Financial Glossary

Every term used across the 25-lesson curriculum, defined in one place and organized by the life stage where it first comes up — plus a Kids & Family section for parents. Each definition links to the full lesson if you want the deeper explanation.

50/30/20 Rule

A budgeting framework that splits after-tax income into 50% needs, 30% wants, and 20% savings and debt payoff. → Building a Budget

Credit Utilization

The share of your available credit you're currently using — a major factor in your credit score. Below 30% is good; below 10% is excellent. → Credit & Credit Scores

Debt Avalanche

A payoff strategy that targets the highest-interest-rate debt first, regardless of balance — mathematically the cheapest approach. → Student Loans & Smart Debt

Debt Snowball

A payoff strategy that targets the smallest balance first, regardless of interest rate — builds momentum through fast visible wins. → Student Loans & Smart Debt

FDIC / NCUA Insurance

Federal insurance covering deposits up to $250,000 per depositor, per bank (FDIC) or credit union (NCUA), per ownership category. → How Money & Banks Work

FICO Score

The most common credit-scoring model, ranging 300–850, weighted roughly 35% payment history, 30% amounts owed, 15% length of history, 10% new credit, 10% credit mix. → Credit & Credit Scores

High-Yield Savings Account

A savings account, typically online-only, paying meaningfully more interest than a traditional big-bank account — while staying FDIC-insured. → How Money & Banks Work

Secured Credit Card

A credit card backed by a refundable cash deposit that becomes your credit limit — a common way to build credit from nothing. → Credit & Credit Scores

Coinsurance

Your percentage share of health costs after the deductible — e.g., you pay 20%, insurance pays 80%. → Insurance Fundamentals

Copay

A fixed fee for a specific health service, like $25 per doctor visit, often independent of your deductible status. → Insurance Fundamentals

Deductible

What you pay out of pocket before insurance starts sharing costs (health), or before a claim payout is reduced (auto/home). → Insurance Fundamentals

Diversification

Spreading money across many investments so no single company or sector can sink your whole portfolio. → Investing Basics

Effective Tax Rate

Your total tax divided by total income — always lower than your top marginal bracket, since only your last dollars are taxed at that rate. → Understanding Taxes

Employer Match

Free money your employer adds to your 401(k) when you contribute, up to a set percentage of salary. → Employer Benefits 101

ETF (Exchange-Traded Fund)

A basket of many stocks or bonds that trades throughout the day like a single stock, often with low fees. → Investing Basics

HSA (Health Savings Account)

A triple-tax-advantaged account (tax-free contributions, growth, and qualified withdrawals) available with a high-deductible health plan. → Employer Benefits 101

Marginal Tax Bracket

The tax rate applied only to your income within that specific bracket — not your entire income, a common misconception. → Understanding Taxes

Out-of-Pocket Maximum

The hard annual cap on health costs you pay — once reached, your insurer covers 100% for the rest of the plan year. → Insurance Fundamentals

Roth IRA

A retirement account funded with after-tax money that grows and withdraws completely tax-free in retirement. → Retirement Accounts Explained

Standard Deduction

A flat amount every filer can subtract from taxable income without itemizing individual expenses. → Understanding Taxes

Traditional IRA / 401(k)

A retirement account funded with pre-tax money that grows tax-deferred and is taxed as income when withdrawn. → Retirement Accounts Explained

Umbrella Insurance

Extra liability coverage that kicks in once your auto or home policy's limits are exhausted — cheap protection for meaningful assets. → Insurance Fundamentals

W-2 vs. 1099

A W-2 employee has taxes withheld automatically; a 1099 contractor must estimate and pay their own taxes. → Understanding Taxes

Asset Allocation

Your overall mix of stocks, bonds, and other assets — the single biggest driver of long-term portfolio results. → Advanced Investing

Dollar-Cost Averaging (DCA)

Investing a fixed amount at regular intervals rather than all at once — reduces regret risk, though lump-sum investing wins more often historically. → Advanced Investing

Index Fund

A fund that simply tracks a market index (like the S&P 500) at very low cost, rather than trying to beat the market. → Advanced Investing

Net Worth

Everything you own minus everything you owe — the single best number for tracking overall financial progress. → Financial Planning & Goals

PITI

The four components bundled into a mortgage payment: Principal, Interest, Taxes, and Insurance. → Homeownership & Mortgages

PMI (Private Mortgage Insurance)

Insurance required by lenders when your down payment is under 20%, protecting the lender (not you) in case of default. → Homeownership & Mortgages

Rebalancing

Periodically selling what's grown and buying what hasn't to restore your target asset mix — a disciplined way to manage risk. → Advanced Investing

28/36 Rule

A lending guideline capping housing costs at 28% of gross income and total debt payments at 36%. → Homeownership & Mortgages

Term Life Insurance

Life insurance covering a fixed period (10–30 years) with no cash value, at a fraction of whole life's cost. → Life & Disability Insurance

Whole Life Insurance

Permanent life insurance that builds cash value but costs 5–15x more than term for the same death benefit. → Life & Disability Insurance

Catch-Up Contribution

Extra retirement-account contributions the IRS allows starting at age 50, on top of the standard annual limit. → Maximizing Retirement Savings

Fee-Only Fiduciary

A financial advisor legally obligated to act in your interest, paid a flat or hourly fee rather than commissions. → Financial Planning & Goals

Power of Attorney

A legal document naming someone to manage your finances if you become incapacitated but are still alive. → Estate Planning Basics

4% Rule

A classic guideline: withdraw 4% of your portfolio in year one of retirement, then adjust that dollar amount for inflation each year after. → Retirement Withdrawal Strategies

Full Retirement Age

The age (67 for most people born 1960+) at which you receive 100% of your calculated Social Security benefit. → Social Security Explained

Medigap

Supplemental insurance that works alongside Original Medicare to cover deductibles, coinsurance, and gaps. → Medicare Basics

Medicare Parts A–D

Part A (hospital), Part B (medical), Part C (private Advantage plans), Part D (prescription drugs). → Medicare Basics

RMD (Required Minimum Distribution)

The minimum amount the IRS requires you to withdraw from Traditional retirement accounts starting at age 73. → Retirement Withdrawal Strategies

Step-Up in Basis

An inherited asset's cost basis resets to its value on the date of death, often erasing decades of capital gains tax exposure. → Legacy & Wealth Transfer

Estate Tax Exemption

The threshold below which an estate owes no federal estate tax — high enough that most estates fall entirely below it. → Legacy & Wealth Transfer

Long-Term Care

Help with everyday activities like bathing and dressing — mostly not covered by Medicare, and a commonly underplanned retirement cost. → Long-Term Care Planning

ABLE Account

A tax-advantaged savings account for people whose disability began before age 46 (raised from 26 in 2026); qualified withdrawals are tax-free and balances are largely protected for SSI and Medicaid. → Money Accounts for Kids

Authorized User

A person added to someone else's credit card account; if the issuer reports it, the account can start building that person's credit history, while the primary cardholder stays responsible for the balance. → Teaching Kids About Money

Child Tax Credit

A federal credit of up to $2,200 per qualifying child under 17 (with a Social Security number), partly refundable and phased out at higher incomes. → Tax Breaks & Protection for Parents

Coverdell ESA

A tax-advantaged education savings account usable for K-12 and college costs, capped at $2,000/year with income limits. → Money Accounts for Kids

Custodial Roth IRA

A Roth IRA opened for a minor with their own earned income — decades of extra tax-free compounding time. → Money Accounts for Kids

Dependent Care FSA

An employer-sponsored account that pays for childcare with pre-tax dollars — up to $7,500 per household in 2026. The same expenses can't also be claimed for the Child & Dependent Care Credit. → Tax Breaks & Protection for Parents

Kiddie Tax

A rule taxing a child's investment income above a small annual threshold at the parents' tax rate rather than the child's. → Money Accounts for Kids

Trump Account

A new tax-deferred investment account for children under 18 with a Social Security number: up to $5,000 a year in contributions, with a $1,000 federal seed for eligible children born 2025–2028. → Money Accounts for Kids

UTMA / UGMA Custodial Account

A flexible investment account opened by an adult for a minor — becomes the child's outright at the age of majority. → Money Accounts for Kids

529 Plan

A state-sponsored, tax-advantaged investment account earmarked for education expenses, including K-12 tuition up to a limit. → 529 College Savings