received from the creditor and agreed to pay back on the loan with interest. In the investment context, it is the amount of money you contribute with the expectation of receiving income.

Private college or university: A higher education institution that is primarily supported by private funds. Includes not-for-profit schools and schools associated with a religious organization.

Property tax: Taxes on property, especially real estate, but also can be on boats, automobiles (often paid along with license fees), recreational vehicles, and business inventories.

Public college or university: A higher education institution whose programs and activities are operated by publicly elected or appointed school officials and which is supported by public funds.

 

Reverse mortgage loans: A special type of home loan only for homeowners who are 62 and older. With a reverse mortgage, the amount the homeowner owes goes up—not down—over time.

 

Sales tax: A tax on retail products based on a set percentage of the retail price.

Savings account: An account at a bank (sometimes called a share savings account at a credit union) used to set aside money and that pays you interest.

Scholarships: Money that students receive based on academic or other achievements to help pay education expenses. Scholarships generally don’t have to be repaid.

Security deposit: A security deposit is extra money you pay one time when you rent an apartment or house. A security deposit is not part of the rent you pay every month. The security deposit might be the same amount of money as one month of rent.

Self employed: A person who carries on a trade or business as a sole proprietor or an independent contractor, or is a member of a partnership that carries on a trade or business, or is otherwise in business alone (including a part-time business).

Social security: Provides benefits for retired workers and people with disabilities, as well as the unmarried children, surviving spouses, or former spouses (in certain cases) of both.

Spoofing: When a caller disguises the information shown on your caller ID to appear as though they are calling as a certain person or from a specific location.

State income tax: Most states and some local municipalities require their residents to pay a personal income tax. Generally, states use one of two methods to determine income tax: the graduated income tax or the flat rate income tax. Both methods first require you to figure your taxable income.

 

Tax credit: Reduces the amount of tax you owe.

Tax deduction: An amount (often a personal or business expense) that reduces income subject to tax.

Tax refund: Money owed to taxpayers when their total tax payments are greater than the total tax. Refunds are received from the government.

Taxes: Required payments of money to governments, which use the funds to provide public goods and services for the benefit of the community as a whole.

Training: Programs aimed at boosting workers' employability and earnings. Training can take place on-the-job or in an educational environment.

Tuition: The fees charged by an educational institution for learning. 

 

Vesting: Vesting is the period of time a participant must work before earning a non-forfeitable right to retirement benefit. Once the participant is vested, the accrued benefit is retained even if the worker leaves the employer before reaching retirement age.

Vocational: A type of postsecondary education that trains students for a specific line of work, such as health care or automotive.

 

Withholding ("pay-as-you-earn" taxes): Money that employers withhold from employees’ paychecks. This money is deposited for the government and is credited against the employees' tax liability when they file their returns. Employers withhold money for federal income taxes, Social Security and Medicare taxes, and state and local income taxes in some states and localities.

Wire or money transfer fraud: Tricking someone into wiring or transferring money to steal from them. One common example of a wire transfer fraud is the “grandparent scam.” This is when a scammer posing as a grandchild or a friend of a grandchild calls to say they are in a foreign country, or in some kind of trouble, and need money wired or sent right away.