Every term, in plain language.

1099 Teens

A tax form for work done as an independent contractor rather than an employee. No tax is withheld for you, and you owe both halves of FICA (15.3%) on top of income tax. Most gig and 'contractor' work is 1099.

Amortization Both tracks

The process of paying off a loan through fixed payments, where each payment covers that period's interest first and the remainder reduces the principal. Early payments are mostly interest; later ones are mostly principal.

Annuity Seniors

An insurance contract that pays income over time in exchange for a lump sum. Some are straightforward; many carry high fees and long surrender periods during which taking your own money back costs a penalty. Always ask for total fees and the surrender period in writing.

APR Both tracks

Annual Percentage Rate: the yearly cost of borrowing, not including the effect of compounding. On a credit card carrying a balance, the effective cost is higher than the APR suggests.

APY Both tracks

Annual Percentage Yield: the yearly return on savings including compounding. This is the number to compare when shopping for a savings account or CD.

Authorized user Teens

Someone added to another person's credit card account. The account's history can appear on the authorized user's credit file, which is one of the few ways to build credit history before you can qualify for a card yourself.

Beneficiary Seniors

The person named to receive an account or policy when the owner dies. Beneficiary designations override a will, so reviewing them after a marriage, divorce, or death matters more than most people realize.

Certificate of deposit (CD) Seniors

A deposit committed for a fixed term at a fixed rate. Federally insured and predictable; withdrawing early costs a penalty, usually a few months of interest.

Compound interest Both tracks

Interest paid on your principal and on the interest already earned. It's what makes long-term saving work and what makes carried debt dangerous: the same mechanism running in both directions.

Cost of attendance Teens

A college's full advertised annual price: tuition, fees, housing, food, books. Almost nobody pays it. The number that matters is the net price.

Credit score Teens

A lender's estimate of whether you pay people back. The common FICO model weights payment history 35%, amounts owed 30%, length of history 15%, new credit 10%, and credit mix 10%.

Credit utilization Teens

The share of your credit limit you're using. Keeping it under 30%, ideally under 10%, is one of the fastest ways to improve a score, and it resets every month.

Deductible Seniors

The amount you pay out of pocket before insurance starts covering costs. A lower premium often means a higher deductible; the total you'd pay in a bad year is the real comparison.

Diversification Teens

Owning many investments so no single failure is catastrophic. One company can go to zero; a broad index of hundreds, historically, has not.

Durable power of attorney Seniors

A legal document authorizing someone you choose to handle financial matters if you can't. Set up in advance, it lets you define the limits while you're fully able to, unlike arrangements made in a crisis.

Earned income Teens

Money from work: wages, salary, tips, self-employment. It's a requirement for contributing to an IRA, which is why a summer job is what makes a teen Roth IRA possible.

Emergency fund Both tracks

Cash set aside for unplanned expenses, held somewhere safe and reachable. The first target for a teenager is $500; the standard adult guideline is three to six months of expenses.

Expense ratio Teens

A fund's annual fee as a percent of your balance. 0.03% costs $3 per $10,000 a year; 1.0% costs $100, and compounds against you for as long as you hold it.

Explanation of Benefits (EOB) Seniors

A statement from an insurer showing what a provider billed and what insurance paid. It is not a bill. Keep it and compare it to the provider's actual bill when that arrives.

FAFSA Teens

The Free Application for Federal Student Aid: the form that unlocks federal grants, work-study, and federal loans, and which most states and colleges use to award their own aid. Free to file, and frequently skipped by families who assume they won't qualify.

FDIC insurance Seniors

Federal insurance covering bank deposits up to $250,000 per depositor, per bank, per ownership category. Credit unions have equivalent NCUA coverage. It covers deposits. It does not cover stocks, bonds, mutual funds, annuities, or crypto, even when sold at a bank.

FICA Teens

The federal payroll taxes on nearly every paycheck: Social Security at 6.2% and Medicare at 1.45%, for 7.65% total. Your employer pays a matching share you never see.

Fiduciary Seniors

Someone legally required to act in your interest rather than their own. Not everyone selling financial products is one; ask, and ask for the answer in writing.

Fixed income Seniors

Income that doesn't rise with your spending needs: Social Security, a pension, an annuity. It isn't necessarily small; it's known, which makes it the easiest kind of income to plan against.

Grace period Teens

The window between a credit card statement closing and its due date, usually about three weeks. Pay the full statement balance within it and you pay no interest at all.

Grant Teens

Aid you don't repay, usually based on financial need. Award letters often list grants and loans together under 'financial aid,' which is why they have to be read line by line.

Gross pay Teens

What you earned before deductions. Net pay is what's left after taxes and withholding; for a first job, expect to keep roughly 80–85% of gross.

Index fund Teens

A fund that buys an entire market segment rather than trying to pick winners. Low fees and instant diversification; the default choice for most long-term investors.

Inflation Seniors

The rate at which prices rise, which quietly reduces what your money buys. Your real return is roughly what you earn minus inflation, so savings earning nothing lose ground every year.

IRA Both tracks

Individual Retirement Arrangement. A traditional IRA gives a tax break now and is taxed on withdrawal; a Roth IRA is funded with money already taxed and qualified withdrawals are tax-free.

401(k) Both tracks

A retirement account offered through an employer. Contributions are usually taken from your paycheck before tax, and many employers match part of what you put in; the match is the closest thing to free money in personal finance.

Liquidity Both tracks

How quickly something can become spendable cash without losing value. A savings account is liquid; a five-year CD and a house are not.

Medicare Seniors

Federal health coverage for people 65 and older and some younger people with disabilities. Part A covers hospital stays, Part B medical services, Part C (Advantage) bundles coverage through private plans, and Part D covers prescriptions.

Minimum payment Teens

The smallest amount that keeps a credit card in good standing. It is deliberately set low. Paying only the minimum can take years and cost more in interest than the original purchases.

Net price Teens

A college's cost of attendance minus grants and scholarships: what your family actually pays. Every college is required to publish a net price calculator, and sticker prices predict it poorly.

Overdraft fee Both tracks

A charge (commonly around $35) for spending money you don't have. Fees apply per transaction, so several small purchases can cost over $100. Opting out of overdraft coverage makes the card decline instead.

Phishing Both tracks

A message impersonating a real institution to get credentials, codes, or payment. The current versions are well written and often use details about you gathered elsewhere. The defense isn't spotting typos; it's contacting the institution yourself.

Principal Both tracks

The original amount borrowed or invested, separate from interest. On a loan, only payments above the interest charge reduce it.

Required Minimum Distribution (RMD) Seniors

The amount the IRS requires you to withdraw each year from tax-deferred retirement accounts once you reach a certain age (currently 73 for most people, scheduled to rise to 75 in 2033). Your custodian will calculate yours on request.

Rule of 72 Both tracks

Divide 72 by an annual rate to estimate the years until money doubles. At 8%, about nine years. At a 24% credit card APR, your balance doubles in about three.

Security freeze Seniors

A free, legally guaranteed block that stops new credit from being opened in your name. It doesn't affect your score or existing accounts, and you can lift it any time. It must be set at all three credit bureaus separately.

Social Security Seniors

Federal retirement and disability benefits funded by payroll taxes. You can claim as early as 62 at a permanently reduced amount, receive the full benefit at full retirement age (66–67), or delay to 70 for credits that increase it.

Subsidized loan Teens

A federal student loan on which the government pays the interest while you're enrolled. On an unsubsidized loan, interest accrues from day one: the same headline rate, a meaningfully larger balance at graduation.

Trusted contact Seniors

A person your bank or brokerage may contact if they see something alarming or can't reach you. They can't move your money or see balances. It is one of the most useful and least invasive protections available, and it's free.

W-2 Teens

The annual form from an employer reporting your wages and the tax withheld. You need it to file a tax return, and it's worth checking against your final pay stub.

W-4 Teens

The form you complete when hired, telling your employer how much tax to withhold. Withhold too much and you get a refund; too little and you owe in April.

Withholding Both tracks

Tax taken out of a payment in advance and sent to the government on your behalf. You can also request withholding on retirement account withdrawals, which prevents a surprise tax bill.

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