An ABC of financial words and what they mean

As a parent it can be difficult to explain the complexities of finance ourselves, let alone explain it to a child. We've partnered up with some experts to help demystify some of the words and phrases and help you to explain them.

Financial literacy charity City Pay It Forward have created this glossary to help:

Word	Explanation
APR	Annual Percentage Rate is yearly interest that a person or company will pay on borrowed money
Budget	A spending plan which covers expected income and expenses over a period of time
Bank of England	The central bank which oversees the UK’s supply of money, sets the interest rate and helps to ensure the country's financial stability
Bankruptcy	A legal term used when a person, a company or an organisation is unable to pay any outstanding debts.
Credit	Credit is a promise that you make to pay someone later
Credit Card	A bank card that allows you to buy goods and services in exchange for paying later. You may have to pay interest on top of what you already owed if you do not repay on time
Debit card	A bank card that allows you to pay for goods and services, on the internet, contactless or by entering a pin number. It also provides access to a cash machine so you can withdraw cash from your bank account to pay for goods or services. Its key feature is that you can only spend what you already have in your bank account
Debt	Generally, when you owe money to someone, a bank or a company
Default	When you cannot pay back your debt or what you owe as originally agreed
Economy	The way a country manages its money and resources (such as workers and land) to produce, buy, and sell goods and services. Goods are products like cars, computers, or even potatoes. Services are duties performed by one person for another, such as teaching and transportation
Energy Crisis	An energy crisis is defined by any great shortage in the supply of energy. This causes the price of gas, electricity or petrol for cars to rise quickly, leading to things being very expensive
Exchange rate	A rate that varies over times and defines how much one currency is worth versus another
Expenses	Money spent to pay for goods and services
Foreign Exchange	A foreign exchange rate is the price of one country's currency in terms of another's. Like all prices, exchange rates rise and fall
Income	Money earned mostly from working or employment
Inflation	An overall rise in the price of goods and services over time
Interest	Refers either to the extra amount you have to pay back when you borrow money, or the money a bank pays you for leaving your money with them
Interest Rate	The extra percentage that you pay back on money you borrow
Loan	Something you borrow, especially a sum of money that is expected to be paid back with interest
Mortgage	A long-term loan to buy a house, flat, building or land
Mortgage rate	The rate (percentage) you pay on a mortgage to the lender
Pension	Savings that people build up over their working lives to give them an income when they are retired
Recession	A drop in economic growth that lasts at least six months. During a recession, businesses sell fewer goods and services
Rent	The amount of money that you pay per week or per month to live somewhere if you do not own the property
Savings	The process of setting income aside for future spending. Saving provides cash for emergencies (unexpected expenses), short, medium and long term goals, and funds for investing
Savings account	A bank account that keeps your money and pays interest and allows withdrawals
Standard of living	The overall degree of comfort of an individual, household, or population, as measured by the amount of goods and services its members consume and its access to basic necessities
Tax	The money collected by the government from individuals and companies
Unemployment rate	The percentage of people who are out of work and looking for jobs. High unemployment rates are a sign of a weak economy

have resources to help you and your child understand financial literacy.

is a Government run website offering advice on money, debt, pensions and benefits. In English and .

Citizens Advice Scotland has a that can help you find sources of online support.

In Northern Ireland you can search for financial support on the NIDirect

91�ȱ� Action Line has further links to useful charities and organisations around hardship and debt.

Disclaimer : All materials in this glossary are provided for information and educational purposes only and do not represent financial advice. The 91�ȱ� and City Pay it Forward are not certified financial advisers and the readers’ use of the content is at their own risk.

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