Basic Financial Concepts
Money you earn regularly from work or investments
Income
Tip & Best Practice: Keep track of all your income sources and diversify your income streams to increase financial stability.
A bank account that earns interest on the money deposited.
Savings Account
Tip & Best Practice: Use a savings account for your emergency fund and compare interest rates to find the best savings account.
The total assets minus total liabilities of an individual.
Liabilities are debts or financial obligations.
Net Worth
Tip & Best Practice: Calculate your net worth annually and increase it by reducing debt and increasing assets.
A numerical code used in many electronic financial transactions.
Personal Identification Number (PIN)
Tip & Best Practice: Use a PIN that is not easily guessable and do not share your PIN with anyone.
Mandatory financial charges imposed by a government on its citizens to fund government activities.
Taxes
Tip & Best Practice: Keep organized records of all income and deductible expenses and use tax software or hire a professional to maximize deductions and credits.
The cost required for something; the money spent on something.
Expense
Tip & Best Practice: Categorize your expenses as fixed (costs that remain constant in amount and frequency such as rent, loan payments, insurance) or variable (costs that change regularly such as groceries, medical care, utilities) and adjust your spending habits.
A bank account that allows easy access to your funds for daily transactions.
Checking Account
Tip & Best Practice: Monitor your account regularly to avoid overdrafts and choose accounts with low fees and benefits like direct deposit.
The total amount of money being transferred in and out of a business or individual's account.
Cash Flow
Tip & Best Practice: Track your cash flow to understand your financial health and maintain positive cash flow by balancing income and expenses.
Wrongful or criminal deception intended to result in financial or personal gain.
Fraud
Tip & Best Practice: Be cautious of unsolicited requests for personal information and regularly monitor your accounts for unauthorized transactions.
Tax levied by a government directly on income, especially an annual tax on personal income.
Income Tax
Tip & Best Practice: Understand your tax bracket and the applicable rates and adjust your withholding to avoid underpaying or overpaying taxes.
Money set aside for future use rather than spent immediately.
Savings
Tip & Best Practice: Aim to save a portion of your income, and automate your savings to ensure consistency.
The performance of banking activities via the internet or through a mobile device.
Online or Mobile Banking
Tips & Best Practices:
Use strong, unique passwords for online banking accounts and regularly monitor your accounts for suspicious activity.
Download your bank's official app for secure access and enable two-factor authentication for added security.
Money that is owed or due.
Debt
Tip & Best Practice: Prioritize paying off high-interest debt first, avoid unnecessary debt, and borrow within your means.
The fraudulent practice of sending emails purporting to be from reputable companies to induce individuals to reveal personal information.
Phising
Tip & Best Practice: Do not click on links or open attachments from unknown senders and report suspicious emails to your email provider and financial institutions.
A type of investment that signifies ownership in a corporation and represents a claim on part of the corporation’s assets and earnings.
Stock
Tip & Best Practice: Invest in a diversified portfolio of stocks and regularly review your stock investments, adjusting as needed.
Savings set aside for unexpected expenses or financial emergencies.
Emergency Fund
Tip & Best Practice: Aim to save 3-6 months worth of living expenses and keep it in a high-yield savings account.
A digital version of your bank account statement, accessible online.
Online Account Statement
Tip & Best Practice: Review your online statements regularly and save or print copies of your statements for record-keeping.
A card issued by a financial company giving the holder an option to borrow funds, usually at point of sale.
Credit Card
Tip & Best Practice: Pay off your balance in full each month to avoid interest charges and use credit cards for building credit, not for long-term debt.
Unauthorized use of someone’s credit card information to make purchases or withdraw funds.
Credit Card Fraud
Tip & Best Practice: Regularly review your credit card statements for any unfamiliar charges. Use secure websites for online purchases and consider setting up transaction alerts with your card issuer.
A fixed income instrument that represents a loan made by an investor to a borrower.
Bond
Tip & Best Practice: Include bonds in your portfolio for stability and income and understand the credit risk and duration of bonds before investing.
The cost of borrowing money or the return on invested money.
Interest
Tip & Best Practice: Understand the difference between simple and compound interest and choose investments with compound interest for higher returns.
A certificate with a fixed maturity date and specified interest rate
Certificate of Deposit (CD)
Tip & Best Practice: Use CDs for short-term financial goals and compare rates from different banks before investing.
A sum of money that is borrowed and expected to be paid back with interest.
Loan
Tip & Best Practice: Understand the terms and conditions before taking a loan, and borrow only what you need and can afford to repay.
A security system that requires more than one method of authentication.
Multi-Factor Authentication (MFA)
Tip & Best Practice: Enable MFA on your online banking accounts and use a combination of SMS, email, and app-based authentication.
A range of investments held by an individual or organization.
Portfolio
Tip & Best Practice: Align your portfolio with your financial goals and risk tolerance and review and adjust your portfolio periodically.