Money Glossary | Centwise

Annual Percentage Rate (APR): The yearly cost of borrowing, expressed as a percentage. Includes interest and most fees, so it's the truest way to compare loans and credit cards.
Annual Percentage Yield (APY): The yearly return on savings, including the effect of compounding. Higher APY means your money grows faster.
Amortization: Paying off a loan through fixed monthly payments. Early payments go mostly to interest; later ones mostly to principal.
Asset: Anything you own that has value — cash, investments, property.
Balance transfer: Moving debt from one credit card to another, usually to get a lower introductory interest rate.
Budget: A plan for how you'll spend and save your income over a set period, usually a month.
Capital gains: Profit from selling an investment for more than you paid.
Compound interest: Interest calculated on both your original money and the interest already earned — growth on growth.
Credit utilization: How much of your available credit you're using, as a percentage. Under 30% is good; under 10% is excellent.
Credit score: A number (usually 300–850) summarizing your creditworthiness, based on payment history, utilization, account age, and other factors.
Debt avalanche: Paying off debts from highest interest rate to lowest — mathematically the cheapest approach.
Debt snowball: Paying off debts from smallest balance to largest — the most psychologically motivating approach.
Diversification: Spreading investments across many assets so no single one can sink you.
Emergency fund: Cash savings set aside for unexpected expenses — typically 3–6 months of essential spending.
Equity: Ownership value — in a home, it's the property value minus what you owe; in a company, it's stock.
Expense ratio: The annual fee a fund charges, as a percentage of your investment. Lower is better.
Grace period: The interest-free window (usually ~21–25 days) between a credit card purchase and when interest starts accruing.
High-yield savings account: A savings account paying far above the national average rate, usually from an online bank.
Index fund: A fund that tracks a market index (like the S&P 500), giving you instant diversification at very low cost.
Inflation: The gradual rise in prices over time, which erodes what your money can buy.
Individual Retirement Account (IRA): A tax-advantaged retirement account. Traditional IRAs give a tax break now; Roth IRAs give tax-free withdrawals later.
Minimum payment: The smallest amount a credit card company accepts each month — paying only this keeps you in debt for years.
Net worth: Everything you own minus everything you owe. The single best number for tracking financial progress.
Principal: The original amount borrowed or invested, before interest.
Sinking fund: Money saved a little at a time for a known future expense — like car insurance or holidays.
401(k): An employer-sponsored retirement plan, often with matching contributions — free money you shouldn't leave on the table.