Do you know your AERs from your ATMs? Don’t worry, Jargonbuster is here to explain all!
Account = Set-up with a bank, building society or credit union so that money can be paid in and paid out.
Annual = something done once a year.
Annual Equivalent Rate (AER) = This interest rate takens into account charges on a savings account to give an overall interest rate to compare.
Annuity = A fixed sum of money paid to someone each year, sometimes for the rest of their life
Apprenticeship = combines practical job training with study allowing you to earn as your learn.
APR = Annual Percentage Rate. This shows how much interest will be received or payable in a year. This makes adjustments where interest is received or paid weekly, or monthly, so that you can see what it is on an annual basis
Asset = something of value. In financial terms, something with monetary value, such as property, cash savings or investments.
ATM = Automated Teller Machine (Hole in the wall to you and me!)
Authorised = Permission or authority given, in advance, in the case of an overdraft.
Automated Teller Machine (ATM) = more commonly known as a “cash machine” or “hole in the wall”, it is a machine which dispense cash, or print bank balance. Money is withdrawn using a bank card and 4-digit PIN (Personal Identification Number).
Auto-enrolment = Automatically entered to participate in a workplace pension at age 22 years old and earning above a threshold.
BACS (Bankers Automated Clearing System) = allows banks to quickly trasnfer money between them.
Bad debt = a debt which is unaffordable, or does not provide any ongoing benefit to the borrower.
Balance = shown on a statement, this is the amount you have, or owe, on a bank or credit card account.
Bancassurance = Insurance products sold or distributed by banks.
Bank = an institution which accepts deposits and lends money.
Bank of England = the UK’s central bank. It acts as the banks’ bank, ensure that the financial system is stable and sets interest rates.
Bank statement = a document which shows all money paid into and out of a bank account each month.
Bankcruptcy = when you are unable to pay your debts, a court order declares you bankcrupt and a receiver deals with people you owe money to to, and takes control of your money and property.
Base rate = interest rate set by the Bank of England.
Basic rate tax = starting rate rate of income tax rate of 20%. Typically paid on income above the annual allowance.
Benefits = financial support paid by the government for those on low incomes or no earnings.
Bear Market = Stockmarket term for when prices and confidence are falling.
Bid = Price at which you can sell.
Bonds = a loan to a government or company which pays a fixed rate of interest in return.
Borrowing = taking money today which must be paid back in the future.
Break even = where income matches costs, leaving neither a profit or a loss
Broke = Completely run out of money ☹
Budgeting = process of planning and managing money. Aim to balance money coming in and out.
Buildings insurance = insurance which covers damage to the structure of your home.
Bursary = monetary award given to pupil or student towards the cost of their studies.
Buy-to- let (BTL) = A type of home buyer and mortgage, where the property is bought to rent out.
Building Society = Offers similar services like a bank, such as savings, loans and mortgages, but unlike a bank, a building society is owned by its members.
Bull Market = Stockmarket term for when prices and confidence are rising.
Capital = amount of money or assets you have available to save or invest.
Capital Gains Tax (CGT) = The tax paid on the increase in value of an asset when sold.
Cash =money in the form of coins and notes.
Cash ISA = tax-free savings account.
Charges = fees or charges payable on borrowing or some financial products.
Charity = on organisation which raises money for those in need.
Cheque = form of paper based payment.
Claims = Request for payment cover or compensation for a loss or event.
Compound Interest = Where interest is not only added to the original amount, but to the interest paid or received too.
Commission = A type of earnings, which is dependent on a level of sales or performance.
Consumer = customer or someone who buys something.
Contactless payment = contactless tap of debit or credit card on device when paying for goods and services up to £30 in value.
Contribution = Payment towards or into an account, pension etc.,
Corporation tax = tax paid by companies on profits.
Council tax = tax paid to local authority for local services such as lighting, rubbish collection etc., Amount payable dependent on property value and number of residents.
Credit = Sum of money paid into a bank or available to spend.
Credit Card = A form or borrowing, which allows you to make payments on a card, which can be paid for later.
Credit limit =maximum amount a credit or store card will lend you at any time.
Credit rating = a rating given to reflect the risk of lending to you. Also known as credit score.
Credit Score = Score and rank of a borrower, which seeks to reflect their likelihood of repaying a debt.
Creditor = A person or company to which money is owed.
Credit Union = a community-based, not-for-profit organisation which allows members to save and borrow on lower interest rates.
Currency = different countries use different currencies. A currency is a form of money.
Current account = a bank, building society or credit union account to manage your money day-to-day, receiving payments, paying bills and keeping it safe.
Cyber security = processes, systems and controls to protect against online fraud and cybercrime.
Debt = When you owe someone money, or a favour.
Debit = Sum of money taken from a bank.
Debit card = plastic card, which can be used to make online transactions, withdraw money from ATMs or make payments without the need to exchange cash. Money comes straight out of your bank account when used.
Debtor = A person or company which owes money to you.
Deductions = amounts taken from your pay by your emplyer, such as pensions contributions, tax etc.,
Default = fail to make a payment on a loan.
Deficit = when more money is spent than is coming in.
Defined benefit = A type of pension where the pension benefit paid on retirement is based on salary and years worked and is known and definable.
Defined contribution = A type of pension where the contributions or payments made into the scheme are known.
Delayed gratification = postponing the sense of enjoyment from immediate spending.
Deposit = Sum of money paid into an account, or a sum payable as a first installment on a purchase with the balance payable at a later date.
Direct debit = A type of payment card, which makes the payment directly from your bank account.
Discount = money off or saving on original cost or price.
Disposable income = amount of money left after all essential items have been paid for and can be spent as you please.
Diversification = spreading risk across different assets and investments.
Dividend = money paid to owners of shares in a company as a return for investing in the company.
Donation = something that is given to charity, including money
Economy = a country’s production of goods and services, and the way its government manages its money.
Electronic transfer =money moves from one account to another without the need for physical exchange of cash.
Estimate = a rough guide to costs or price.
Exchange rate = how much you will receive for changing one currency for another.
Exempt = not included, often seen in insurance policies to describe events not covered.
Excess = amount payable on an insurance contract, before insurance cover kicks in and insurance company pays losses.
Fair trade =aims to ensure workers and producers receive fair price for goods and services provided.
Fee = one-0ff or ongoing charges for setting up a loan, receiving financial services etc.,
Financial exclusion =lack of access to mainstream banking and financial services.
Financial Services Compensation Scheme (FSCS) = protects customers savings should anything happen to your bank, building society or credit union.
Fixed = A set level of payment which doesn’t change of fluctuate.
Floating = A payment which moves up and down with interest rates.
Fraud = dishonestly obtaining money.
First Time Buyer (FTB) = person buying a home for the first-time.
General Data Protection Regulations (GDPR) = regulation to protect the use and storage of customers’ data.
Gift Aid = a scheme allowing registered charities to reclaim tax on donations mad to them by UK taxpayers. The taxman will add 28p to every £1 given, which increases the amount of the original donation.
Good debt = debt that is affordable and provides an ongoing benefit.
Graduate = student who has successfully completed their studies.
Grant =cash award typically given for specific purposes such as funding studying or investment.
Gross = Before tax deducted, such as gross interest or gross earnings.
Hacking = criminals successfully gain passwords or PINs to accounts.
Health Insurance = insurance to cover medical expenses if you are ill and unable to work.
Higher rate tax = 40% tax rate.
Hire purchase (HP) = a payment plan if you don’t have the money to pay upfront. Deposit paid followed by series of regular payments to cover the balance and interest. Often used to buy cars, the car is not owned until fully repaid.
House Price Inflation = rise in the price of houses for sale.
Home buildings insurance = insurance covers the cost of damage to the structure of your home.
Home contents insurance = insurance which covers your possessions in the home (and sometimes outside the homes) against loss or damage.
Hourly rate = rate of pay per hour for work.
Her Majesty’s Revenue & Customs (HMRC) = the government department responsible for collecting taxes and making benefit payments.
Identity theft = type of theft where an individual’s personal details are illegally taken for financial gain.
Illiquid = difficult to change quickly and cheaply into cash.
Income =money that comes to you can include earnings, gifts, interest and dividends.
Income tax =tax payable on income. The rate payable depends on the amount of income earned.
Inflation = Increase in general prices over time. A given amount of money will buy less over time due to inflation.
Inheritance =money or asses given to others during someone’s life or when they die.
Insolvency = Financial distress where unable to pay bills.
Instalments = regular weekly or monthly repayments to pay off a loan.
Insurance = protection against financial loss or something going wrong. Provides peace of mind by providing compensation for specified loss, damage, illness or death, in return for regular premium payments.
Insurance premiums = the annual or regular monthly payments paid to an insurance company to provide insurance cover.
Insurance policy = a contract between you and the insurance company detailing the insurance cover provided.
Interest = Money paid regularly for either lending or saving. Reward for saving or cost of borrowing.
Interest only = Only pay the interest on a loan and not repayment of the amount borrowed.
Investment = products that have the potential to grow in value. They can also fall in value and you could lose money.
ISA = Individual Savings Account. A type of savings or investment account, where the income or growth in value are not subject to tax.
Junior Individual Savings Account (JISA) = A tax-free savings account for children under 18, with contributions made by the UK government. Becomes a regular ISA when the child turns 18.
Life insurance = insurance which pays out a lump sum to family or beneficiaries on death, or in some cases critical illness. Helps to clear any outstanding debts, such as mortgages on death.
Lifetime ISA = long-term, tax-free savings account which the government contributes to, to help save for first-time property and/or retirement.
Loan = Something borrowed, typically money, which must be paid back, normally with interest.
Loan shark = an unregulated money lender. As they are unregulated , there is no limit to the interest rate and fees they charge.
Loan to value (LTV) = is the ratio of a loan to the value of the asset, commonly used in mortgages.
Lottery = a form of gambling that involves drawing random numbers to win a prize.
Lump Sum = a one-off payment.
Money laundering = disguising the origins of money obtained through criminal activity.
Money mule = a person who transfers illegally obtained money on behalf or others.
Mortgage = a loan used to buy a property and secured against it.
Motor insurance (third party) = legally required insurance to cover costs if you damage someone else or their property.
Motor insurance (third party, fire and theft) = insurance which also covers your own vehicle if stolen or catches fire.
Motor insurance (fully comprehensive) = covers damage to you and your car aswell as damage to someone else and their car.
National Insurance = deduction from wages by government to fund benefits, such as state pensions.
National Insurance Number = everyone receives their NI number shortly before their 16th birthday, receiving a plastic card in the post.
National Minimum Wage = the minimum pay per hour workers are entitled to by law. The exact amount is dependent on age.
Needs = essential neccessities, the things you can’t do without, such as food, rent etc.,
Negative Equity = when house prices fall such that the outstanding balance on your mortgage is greater than the value of your house if it were sold.
Net = after tax deducted.
No claims bonus = a discount on premiums for those insurance policyholders, who have not made claims in previous years on their insurance.
Offer = price at which you can buy.
On budget = when spending is in line with plan, or budget.
On target earnings (OTE) = relates to commission earnings. Guide to earnings you can expect if targets are reached.
Outgoings = expenditure and spending.
Over-budget = when the cost of something exceeds the budget or plan.
Overdraft = drawing more money from a bank account than the account has. Can be arranged or unarranged.
Overtime = time worked in addition to normal contracted hours.
P45 = a document provided by an employer when you leave a job to ensure you pay the right amount of tax.
P60 = document which summarises earnings, tax and deductions in a tax year. Your employer should give you a P60 at the end of every tax year.
Pay-as-you-earn (PAYE) = tax and National Insurance deductions taken from your wages by your employer.
Payday lender = provide very short-term loans (to see people through until payday) for small amounts of money. Often high cost with high interest rates.
Payments = money paid out.
Pension = an income paid to someone who has reached retirement age and no longer works.
Pension contribution = money paid in by you and your employer to a pension scheme to pay a pension on retirement. Contributions usually calculated as a percentage of your salary.
Pension scheme = a type of savings and investment plan that builds over your working life to pay a pension on retirement.
Personal tax allowance =amount of income that you don’t have to pay tax on. For most people this is currently £12,500.
Pet insurance = insurance to cover vet fees if your pet needs an operation or medical treatment.
Philanthropy = desire to support projects and promote the welfare of others large donations of money.
Phishing = deceptive e-mails and websites used by fraudsters to try and gather personal information.
Policy = in insurance, a contract between the insurance company and the customer, known as the policyholder.
Portfolio = a range and variety of different investments held by an investor.
Poverty = when people don’t have enough money or income to afford basic needs such as food and shelter.
Premiums = Cost of insurance installment. Can be paid as a single premium (one payment) or multiple (spread across the life of the policy).
Premium Bond = form of savings offered by government backed savings bank – National Savings and Investment (NS&I). Pays monthly tax-free prizes instead of interest.
Principal = the original amount of money saved or borrowed.
Profit = amount of money left after all costs and expenses have been deducted from income.
Progressive Tax = tax rate is higher on larger amounts.
Quote = an estimate or price for goods or services.
Regressive Tax = a tax rate falls as the taxable amount increases. Takes a higher % of low income and a lower % of higher income.
Remortgage = when a homeowner or mortgage holder changes to a new mortgage.
Rent = paid to the property owner by the person living in the property.
Repayment = pay back of the amount borrowed on a loan/mortgage. Includes both payment of interest and part of the original amount borrowed.
Repossession = when the bank or mortgage provider takes over the ownership of a property as the resident has failed to keep up with mortgage payments.
Retirement = period when someone is no longer working and earning, and relies on a pension for income.
Return = the amount that you get back on investments. Can be both positive and negative depending on whether the value of investments has grown or fallen.
Risk = uncertainty such as the possibility that values fall or your don’t have enough savings.
Salary = amount of money earned by an employee, typically paid each month
Saving = reducing the amount you spend or act of putting money aside for future use.
Savings = act of putting money aside for future use.
Scholarship = award given to a student with strength in their chosen field such as sports, music or academic excellence to fully or partially cover school or university fees.
Second hand = an item which is not new, but was once owned by someone else.
Secured = Where the issuer of a loan has security or a call on the asset if the borrower fails to repay.
Self-assessment = way some people pay tax.
Self-employed = a person working for themselves or own business.
Self-insured = having enough savings or wealth not to need to take out an insurance policy.
Shareholders = the owner of a share in a company.
Shares = a unit or ownership, or stake in a company.
Simple Interest = interest calculated as a percentage of the original sum.
Skint = little of no money available ☹.
Stamp Duty = a duty, or tax, paid on the value of assets when they change legal ownership.
Standing Order = a regular payment set up between the bank and the recipient.
Takings = another word for earnings.
Tax = a charge on by the government on income, profits, transactions and expenditure to pay for public services.
Tax allowance = amount of tax you can earn before tax is payable.
Tax Avoidance = minimising tax due and paid within the law.
Tax code = a code which shows how much you can earn before paying tax.
Tax evasion = illegal non-payment or under-payment of tax due.
Tax relief = an allowable scheme which reduces the amount of tax paid.
Tax year = runs from 6th April to 5th April in the following year. Period over which taxes are calculated.
Term = period of time over which something lasts, like a loan or savings deposit.
Thrift = using money and resources carefully and not wastefully.
Tip = extra payment for good service.
Transaction = a payment for something or payment of money into, or out of a bank account.
Travel insurance = insurance which covers disruption, cancellation, loss of luggage or costs of medical expenses when travelling overseas.
Under-budget = when spending comes in below plan, or budget, costing less than originally forecast.
Unit price = price for one item or measurement.
Universal credit = benefit payment paid to those on low incomes to help with living costs.
Unsecured = a lender has no ability to take an asset as security on an unpaid debt.
Utilities = everyday services such as gas, electricity, water and telecoms.
Value = the monetary worth placed on something. Not necessarily the same as price.
Value Added Tax (VAT) = a tax added to the price of goods and services. A regressive tax.
Variable interest rate = an interest rate which can move up or down, causing interest payments to change.
Wages = money earned and paid on a weekly or monthly basis.
Wants = non-essential things you’d like to buy if you had the money.
Wealth = amount of money, cash and assets, a person or business has.
Withdrawal = money taken out of your account.
Workplace Pension = a pension scheme offered by an employer where the employee is automatically enrolled.