How's that work?
Growing up, personal finance education may have looked very different for all of us. No worries. It's never too late to be informed. Take a read through here to make sure you are comfortable with some common terms and concepts.
It's in the tiny print that you may (ahem, or may not) have read when you opened a credit card or savings account. It is the yearly rate charged for borrowing or earned through savings or an investment. It is expressed as a percentage that represents the actual yearly cost over the term of a loan or investment. Most commonly, you'll encounter it with credit cards.
APR (Annual Percentage Rate)
The bank pays a fixed amount of interest for a fixed amount of money during a fixed amount of time. You select the number of years the CD is for and the amount of money to put in, and then you wait and save. Benefits: No risk, simple, no fees, offers higher interest rates than savings accounts. Trade-offs: Restricted access to your money, withdrawal penalty if you cash in before the expiration date.
CD (Certificate of Deposit)
Basically, it's earning interest on interest. Each time interest is calculated on the amount you have saved, it includes the interest that you earned last time. Learn more...
A credit card allows you to borrow money to buy things. There can be a cost to borrowing that money (you might pay interest and fees), but there can also be a benefit (you might earn rewards and build your credit). At the end of a month of spending, you can choose to repay the entire amount or leave an unpaid balance that is subject to interest until it is paid off. Learn more...
Your track record of how you handle money loaned to you (through loans, credit cards, bank accounts, etc.) is your credit history. It can affect your ability to borrow money for a car or house and to find a place to live.
Three credit bureaus (Experian, Equifax and TransUnion) keep track of the accounts you open and close, how much you owe, where you owe, where you've lived, who is peeking at your report, and personal identifying information like your social security number.
Your credit score is calculated based on information found in this credit report. It is determined by your past financial behavior that represents your potential risk when loaned money. All sorts of companies (e.g. credit cards, insurance, banks) use it to decide if you can borrow, how much you can borrow, and what it will cost you to borrow.
When you owe, you have a debt. In more specific terms, if you have a balance on a credit card, a car loan, student loans, a mortgage, or a pay day loan, you officially have debt.
Money that you have safely saved for those things that you define as an emergency. Opinions vary on how much to have or where to keep it. We all have varying income stability, backup assistance, and comfort levels. First just start by saving something and making sure you know what emergency really means to you before it happens. Learn more...
Money that someone who borrows pays to someone who lends, usually based on a percentage. When you have your money saved at a bank, the bank uses your money (while it is still safely there for you) and they pay you interest.
Stock represents ownership of a corporation. Stockholders own a share of the company and are entitled to a share of the profits as well as a vote in how the company is run.
Counties, cities, states, and the US government all want money for the services that they provide. One major tax that (most) states and the federal government levy is on the money you earn. Learn more...