Cost of Money

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.