32: Money Terms A-Z

Please listen to our podcast for the hilarious and educational terms Susan shares!

1. Asset Allocation. Very important part of your financial plan! The proportion of your portfolio is split up into various asset classes, based on your goals, personal risk tolerance, and time horizon. Stocks, bonds, and cash or cash alternatives (like certificates of deposit) make up the three major types of asset classes.
   

2. Capital Gains. The increase in the value of an asset or investment — like real estate or stock — above its original purchase price. The gain, however, is only realized when the asset is actually sold. Especially important for taxable investment accounts. Know where to find this number on your statement.
   

3. Compound Interest. This is the interest you earn on the amount you deposit, plus any interest you've accumulated over time. Think of it as “interest on interest.” It will make your savings or debt grow at a faster rate than simple interest, which is calculated on the principal amount alone.
   

4. Health savings account. Also known as an HSA, this is a type of savings account with certain tax benefits. You can use your HSA to pay for out-of-pocket medical costs.
   

5. Money market account. A deposit account offered by banks that may offer higher interest rates on your savings. and often includes check-writing.