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Need help understanding some of the more common financial terms? This glossary will help get you started.

Ascending OrderFinancial Term
529 Plan

An education savings plan operated by a state or educational institution designed to help families set aside funds for future college costs. They are categorized as either savings or prepaid plans. Savings plans invest contributions in mutual funds or similar investments. Prepaid plans allow someone to pre-pay all or part of the costs of a college education.


An announcement - usually paid - of a product's or service's benefits that is intended to encourage its purchase.*

Annual Percentage Rate (APR)

The percentage cost of credit on an annual basis, which must be disclosed by law. Example 1: A $100 loan repaid in its entirety after one year with a $10 finance charge ($9 interest plus a $1 service fee) has an APR of 10%. Example 2: A $100 one-year loan with a $10 finance charge repaid in 12 equal installments (meaning the borrower has the use of less and less of the loan principal each month) has an APR of 18%.

Annual Percentage Yield (APY)

The annual rate of return on an investment, which must be disclosed by law and which varies by the frequency of compounding. Example 1: A $1,000 investment that earns 6% per year pays $60 at year-end and has an APY of 6%. Example 2: A $1,000 investment that earns 0.5% per month (6%/12) pays $61.68 in one year and has an APY of 6.17%. Example 3: A $1,000 investment that earns 0.0164% per day (6%/365) pays $61.83 in one year and has an APY of 6.18%.


Items of value that are owned by a business, institution, or individual.

Automated Teller Machine (ATM)

A computer terminal used to conduct business with a financial institution or purchase items such as postage stamps or transportation tickets; also known as a cash machine.

Bad debt

Debt acquired where the value of the purchase depreciates and/or has no potential to develop into future income (asset).


A state or federally chartered for-profit financial institution that offers commercial and consumer loans and other financial services.


A state of being legally released from the obligation to repay some or all debt in exchange for the forced loss of certain assets. A court's determination of personal bankruptcy remains in a consumer's credit record for 10 years.

Bankruptcy Abuse Prevention & Consumer Protection Act

A revision of bankruptcy law intended to make the system fairer for creditors and debtors, and make affordable credit available to more people.


A person or organization named to receive assets after an individual's death.


Interest bearing certificates used as a means for the government or business to raise money. The issuer (borrower) promises to repay the bondholder (creditor) the debt and a specified amount of interest at maturity.


A plan for managing income and expenses, also called a spending plan.

Business plan

A description of a company's organizational structure, staff, activities, and marketing and financial plans, including expected sources of income and expenses.

Business profit

The income a company earned in a certain period of time.

Capital gains

The positive difference between an asset's purchase price and the selling price. Current tax regulations require any gains to be taxed at a rate up to 28%.

Capital loss

Monetary loss that occurs when the selling price of an asset is less than the original amount invested.


A profession or field of employment for which one studies or trains, such as financial services or medicine. (See Job.)


Money in the form of bills or coins; currency.

Cash flow statement

A summary of receipts and payments for a given period, helpful when preparing a budget; also known as an income and expense statement.