Personal Finance Vocabulary

Definitions of Key Financial Terms

Finance

  • Definition: The management of money.

Budget

  • Definition: An estimate of money that is expected to come in (income) versus money that is expected to go out (expenses) during a specific period of time.

Debit Card

  • Definition: A card used to pay money directly from one’s own bank account, allowing for immediate withdrawal of funds for transactions.

Credit Card

  • Definition: A card used to borrow money from a bank, which allows the user to make purchases or withdraw cash on credit up to a pre-approved limit with a commitment to repay the bank later.

Checking Account

  • Definition: Money kept in a bank account that is readily available for everyday purchases and transactions.

Savings Account

  • Definition: Money kept in a bank account that is intended for larger purchases in the future; it typically earns interest over time.

Wage

  • Definition: An amount of money paid to an employee at a specific rate per hour worked.

Stipend

  • Definition: A fixed sum of money paid periodically to an individual for a job or service rendered, often referred to as an allowance.

Salary

  • Definition: A fixed regular payment, usually made once a month or once every two weeks, that accumulates to a certain annual sum.

Opportunity Cost

  • Definition: The potential loss of other alternatives when one option is chosen over another; it reflects the value of the best alternative that must be forgone in order to pursue the chosen option.

Unit Price

  • Definition: The cost associated with a single unit of a product, expressed in terms of a standard measurement (for example, per pound or per ounce).

Fixed Expense

  • Definition: An expense that remains constant regardless of the level of goods or services consumed, such as rent or a cell phone bill that does not change month-to-month.

Variable Expense

  • Definition: An expense that fluctuates depending on usage or consumption levels, such as spending on dining out which can vary each week or month.

Income

  • Definition: Money received for work or services on a regular basis, which can include wages, salaries, commissions, or other forms of earnings.