ASSEB HS Financial Literacy key terms

The amount of money an employee actually receives in a pay period after all deductions, such as income tax, social insurance contributions, and retirement plan contributions, have been subtracted from gross pay.

The total amount of money earned before any taxes, contributions, or other deductions are removed. It is the starting figure on a pay statement and the basis for many tax and benefit calculations.

Any amount subtracted from an employee's gross pay by the employer, including mandatory items such as income tax and social insurance, and voluntary items such as retirement savings or insurance premiums.

The portion of an employee's pay that an employer sends directly to the tax authority on the employee's behalf, estimated from the employee's expected annual tax liability so that tax is paid gradually.

The portion of income that remains subject to tax after allowable deductions, exemptions, and adjustments are applied. Tax rates are applied to this amount rather than to total earnings.

An amount that can be subtracted from income before tax is calculated, which lowers taxable income. Its value to the taxpayer depends on the applicable tax rate.

A direct reduction of the tax owed rather than of taxable income. A credit therefore usually reduces a tax bill by its full face value, and refundable credits can produce a refund.

The rate applied to the next unit of taxable income within a progressive tax system. It is usually higher than the average rate and does not apply to all of a person's earnings.

A tax structure in which higher income levels face higher rates, so the share of income paid in tax rises as income rises. Income tax is commonly structured this way.

A tax that takes a larger share of income from lower earners than from higher earners, often because the rate is flat but applied to goods or wages that consume a bigger portion of small budgets.

A form or filing submitted to the tax authority that reports income, deductions, and credits for a period and calculates whether tax was overpaid or underpaid.

A fixed deduction amount that taxpayers may claim instead of itemizing individual deductible expenses. It simplifies filing and is available without supporting receipts.

A tax added to the price of goods or services at the point of sale and collected by the seller. Because it applies to spending rather than income, it weighs more heavily on lower earners.

The total amount a buyer pays for a good or service, including any sales tax or fees added at checkout, as distinct from the advertised shelf price.

A plan that compares expected income with planned spending and saving over a set period, used to control cash flow and direct money toward chosen goals.

The timing and size of money coming in and going out over a period. Positive cash flow means inflows exceed outflows; negative cash flow means obligations exceed available money.

A cost that stays roughly the same from period to period regardless of usage, such as rent or a subscription. Fixed costs are predictable and easier to plan for.

A cost that changes in amount or frequency depending on behavior and circumstances, such as groceries, fuel, or entertainment. These are the most flexible items to adjust in a budget.

Money spent on non-essential goods and services that could be reduced or postponed without harming basic living standards, such as dining out or hobbies.

Money set aside in a readily accessible account to cover unexpected costs or loss of income, typically several months of essential expenses, so that borrowing is avoided.

The value of the best alternative given up when a choice is made. Every spending or saving decision carries one, even when no money changes hands.

The sacrifice of one benefit or option in order to gain another. Recognizing trade-offs helps a decision maker compare alternatives rather than judging a single option in isolation.

Interest calculated on both the original principal and on interest already earned, so a balance grows faster over time than with simple interest. It works in reverse for debt.

The original amount of money borrowed, lent, or invested, separate from any interest or fees that accrue on it. Payments typically cover interest first and then reduce principal.

The principle that money available now is worth more than the same amount later, because it can be invested and earn a return in the meantime.

A general rise in the price level over time, which reduces the purchasing power of money. Savings must earn a return above the inflation rate to preserve real value.

The quantity of goods and services a given sum of money can buy. It falls when prices rise and rises when prices fall.

How quickly and cheaply an asset can be converted into cash without losing value. Cash and savings accounts are highly liquid; property and long-term investments are not.

Spreading money across different assets, sectors, or regions so that a loss in one holding is offset by others. It reduces specific risk but not overall market risk.

The possibility that an investment will lose value or return less than expected. Higher potential returns generally require accepting greater uncertainty.

A person's willingness and financial ability to accept uncertainty in exchange for potential returns. It depends on goals, time horizon, income stability, and temperament.

The length of time before invested money will be needed. Longer horizons generally allow more risk because there is more time to recover from short-term losses.

The effective annual return on a deposit account, reflecting the effect of compounding. It lets savers compare accounts with different compounding schedules on a like-for-like basis.

The yearly cost of borrowing expressed as a rate, including certain fees as well as interest. It is designed to make loan offers comparable across lenders.

A numerical summary of a person's credit history, based on factors such as payment record, amounts owed, and length of history. Lenders use it to judge repayment likelihood.

A record compiled by a credit bureau listing a person's borrowing accounts, payment history, and public financial records. Errors in it can be disputed and corrected.

Total monthly debt payments divided by gross monthly income, expressed as a percentage. Lenders use it to assess whether a borrower can take on additional obligations.

The process of paying off a loan through scheduled payments that cover interest and gradually reduce principal, so that the debt reaches zero at the end of the term.

The percentage charged by a lender or paid to a saver over a period, usually a year. It is the price of using money and a core input to any borrowing decision.

A card requiring a cash deposit that serves as collateral and usually sets the credit limit. It is often used to build or rebuild a credit history.

The amount a policyholder pays, often monthly or annually, to keep an insurance policy in force. It is the regular cost of transferring risk to an insurer.

The amount a policyholder must pay out of pocket for a covered loss before the insurer begins to pay. Choosing a higher deductible typically lowers the premium.

The maximum amount an insurer will pay for a covered claim under a policy. Costs above the limit remain the policyholder's responsibility.

Legal protections for buyers of goods and services, covering matters such as truthful advertising, product safety, refunds, and fair treatment in lending and debt collection.

The fraudulent use of another person's personal or financial information to obtain credit, money, or services. Victims may need to freeze credit and dispute fraudulent records.

A scam that impersonates a trusted organization through messages, calls, or fake websites to trick a person into revealing passwords, card numbers, or other sensitive data.

The cost of a product expressed per standard unit of measure, such as per kilogram or per liter. Comparing unit prices reveals which package size is genuinely cheaper.