Reference

Money glossary

Plain definitions for the terms that appear across our guides — no jargon used to explain jargon.

A

APR (Annual Percentage Rate): The yearly cost of borrowing including compulsory fees, expressed as a percentage. It is the number to compare between two loans or cards — not the monthly rate.
APY (Annual Percentage Yield): The yearly return on savings once compounding is included. A 5% rate compounded monthly is an APY slightly above 5%.
Amortisation: The schedule that splits each loan payment between interest and principal. Early payments are mostly interest; the balance only falls slowly at first.

Balance transfer: Moving a credit-card balance to a card offering 0% for a promotional period. Nearly always carries a 3–5% transfer fee, which has to be included in the maths.
Budget: A plan for money you have not spent yet. If it only records what already happened, that is tracking, not budgeting.

Compound interest: Interest earned on interest. It is the reason small regular saving beats occasional large saving, and the reason card debt grows so quickly.
Credit utilisation: The share of your available credit you are using. Under 30% is the usual guidance; under 10% scores best.
CD / fixed-term deposit: Savings locked for a set term in exchange for a higher rate. Breaking it early usually costs several months of interest.

Debt avalanche: Paying the highest interest rate first. Mathematically the cheapest order.
Debt snowball: Paying the smallest balance first. Costs slightly more in interest but clears accounts faster, which more people find sustainable.
Deductible / excess: What you pay yourself before insurance pays. Raising it lowers the premium — only sensible if you could cover it from savings today.

Emergency fund: Cash set aside for unexpected, necessary and urgent costs. Sized on essential spending, not income.
Essential spending: What you cannot stop paying without losing your home, health, job or legal standing. The basis of every emergency fund calculation.

High-yield savings account (HYSA): An instant- or near-instant-access savings account paying close to the central bank rate. The default home for an emergency fund.

Minimum payment: The smallest amount a lender will accept each month. Paying only this on a credit card can take decades to clear the balance.

Net pay / take-home: What actually lands in your account after tax and payroll deductions. Every budgeting rule on this site uses this figure, never gross.

Sinking fund: Money saved steadily for an expected but irregular cost — car servicing, insurance renewal, Christmas. Keeps the emergency fund intact.
Standing order / automatic transfer: A repeating transfer you set once. The single highest-leverage habit in personal finance, because it removes the monthly decision.

Zero-based budget: A method where income minus every assigned category equals zero — every unit of money is given a job before the month starts.

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