Financial terms your members may not know

To help aid you with your financial literacy, below you’ll find a few basic terms to help you sound smart when it comes to finances. With 65% of Americans qualifying to be called financially illiterate, these terms will help put you ahead of the curve. Having these terms in your hip pocket will help ensure you don’t wander around the financial landscape in a haze of jargon you don’t quite understand. So, take a few minutes and educate yourself.

Defined Contribution Plan

This is a retirement fund that the employee of a company puts a percentage of their pay into. The employer usually matches a percentage of what the employee puts into the fund. This isn’t always the case, but it is common. The good thing is there’s a double whammy in terms of how much money you get.

FICO Score

This should be a recognizable term for you if you’re over the age of 18. Your FICO score is a number calculated based on your current debt, payment history on said debt, types of credit, how long you’ve had credit, and your new credit.The score you have will influence the terms you get on loans, amount of credit offered, etc. The higher the score, the better.

Rebalancing

All this means is that you are reallocating your assets back to your desired percentage of bonds, cash, and stock. For example, you’re changing 80% stocks, 10% cash, and 10% bonds back into 65% stocks, 20% cash, and 15% bonds, assuming these are numbers you want. It’s completely up to you.

Umbrella Insurance

This is extra insurance that covers beyond your home insurance, car insurance, or boat insurance. If for some weird reason you find yourself in a high probability situation of being sued for damaging another person’s property, this would be a good thing to have.

Now, there many more financial terms to learn, but this is a short list to help get you started. Don’t worry! More will come.