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Financial Literacy — Personal Finance

Essential money management concepts

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budget_blueprint 15 terms Jan 28, 2026
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Terms 15

1
Budget
Plan for allocating income across expenses, savings, and investments
2
Net Worth
Total assets minus total liabilities
3
Credit Score
Number (300–850) reflecting creditworthiness based on debt history
4
Compound Interest
Interest earned on principal plus previously accumulated interest
5
Emergency Fund
Savings covering 3–6 months of expenses for unexpected events
6
401(k)
Employer-sponsored retirement savings account; contributions pre-tax
7
Roth IRA
Individual retirement account using after-tax contributions; withdrawals tax-free
8
Diversification
Spreading investments across assets to reduce risk
9
Stock
Ownership share in a company; value fluctuates with company performance
10
Bond
Loan to a government or company; pays fixed interest over time
11
Index Fund
Fund tracking a market index like S&P 500; low fees and broad exposure
12
Inflation
Rising prices over time; erodes purchasing power of savings
13
Debt-to-Income Ratio
Monthly debt payments divided by gross monthly income
14
APR
Annual Percentage Rate; total yearly cost of borrowing including fees
15
Liquidity
How easily an asset can be converted to cash without losing value