Financial Literacy Vocabulary

ABA number/check routing number

A 9-digit code identifying your bank for electronic transfers and checks, found at the bottom left of your checks, followed by your account number and the check number

ATM card

Provides access to your bank account via Automated Teller Machines (ATMs) for functions like cash withdrawals, balance checks, and transfers, using a PIN for security

Automatic bill payment services

Allows you to electronically pay bills from a checking account or debit card on a recurring schedule

Account balance

The total amount in a financial account at a specific time, representing the sum of all credits

Bank

A licensed financial institution

Bank Statement

A monthly summary from your bank showing all your financial activities

Bounced check

A check that a bank rejects and returns unpaid

Car loan

A sum of money borrowed from a lender, like a bank or credit union

Cash loan

A personal loan that provides a lump sum of money upfront

Cashier’s check

A secure payment system guaranteed by a bank

Certificate of Deposit (CD)

A low risk savings account where you deposit money for a term. Earn a guaranteed, often higher, fixed interest rate, in exchange for agreeing not to withdraw the money until the maturity date, when penalties apply for early access.

Certified check

A personal check guaranteed by the writer's bank, which verifies funds and the signature

Check cashing centers

Businesses that turn checks into instant cash with a fee

Check cashing fee

A fee that a business or bank applies to turn a check into immediate cash for a customer

Check fraud

Using checks illegally for to get money. Examples: Forged Signatures: Signing a check without authorization, Check Washing: Using chemicals to erase ink to change payee/amount on a legitimate check, Counterfeiting: Illegally printing fake checks using stolen account details, Paper Hanging: Writing checks on an account that's closed or has insufficient funds, relying on float time, Check Kiting: Exploiting the time between deposits by writing checks between multiple accounts to temporarily inflate balances, Fake Check Scams: Receiving a fake, often oversized, check and being asked to deposit it and wire back some money or buy supplies for a job.

Check number

A unique, sequential identifier (usually 3-4 digits) printed on the top right and bottom right of a check

Check register

A personnel ledger used to track all checking account transactions

Check stub

The detachable part of a check

Check

A written order instructing a bank to pay a specific sum from the drawer's account to the recipient

Checking account number

A unique set of numbers assigned to a specific checking account by a bank

Commercial bank

A financial institution that serves businesses and individuals by accepting deposits

Credit

The ability of a customer to obtain goods or services before payment

Credit card

If you are under 21 you have to have a co-signer or show proof of sufficient income to repay the debt. Each month you receive a statement that lists all of your purchases. The total amount is called your balance. If you pay the full amount=no interest for the service. If you do not pay the full amount=it becomes a loan to you from the card issuer and you begin to pay interest on this loan. Entitles you to make purchases based on your promise to pay for these purchases at a later date. Every card has a credit limit (maximum amount you can borrow)Features: They let you shop now and pay later, without using cash. Provide “zero liability” protection. Many credit cards offer a rewards program that lets you earn free airline miles, cash, etc.Credit card purchases are loans and you will pay interest on these loans unless you pay the balance in full each month. Credit cards make impulse buying easier.

Credit Union

A non-profit making money cooperative whose members can borrow money

Debit card

It looks like a credit card but works differently. The funds are immediately withdrawn from your bank account. You can spend only what is in your account. You need to stick your budget or you can overdraw. Features: They are an easy and safe alternative to carrying cash. Most provide “zero liability” which means you aren’t responsible for charges if the card is lost or stolen. There is no interest charged. You can’t go into debt with a debit card. However, be careful not to run out of funds in your account, or you will be charged an overdraft fee for each transaction.

Depositor

An individual or entity that places money into a financial account, such as a bank

Direct deposit

A secure, electronic method for paying people by transferring funds directly into their bank accounts, commonly used for paychecks, tax refunds, and government benefits like Social Security

Endorse

To sign the back of a check or financial document to authorize payment or transfer, like signing for a loan addendum or putting your signature on a check to deposit it

Endorsement

Sign (a check or bill of exchange) on the back to make it payable to someone other than the stated payee or to accept responsibility for paying it.

FDIC

A U.S. government agency ensuring bank stability by insuring deposits (up to $250,000 per depositor) in case of bank failure, supervising institutions, and resolving failed banks.

Finance companies

A company concerned primarily with providing money, as for short-term loans

Financial intermediaries

An institution or entity that acts as a go-between, connecting savers and borrowers in the financial system, making transactions smoother and more efficient.

Free checking

A basic bank account without typical recurring fees, like monthly maintenance or minimum balance charges, making everyday banking affordable

Insufficient funds

Not enough money in the bank account

Line of credit

A flexible borrowing arrangement allowing you to draw funds as needed, up to a set limit, pay them back, and borrow again, similar to a credit card

Liquidity

How easily and quickly an asset can be converted into cash without losing significant value, with cash itself being the most liquid

Minimum balance required

The lowest amount of money a bank requires in an account to avoid monthly fees, earn interest, or keep the account open

Money market account

A bank deposit account that is like both savings and checking accounts. Offers higher interest than standard savings while allowing limited check-writing/debit card access, making them good for emergency funds or short-term goals, but with potential minimum balance/withdrawal limits, and are FDIC/NCUA insured

Money order

A secure, prepaid paper document for a specific amount of money. An alternative to checks or cash

Online access

The ability to connect to the internet to use websites, apps, and digital services, often through devices like computers or phones, allowing you to view information and manage accounts

Overdraft protection

It happens when a bank pays a transaction that exceeds the available funds in your checking account.

Pawn shops

A business that offers short-term loans, where customers get cash for valuable items (jewelry, electronics) they pledge; if not repaid with high interest/fees, the shop keeps and resells the item

Penalty

A monetary payment required as a consequence for breaking a rule, law, contract, or regulation, serving as punishment, discouragement, or a corrective measure to ensure compliance and accountability

PIN number

A secret, usually four-to-six-digit, numerical code used to verify your identity for secure electronic transactions

Predatory lending

Abusive, unfair loan terms, often targeting vulnerable borrowers (low-income, minorities) with unaffordable loans, high fees, and deceptive practices like loan flipping

Promissory Note

A legally binding, written promise by one party (the borrower) to pay a definite sum of money to another (the lender)

Reconcile

The process of comparing two sets of financial records to ensure they are accurate, complete, and in agreement

Reconciliation of check register

Comparing your internal cash records (the register) with your bank statement to find and fix discrepancies, ensuring your cash balance is accurate, catching errors, preventing fraud, and verifying all transactions

Redlining

The illegal, discriminatory practice where financial institutions deny services like mortgages, insurance, or loans to residents of specific, often minority, neighborhoods, regardless of individual creditworthiness, based on the racial or ethnic makeup of the area

Safe deposit box

A secure, rented container within a bank's vault, used to store valuables and important documents

Savings account

This is a place to keep your money safe and you can open one at most banks. A withdrawal is when you take money out of your account. A deposit is when you add money to your account

Savings bank

A financial institution that receives savings accounts and pays interest to depositors

Securities Investor Protection Corp

A non-profit, congressionally chartered organization that protects customers of failing brokerage firms, ensuring they get back their cash and securities

U.S. Savings bond

A low-risk, interest-bearing debt security issued by the U.S. Treasury to individuals, functioning as a way to loan money to the government in exchange for guaranteed repayment of principal plus interest

Balanced budget

Revenues equal expenditures, resulting in neither a deficit (spending more than earned) nor a surplus (earning more than spent)

Budget

A spending plan that you decide upon

Deficit

The amount by which something, especially a sum of money, is too small

Discretionary income

The money left over after paying taxes and essential living costs (like housing, food, utilities, healthcare) that you can freely choose to spend, save, or invest in non-essential things like entertainment, hobbies, or vacations

Disposable income

Income remaining after deduction of taxes and other mandatory charges, available to be spent or saved as one wishes

Emergency Fund

A fund that is ready for unexpected expenses

Fixed expense

Expenses that you need in order to live and stay the same each month.

Short term goal

A goal that is for a few months to save for something small, like concert tickets

Income

Money that you get from doing a service or a job

Intermediary goal

A milestone set between a short term goal and a long term goal

Long-term goal

Something you try to achieve through 1-5 years

Needs

An item or thing that is necessary to have, like water, food, shelter

Opportunity costs

The loss of something you could’ve gained from other alternatives when one alternative is chosen.

Pay yourself first (the rule)

A budgeting strategy where you pay, invest, or save in something before spending money on less important things. Example; you pay your water bill before going out to the movies.

Personal income

A person’s total amount of money from all sources before taxes are deducted

Spending plan

Something like a roadmap for your money, outlining your income and expenses over time, to help you

Surplus

The extra amount of something (goods, money, resources) left over after needs or demands are met

Trade-offs

When you gain something but have to give up something

Variable expense

A variable expense is a cost that changes depending on your usage, consumption, or the volume of goods/services produced

Wants

An item that is not necessary to have

Accountant

They are financial professionals who record, analyze, and interpret financial data, preparing statements, managing taxes, auditing for accuracy, and providing insights for business decisions, bridging the gap between a company's financial health (accounting) and its future growth (finance) by ensuring compliance and informing strategy

Banker

A professional managing financial services for individuals or businesses, ranging from retail roles (accounts, loans) to complex investment banking (IPOs, mergers), acting as a trusted advisor for financial decisions, wealth management, capital raising, and market transactions. The term is broad, covering personal bankers, commercial bankers (for businesses), and investment bankers (capital markets).

Broker

An individual or firm that acts as an intermediary, buying and selling financial assets (like stocks, bonds, or currencies) on behalf of clients, connecting investors to markets and charging a commission or fee for facilitating transactions

Credit counselor

A professional who helps individuals manage and repay debt by providing financial education, creating budgets, analyzing credit, and developing debt management plans (DMPs), often negotiating with creditors for lower interest rates or waived fees to help clients avoid bankruptcy and achieve financial stability. They offer personalized guidance on managing loans, credit cards, and general money matters, acting as intermediaries with lenders to restructure payments.

Financial Consultant

A professional who provides expert guidance to individuals or businesses on managing finances, creating investment strategies, planning for goals (like retirement or buying a home). Improves financial efficiency, often by analyzing assets, cash flow, and risks to develop personalized plans

Financial planner

A professional who helps individuals and families manage their money, create comprehensive strategies, and achieve long-term goals like retirement, education, or wealth building, covering budgeting, investing, taxes, and estate planning through holistic, personalized guidance

Financial writer

A professional who creates, edits, and researches content related to the finance industry, including banking, investing, personal finance, economics, and fintech. They act as interpreters, transforming complex, data-heavy financial information into clear, engaging, and accurate content for a wide range of audiences, from consumers to industry professionals.

Financial analyst

They evaluate financial data, market trends, and economic conditions to help companies and individuals make informed investment, budgeting, and strategic decisions.

Insurance agent

A licensed professional who sells, markets, and services insurance policies (life, health, auto, property) for individuals or businesses, acting as an intermediary between clients and carriers, either working for one company (captive) or multiple (independent), helping clients find suitable coverage and assisting with claims, often earning commissions. In finance, they are crucial for risk management, offering products that protect assets and future financial security, and may also sell securities-based products like variable annuities, requiring additional financial licensing (FINRA).

Insurance salesperson

Sells policies like life, health, property, and casualty insurance, acting as a financial guide to match clients with coverage for financial protection, requiring licensing and skills in sales, customer service, and financial needs assessment to advise individuals/businesses on managing risks.

Investment Analyst

They research and evaluate financial data (like stocks, bonds, economic trends) to provide "buy, sell, or hold" recommendations, helping firms and clients make informed decisions for profitable investments.

Mortgage banker

A company or individual that originates, underwrites, funds, and often services real estate loans, using their own or borrowed capital, and can sell the loans on the secondary market, unlike brokers who only connect borrowers with lenders. They guide clients through the loan process, from application to closing, and manage payments, acting as a direct lender and financial intermediary for homebuyers and businesses.

Real estate sales person

A licensed professional who helps clients buy, sell, lease, or rent properties, working under a licensed broker for compensation, typically a commission

Stock analyst

A financial professional who researches and analyzes public companies and industries to forecast stock performance, providing buy/sell/hold recommendations to investors, using financial statements, economic data, and models to identify undervalued or overvalued securities for firms or clients. They work in investment banks (sell-side) or for investment funds (buy-side) and are crucial for helping investors make informed decisions

Underwrite

The process where a professional or institution assesses the risk of a financial venture (like a loan, insurance policy, or stock offering) to decide if it's worth taking on and at what price/terms, ensuring potential losses are covered by premiums or interest, with the goal of making a profit by taking on calculated risk in exchange for a fee

Annual Percentage Rate (APR)

The total annual cost of a loan, expressed as a percentage. That includes both the interest rate and other lender fees like origination charges

Buying power

Your total capacity to purchase things like goods, services, or investments

Compound interest

This is what makes savings really grow. When your interest compounds, is gets added back to your account and becomes part of your principal. With more principal the account earns even more interest, which continually compounds into new principal

Federal Reserve Bank

One of the 12 regional banks that form the central bank of the U.S.

Interest

Is the money the bank pays you for leaving it in your savings account

Interest rates

The percentage amount of your principal that the bank agrees to pay into your account. APR

Principal

The initial sum of money borrowed in a loan or investment. Base amount that earns interest

Rule of 72

The rule of 72 is a fast way to estimate how long it will take you to double your savings with compound interest

Simple interest

A method to calculate interest on the original principal amount of a loan or investment. I = Prt (Interest = Principal x Rate x Time).

Time value of money

A concept that a dollar today is worth more than the same dollar in the future. Money you have now can be invested to earn interest.

3 C’s of credit (capacity, character & collateral)

They are a lender's framework to assess borrower risk, focusing on Character (credit history/reputation for repayment), Capacity (ability to repay via income vs. expenses/debt), and Collateral (assets securing the loan), often expanded to the 5 Cs (adding Capital & Conditions) for a full picture of creditworthiness.