GLOSSARY OF TERMS      From ALA: Financial Literacy Education in Libraries: Guidelines for Best  Practices for Service 

https://www.ala.org/rusa/sites/ala.org.rusa/files/content/FLEGuidelines_Final_September_2014.pdf

Amortization: The distribution of payment in regular installments.

Annual Percentage Rate (APR): The annual rate charged for borrowing (or earned by investing), expressed as a single percentage that represents the actual yearly cost of funds over the term of a loan. This includes any fees or additional costs associated with the transaction.

Asset(s): A resource with economic value that an individual, corporation or country owns or controls with the expectation that it will provide future benefit.

Bank: A financial institution licensed as a receiver of deposits. There are two types of banks: commercial/retail banks and investment banks. Individual consumers primarily use commercial banks, which are concerned with withdrawals and deposit services. Investment banks provide different services such as sales and trading, capital raising, and consulting to institutional clients.

Bankruptcy: A legal state where an individual, corporation, or government is released from the obligation to repay some or all debt, often in exchange for the forced loss of certain assets.

Bond: A debt investment in which an investor loans money to an entity, corporation or government for a defined period of time at a fixed interest rate. Bonds are used by many companies and governments to finance projects and activities.

Budget: An estimation of income or revenue and plan for expenses for a specific future period of time.

Capital gain/loss: An increase or a loss in value of a capital asset such as investments and real estate.

Checking Account: A deposit account held by an individual or an entity at a financial institution.

Collateral: Property or other assets that a borrower offers a lender to secure a loan.

Compounding: Calculating interest based on both the principal and previously earned interest.

Contract: A legally-binding agreement between two or more parties.

Credit: The ability of a customer to obtain goods or services before payment, based on the trust that payment will be made in the future, often with the addition of interest.

Credit Card: A card issued by a financial institution allowing the cardholder to borrow funds with the obligation to repay them within a specific time.

Credit Limit: The total amount of money a credit card company will lend to a borrower. 

Credit Report: A detailed report of an individual’s credit history prepared by a credit bureau and used by a lender to determine a loan applicant’s creditworthiness.

Credit Score: The numeric representation of an individual’s creditworthiness based on income and credit history.

Credit Union: A member-owned financial institution. As soon as you put money into a credit union account you become a partial owner and can participate in its profitability.

Debit Card: An electronic card which allows an individual to access their own funds from their checking or savings accounts.

Debt: Something of value, such as money, that is owed or due.
Deductible: The amount you have to pay out of pocket for expenses before an insurance company will cover the remaining costs.

Depreciation: When the value of an asset decreases.

Dividend: A cash distribution by a company to its shareholders.

Diversification: An investment technique that reduces risk by mixing a wide variety of investments within a portfolio.

Electronic Funds Transfer (EFT): Funds being transferred trough electronic accounts such as wire transfers.

Endorse: To authorize the deposit or cashing of a check.

Equity: A stock or any other security representing an ownership interest in a company.

Finance Charge: A fee charged for the use of credit or extension of existing credit.

Foreclosure: The failure of a homeowner to make payments on their mortgage, resulting in the repossession of their home.

Fraud: A criminal deception intended to result in financial gain. 

Identify Theft: When someone purposefully steals the personal identity of another such as their social security number, financial information, or passport.

Index: A set of portfolios of securities representing a particular market or portion of it. 

Individual Retirement Account (IRA): An investing tool used by individuals to earn retirement savings.

Inflation: An overall increase in market prices, resulting in the devaluation of a country’s currency and of saved funds.

Insurance: A contract for a person or an entity receiving financial protection from an insurance policy maker, such as health insurance, auto insurance, and home insurance. Insurance is purchased by the payment of a premium.

Interest: The cost of borrowing money expressed as an annual percentage rate. 

Investment: An asset or item that is purchased in anticipation that it will gain value over time.

Late Fee: A financial penalty for not paying a bill on time.

Liquidity: The degree to which an asset can be quickly and easily bought or sold.

Maturity Date: The date on which a debt or contract comes due.

Medicaid: A government assistance program for low-income individuals or families which helps pay the cost of medical or custodial expenses.

Mortgage: A loan for the purchase of real estate, usually secured by the property being acquired.

Mutual fund: A pool of funds collected from many different investors with the goal of investing in securities (stocks, bonds, and similar assets). Mutual funds are operated by money managers who invest the fund’s capital to create gains for the fund’s investors.

Net worth: The amount that assets exceed liabilities. Increasing net worth indicates good financial health for a firm and is key in determining how much an entity is worth. Net worth can be applied both to businesses and to people.

New York Stock Exchange (NYSE): The largest equities exchange in the world based on total market capitalization and listed securities. Domestic and foreign firms can list their shares on the NYSE provided they follow the Securities Exchange Commission (SEC) requirements (listing standards).

Nominal Interest Rate: The interest rate before inflation is taken into account. 

Opportunity Cost: The value of the forgone money, time or other benefits you could have received by taking an alternative action.

Option: A type of derivative security that represents the right to purchase or sale an asset at a preset price within a specific timeframe.

Payday Loan: A type of short-term borrowing where an individual takes a small loan amount at a high interest rate, with their paycheck held as collateral.

Payroll Deductions: A contribution plan where an employer deducts a specific amount of money from an employee’s pay and puts the money towards insurance, healthcare or an investment account on behalf of the employee. Employees typically enter payroll deduction agreements on a voluntary basis.

Phishing: A method of identity theft that occurs through the internet. Phishing occurs when a false website that appears to represent a legitimate organization requires visitors to submit personal information to the site (via purchase or updating personal information). This information is then used by criminals for their own purposes or sold to other organizations.

Portfolio: A grouping of financial assets (stocks, bonds and cash equivalents). Portfolios are held by investors and/or managed by financial professionals.

Predatory Lending: Questionable actions carried out by a lender to entice a borrower into taking a mortgage with high fees, a high interest rate, or which strips the borrower of equity, or places the borrower in a lower credit rated loan to the benefit of the lender.

Principal: The amount borrowed or the amount still owed on a loan, not including interest.

Privacy: A term relating to the use of personally identifiable information. Privacy prohibits the selling of consumer information to companies for marketing or soliciting purposes without customer consent.

Profit: The financial benefit realized when revenue gained from business activity exceeds the expenses, costs and taxes needed to sustain the activity.

Rate of Return: The amount of money generated by an investment before expenses like taxes, investment fees and inflation are factored in. Also known as nominal rate of return.

Real Estate: Land plus anything permanently fixed to it, including buildings, sheds and other items on the property. Real estate is typically divided into three categories: (1) Residential, (2) Commercial, and (3) Industrial.

Real Estate Investment Trust (REIT): A type of security that sells like a stock on the major exchanges and invests in real estate directly through properties or mortgages.

Real Rate of Return: The annual percentage return realized on an investment. This is adjusted for changes in price because of inflation, fees, or other external effects.

Risk: The chance an investment’s actual return will be different than expected. Risk includes the possibility of losing a portion or all of the investment.

Savings Account: A deposit account held at a bank or other financial institution that provides security and a modest interest rate.

Savings Bond: A bond offered at a fixed rate of interest over a fixed period of time. These are not typically subject to state or local income taxes.

Security: A financial instrument such as a stock, bond, option, or fund which can be bought, sold, or traded.

Social Security: A United States federal program of social insurance and benefits. The program benefits include retirement income, disability income, Medicare and Medicaid, and death and survivorship benefits.

Stock: A type of security that signifies ownership in a corporation and represents a claim on the corporation’s assets and earnings.

Taxes: A compulsory contribution to government revenue that is levied based on an organization or individual’s income or purchases. Tax income is often used to fund government programs such as education, military, and so forth.

Time-value of Money: The concept that the present value of money is greater than the value of the same amount of money in the future. Based on the principle that money can earn interest and is subject to inflation, any amount of money has greater value the sooner it is received.

Transparency: The extent to which investors have access to financial information, including prices, market data and financial reports. Transparency relating to information provided by companies is known as disclosure. Transparency is a prerequisite for free and efficient markets.

Trust: A situation where one party, known as the trustor, gives another party the right to hold assets for the benefit of a third party.

Unbanked: Slang terminology for people who do not use bank or other financial institutions.

Welfare: A government program by which financial assistance is provided to individuals who cannot support themselves. Welfare programs are funded by taxpayers.

Will: A document specifying the distribution of a person’s assets upon death. 

Withholding: Part of an employee’s wages that is not included in his or her paycheck because it is directly forwarded to federal, state and local tax authorities.

Yield: The return on an investment, including interest or dividends received from a security. Usually expressed as an annual percentage calculated by dividing earnings by the initial investment.