Glossary

A well-known retirement guideline based on historical market data: withdrawing about 4% of an investment portfolio in the first year, then adjusting that amount for inflation, has historically lasted around 30 years under certain assumptions. It's a rule of thumb, not a guarantee.

Short for annual percentage rate: the yearly cost of borrowing, including interest and usually certain fees, shown as a percentage. It makes loans easier to compare. Exact rules vary by country.

How money is divided between different types of investments, such as shares, bonds and cash. The mix affects both potential growth and risk.

An account at a bank where you can keep money safely, receive payments and pay for things. Many accounts come with a card for paying and withdrawing cash.

A loan you make to a government or a company. In return, it usually pays you interest and gives back the original amount on a set date.

A plan for your money, made in advance, showing what comes in and where it will go. It helps you decide on spending and saving before the money is gone.

Interest calculated on your original money and on the interest it has already earned. Over time, this can make savings grow faster, and unpaid debts too.

Example€100 at 10% a year becomes €110 after one year, then €121 after two.

A card that lets you buy things with borrowed money and pay later. If the full balance isn't paid back on time, interest is usually charged.

A number lenders may use to judge how likely someone is to repay borrowed money, based mainly on their borrowing and repayment history. Not every country uses one.

Short for cryptocurrency: digital money that exists only online, is recorded on a shared system called a blockchain and isn't issued by a central bank. Its price can rise and fall very sharply.

Money you owe to someone else, such as a bank, a shop or a person. Loans and unpaid credit card balances are common forms of debt.

Spreading money across different investments so that one doing badly has less effect on the whole. It can reduce risk, but it doesn't remove it.

A portion of a company's profit paid out to its shareholders. Not every company pays dividends, and payments can change or stop.

Investing a fixed amount at regular intervals, whatever the price. This means buying more when prices are low and less when they are high.

ExampleInvesting €50 every month, whether prices are up or down.

Money set aside for unexpected costs, like a broken phone or an urgent repair. It's kept easy to reach, so a surprise doesn't have to turn into debt.

Short for exchange-traded fund: a fund that can be bought and sold on a stock exchange like a single share, and that usually holds many investments. Many ETFs track an index.

Buying something on the spot without planning to, often because of emotions, a sale or clever marketing rather than a real need.

Money that comes in, for example from a job, a business, a pension or interest on savings.

The general rise in prices over time. With inflation, the same amount of money buys a little less than before.

An agreement where you pay a regular amount, called a premium, so that an insurer covers certain costs if something goes wrong, such as an accident, illness or damage.

The cost of borrowing money, or the reward for lending or saving it. It's usually a percentage of the amount borrowed or saved.

The percentage used to calculate interest, usually expressed per year.

ExampleAt 5% a year, €100 earns or costs €5 in interest over one year.

Putting money into something, such as shares or funds, in the hope that it grows over time. Unlike money in a bank account, invested money can also lose value.

Insurance that pays money to chosen people, such as family members, if the insured person dies. It's often used to protect those who depend on someone's income.

When spending rises as income rises, so earning more doesn't leave more money to spare. It's different from price inflation.

Money borrowed that has to be paid back over time, usually with interest added.

The tax rate applied to the highest slice of your income. In many tax systems, a higher rate applies only to the part of income above a certain level, not to all of it.

ExampleIf income above €30,000 is taxed at 30%, earning €31,000 means only the last €1,000 is taxed at 30%.

A loan used to buy a home, with the home itself serving as security. If the loan isn't repaid, the lender can take the property.

A fund that pools money from many investors and invests it together, usually managed by professionals. Unlike an ETF, it usually isn't traded on a stock exchange: it's bought and sold at a price calculated once a day.

A need is something you can't really do without, like food or a place to live. A want is something you'd like to have but could live without.

What you own minus what you owe.

ExampleIf you have €5,000 in savings and still owe €2,000 on a loan, your net worth is €3,000.

What you give up when you choose one option over another.

ExampleIf you spend €20 on a game, the opportunity cost is whatever else that €20 could have been used for.

A saving habit: putting money aside as soon as you're paid, before spending on anything else, instead of saving whatever happens to be left at the end.

An income received in retirement, usually earned through years of work and contributions. It can come from the state, an employer, personal savings or a mix of these.

The full collection of investments someone owns, seen as a whole.

The price is what something costs. The value is how useful or worthwhile it is to you. Something cheap can be poor value, and something expensive can be good value.

How much your money can actually buy. If prices rise while the amount of money you have stays the same, your purchasing power falls.

How much an investment gains or loses over a period of time.

ExampleIf €100 grows to €105, the return is €5, or 5%.

The chance that an outcome turns out differently from what you expected, including the possibility of losing money. Investments that may grow more usually come with more risk, but more risk doesn't guarantee more growth.

A trick designed to take your money or personal information, often by pretending to be someone trustworthy or promising something that sounds too good to be true.

A difficult economic situation where prices rise quickly (high inflation) while the economy barely grows, usually alongside rising unemployment.

A small piece of ownership in a company. "Shares" usually means the individual units, while "stock" often refers to that ownership more generally. Shareholders can gain if the company does well and lose money if it doesn't.

A measure that tracks the performance of a group of shares, giving a quick picture of how that part of the market is doing.

Money that people and businesses must pay to the government, for example on income, purchases or property. It pays for public services such as roads, schools and healthcare.

A legal document that sets out who should receive your money and belongings after you die. Without one, the law usually decides.

A sum of money you didn't expect or plan for, such as an inheritance, a bonus or a prize.