Money Dictionary

401(K): An Individual Retirement Account that lets employees save for retirement while deferring income taxes on the deposits and earnings. A 401(K) holder cannot withdraw funds before age 59 1/2 without penalties.

Adjustable Rate Mortgage (ARM): A mortgage with a variable interest rate.

Annuity: An insurance-like contract providing monthly, quarterly, semi-annual or annual payments.

Auction Rate Securities: A bond whose interest is reset periodically through a dutch auction.

"Breaking the Buck": When a money market fund’s net asset value (NAV) falls below $1.00 per share.

Brokerage: A firm that acts as an intermediary between a purchaser and a seller of stocks or bonds.

Certificate of Deposit (CD): An investment product that gives fixed interest payments on a fixed amount of money over a fixed amount of time.

Credit Union: A cooperative financial institution that is owned and controlled by its members

Direct Deposit: Depositing funds electronically directly to your checking or savings account rather than issuing a paper check.

Dutch Auction: A type of auction where the auctioneer begins with a high asking price, which is lowered until some participant is willing to accept the auctioneer's price.

FDIC: Federal deposit insurance protects the first $100,000 of deposits that are payable in the United States.

Federal Reserve (Fed): The central banking system of the United States.

Financial Industry Regulatory Authority (FINRA): The largest non-governmental regulator of U.S. securities firms.

Fixed Annuity: An insurance contract in which the insurance company makes fixed dollar payments.

Holding Company: A company that owns part, all, or a majority of other companies' outstanding stock.

Home Equity Line of Credit (HELOC): A loan where the collateral is the borrower’s home equity.

Index Fund: A type of mutual fund constructed to match or track the components of a market index.

Individual Retirement Account (IRA): An investing tool used by individuals to earn and earmark funds for retirement savings. There are several types of IRAs: Traditional IRAs, Roth IRAs, SIMPLE IRAs and SEP IRAs.

Money Market Fund: A type of mutual fund that is required by law to invest in low-risk securities. They attempt to keep their net asset value (NAV) at a constant $1.00 per share.

Mutual Fund: A professionally managed type of fund that pools money from many investors and puts it in a wide range of investments.

National Association of Securities Dealers (NASD): A self-regulatory organization of the securities industry responsible for the operation and regulation of the Nasdaq stock market.

National Credit Union Administration (NCUA): A government agency that provides identical coverage to credit unions as the FDIC does for banks.

Negative Amortizing Loan: When the mortgage payment is smaller than the interest due, causing the loan balance to increase rather than decrease.

Payable on Death (POD): A bank account that names a specific person as the beneficiary of all funds once the bank account holder dies.

Roth IRA: An Individual Retirement Account that accumulates earnings on a tax-deferred basis and allows tax-free earnings withdrawals.

Revolving Credit: A type of credit that does not have a fixed number of payments.

Savings & Loans Association: Also known as a thrift, a financial institution that specializes in accepting savings deposits and making mortgage loans.

Secretary of the Treasury: The head of the United States Department of the Treasury (currently Hank Paulson).

Securities Investor Protection Corporation (SIPC): An organization that compensates investors if the firms handling their funds and securities go bankrupt.

Severance Package: Pay and benefits an employee receives when they leave employment at a company.

Simplified Employee Pension (SEP):
A variation of the Individual Retirement Account used in the United States.

Short Selling: To borrow a security and sell it, expecting that it will decrease in value in order to buy it back at a lower price and keep the difference.

T-Bills: Government bonds issued by the United States Department of the Treasury through the Bureau of the Public Debt.

Take-Home Income: The amount of after-tax income that is available to divide between spending and personal savings.

Three C’s: Credit, Collateral, Capacity.

TIAA-CREF: Teachers Insurance and Annuity Association - College Retirement Equities Fund.

Treasury Department: The agency that regulates all government revenue. Its activities include collecting taxes and circulating money.

Trust: An arrangement where property is managed by one person (or persons, or organizations) for the benefit of another.

Variable Annuity: An insurance contract in which the insurance company makes variable dollar payments.

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