Your financial glossary

Spend 50% on needs, 30% on wants, 20% on savings/debt.

Annual Equivalent Rate — the interest rate on savings, showing what you'll earn in a year.

Annual Percentage Rate — the yearly cost of borrowing money, including interest and fees.

Things you own that have value — property, investments, savings.

Your employer must enrol you in a pension and contribute to it.

A loan you give to a government or company that pays you interest.

A plan for how you'll spend your money each month.

Money back on purchases, either as a percentage or fixed amount.

Interest earned on both your original money and the interest already added.

The maximum you can spend in one tap without entering your PIN (£100 in UK).

The amount needed to cover basic expenses like housing, food, and bills.

A number (300–850) showing how reliably you repay debts.

The percentage of available credit you're using.

A lump sum paid if you're diagnosed with a serious illness.

A bank account for everyday transactions like paying bills and receiving your salary.

A strategy to pay off highest-interest debts first to save money.

A strategy to pay off smallest debts first for quick wins and motivation.

Upfront payment when buying a property, usually 5–20% of the price.

An automatic payment where you authorise someone to take money from your account on set dates.

A portion of a company's profits paid out to shareholders.

Money set aside for unexpected expenses like car repairs or job loss.

The portion of your property you truly own (value minus mortgage).

Exchange-Traded Fund — a basket of stocks or bonds you can buy in one go.

The amount you pay before insurance kicks in (e.g., first £250 of a claim).

Financial Independence, Retire Early — a movement focused on aggressive saving and investing.

Insurance that pays part of your salary if you can't work due to illness or injury.

Tax you pay on earnings from work or investments.

The rate at which prices increase over time.

Individual Savings Account — a tax-free way to save or invest in the UK.

Money you owe — debts, loans, mortgages.

A payout to your family if you die, helping them cover expenses.

Lifetime ISA — a savings account for first-time home buyers or retirement, with a 25% government bonus.

Loan-to-Value ratio — how much you borrow versus the property value.

The smallest amount you must pay on a credit card or loan each month.

A loan to buy property, secured against the property itself.

UK tax on earnings that funds NHS, pensions, and benefits.

Needs are essentials (housing, food). Wants are nice-to-haves (dining out, subscriptions).

Everything you own minus everything you owe.

Borrowing money from your bank when your account balance goes below zero.

Money earned without active work — dividends, rental income, royalties.

Savings set aside for when you stop working, with tax benefits.

The total value of your retirement savings.

The amount you can earn tax-free each year (£12,570 in 2024/25).

Your collection of investments — stocks, bonds, funds, and other assets.

Stocks and Shares ISA — invest up to £20,000/year tax-free in the UK.

Money saved over time for a specific future expense (like car insurance).

Self-Invested Personal Pension — a retirement account you control.

Tax paid when buying property in England and Northern Ireland.

A regular payment you set up to send the same amount to someone on specific dates.

Regular payment from the government when you reach retirement age.

Shares in a company that you can buy, giving you partial ownership.

A recurring payment for a service (Netflix, gym, Spotify).

A code on your payslip showing how much tax-free income you get.

Reducing the tax you pay on certain expenses like pensions or charity donations.

You can take 25% of your pension pot tax-free when you retire.

Every pound has a job — income minus expenses and savings equals zero.