Financial Terms: Simply Explained

Deciding how to spend and save your money is not difficult, but when adults talk about spending and saving it might seem like they are speaking a foreign language. They throw around terms like “annual percentage rate” or “compound interest” and it all seems too complicated. However, once you learn what the terms mean, you will find spending, saving and investing your money is not so confusing after all.

Money Terms

The coins and dollar bills in your piggy bank are not the only types of money people have. Focus on these money terms so you can understand the different types of money or where someone’s money comes from.

Balance: The amount of money you have in your account or piggy bank.

Cash: All the coins and dollar bills you have.

Checks: Pieces of paper you fill out to transfer money from your bank account to someone else’s bank account.

Credit card: A plastic card with a set spending limit that allows you to purchase something and pay for it later.

Debit card: A plastic card tied directly to a checking or savings account, taking money from the account to make purchases.

Test your knowledge.

Fill in the sentences with the appropriate term from the following word bank: Check, Debit card, Balance, Cash, Credit card.

  1. If you want to know if you can afford something, you should check your ___________________.
  2. Instead of getting cash from the ATM, you can spend money from your bank account by using a _______________________.
  3. If you have a checking account, you can write a _______________ for a larger purchase instead of paying cash.
  4. Sometimes people put larger purchases on a ______________________ because they do not have to pay for it right away.
  5. The vending machine only accepts ____________________.

(Answers are presented at the bottom of the page)

Banking Terms

If you want to put your money somewhere safe, chances are you will open an account at the bank. Before you do that, however, you need to understand some key banking terms.

ATM: Automated teller machine, or a place to withdraw money from a bank.

Annual Percentage Rate (APR): The amount of interest (or extra money) paid on a loan or credit card each year.

Bank: A safe place to keep your money.

Checking Account: A place to keep your money at a bank. Money is withdrawn (or removed) by writing checks or using a debit card.

Deposit: Add money to a bank account.

Loan: Money given to someone by the bank that must be repaid with interest.

NSF: Non-sufficient funds or a lack of money in your bank account.

PIN: Personal Identification Number, a code used to access the money in your bank account through an ATM.

Savings Account: A place to keep your money at a bank. Money earns a small amount of interest as the balance builds.

Test Your Knowledge

Use the definitions above to help you answer the following questions:

  1. Which type of account should you open if you want to earn interest on your money?
  2. If your grandma gives you $100 for Christmas and you want to put it in your bank account, what will you do with it?
  3. Should you share your PIN with other people? Explain.
  4. Based on the meaning of annual percentage rate is it better to have a loan with a 10% APR or a 4% APR?
  5. If you want to borrow money, what will you do?
  6. How can you get money from your bank account?

Spending and Saving Terms

Allowance: A regular amount of money given to you by someone, usually your parents.

Barter: Trade items for other items without spending any money.

Borrow: Temporarily use someone else’s money with the intent of paying it back.

Budget: A plan for your money, outlining where you will spend your money and how much money you have to spend in each area.

Debt: Money you owe.

Income: All the money you have to spend.

Interest: Money added over time to a debt you owe or to a balance in a savings account.

Savings Goal: The amount of money you hope to save within a specific period of time.

Test Your Knowledge

Match the scenario with the term it best relates to:

  1. Each week, Erica’s parents give her $50 to spend on whatever she wants. In exchange, she does chores around the house.
  2. Todd really wants to buy a video game, but he does not have enough money. His dad offers to give him some money, but expects him to pay it back.
  3. Traciana needs $500 to buy a new bike. She has 6 months to get the money.
  4. Ben does not have any money, so he works odd jobs for people in exchange for things he wants.
  5. Victoria’s brother reminds her that she borrowed $50 from her and he expects her to pay it back, along with a dollar for every day it takes. (2 words)
  6. Mike works many odd jobs and from them all, he earns around $1000 a month.


  1. Allowance
  2. Barter
  3. Borrow
  4. Budget
  5. Debt
  6. Income

(Answers can be found at the bottom of the page)

Suggested Activities
  1. Choose one of the sections of terms and create a poster that contains pictures and definitions of each term.
  2. Draw a picture to help you remember each of the terms in a section.
  3. Create a short skit or video that uses the terms from one of the sections.

Discussion Questions
  1. How can understanding financial terms help you become a better spender and saver?
  2. Are there any other financial terms you are confused about?
  3. Who can you ask if you have questions about what something related to money means?

Answer key:

Money terms: 1. Balance, 2. Debit card, 3. Check, 4. Credit card, 5. Cash

Banking terms: 1. Savings Account, 2. Deposit, 3. No, for your account security, keep it confidential, 4. 4% is better,
5. Ask the bank for a loan, 6. Use the ATM.

Spending and Saving terms: 1. Allowance, 2. Borrow, 3. Savings goal, 4. Barter, 5. Debt and interest, 6. Income