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Financial literacy is not an overnight achievement. Instead, it is a life-long learning process that comes with financial experiences and ongoing education. To help you get started or refresh your knowledge, we’ve complied an A-to-Z guide with some of the most common terms you’ll need to know as you navigate your journey to financial independence. 

A: Accounts

An account is what you hold at a financial institution that allows you to make deposits and withdrawals to help you manage your money. There are many different types of accounts, with the most common account types being checking and savings accounts.

A checking account provides easy access to funds for daily transactions, such as paying bills or making purchases. Some of the various checking account options include:

• Interest-Bearing Checking Accounts, like our Growth Checking Account
• Free Checking Accounts
• First Step Checking Accounts

A savings account helps you save for future use and is not for everyday expenses. Depending on the account, you may need to maintain a minimum balance or limit withdrawals to avoid fees. These accounts often earn interest and some options include:

• High Yield Savings Accounts, like our Growth Savings Account
• Club Savings Accounts
• Money Market Accounts
• Individual Retirement Accounts (IRAs)

At First Harvest, your deposit funds are insured up to $500,000 by the NCUA and by the Excess Share Insurance (ESI) Corporation.

B: Budgeting

Budgeting is the process of creating a plan for saving and spending your money. It involves tracking income, setting expense limits, and allocating funds toward various categories such as needs, savings, and wants. The goal of budgeting is to help you manage your finances, avoid overspending, and work toward financial goals. The 50/20/30 rule is a great budgeting tool that divides your income into three categories: 50% for essential spending, 20% for savings, and 30% for wants.

C: Credit Score

Credit scores represent your creditworthiness, which lenders use to assess your risk. The most commonly used credit score is the FICO Score, though lenders also use VantageScore which was developed by the three major U.S. credit bureaus: Equifax, Experian, and TransUnion. Many consumers struggle to understand how credit scores are calculated, but the general scoring model takes into account several factors, including your credit utilization ratio, payment history, and credit history.

D: Debit Card

A debit card provides a convenient way to access your money without having to carry cash. Most retailers accept debit cards as a form of payment and you can also use your card at an ATM to withdraw cash. Since debit cards are directly linked to your checking account, you can spend your available balance. Debit cards can also be added to your mobile and digital wallet for an even more secure and contactless payment option!

E: Electronic Funds Transfer (EFT)

An electronic funds transfer is the digital transfer of money between people, financial institutions, and businesses. EFT technology is used for digital bill payments, sending money to friends and family, as well as direct deposits and credit card transactions. Apps like Cash App, PayPal, and Venmo use EFT to offer convenient peer-to-peer (P2P) instant transfers.

F: Fixed Interest Rate

A fixed interest rate is a consistent rate applied to a loan that does not change throughout the loan term. Fixed rates can help offer predictable monthly payments and lump sum financing, like with a personal loan or auto loan. There are also fixed-rate revolving loans, like credit cards, which will likely have varying monthly payments based on your spending habits.

G: Guaranteed Investments and Earnings (GIEs)

GIEs usually refer to a financial product or strategy that offers a set return on income over a specific period of time. These products offer a conservative approach to investing with low risk and provide predictable returns on savings. Share and IRA Certificates, Bonds, and Fixed Annuities are examples of financial products which lock in savings rates for a fixed term.

H: Home Loans

Home loans, or mortgages, are loans secured by real estate. Common types of home loans include First Mortgages and Home Equity Loans.

A First Mortgage is a home loan in first lien position that is used to purchase primary or secondary residences and sometimes investment properties. First Mortgages typically carry a lower interest rate compared to other home loan types because of it lien position.

A Home Equity Loan uses the equity in your home as collateral, and can be referred to as a second mortgage because it's taken in addition to your primary mortgage, if your First Mortgage has not been paid off. The loan amount of a Home Equity Loan is based on the difference between the home's current market value and the mortgage balance. Home Equity Loans can either be a fixed-rate home equity loan or what’s called a variable-rate home equity line of credit (HELOC).

I: Interest Payment

Interest is the cost of borrowing money. An Annual Percentage Rate (APR) represents the total cost of a loan, including interest and fees, as a yearly rate. A higher APR indicates a more expensive loan and applies to both simple and compound interest loans.

J: Joint Account

A joint account is a financial account shared by two or more people, typically used by family, couples, or business partners. Joint accounts offer accountholders the same benefits as a standard account, including access to funds and the ability to withdraw cash, write checks, and make payments.

K: Kids Accounts (or Youth Accounts)

Kids or Youth Accounts are savings and checking accounts designed specifically for children and teens. They typically require a lower initial deposit than adult accounts, offer attractive interest rates, and have fewer fees.

L: Loans and Lines of Credit

A loan is an agreement between a lender and a borrower and can be used for large and small purchases. Loan terms include the repayment period or maturity date, the interest rate or APR, and payment schedule. Secured loans will require collateral, like auto loans and mortgages. If the borrower defaults or fails to repay the loan, the lender can take possession of the collateral.

Lines of credit or revolving credit, including credit cards and HELOCs (Home Equity Lines of Credit), allow you to borrow money up to the credit limit and payoff the total all at once or in installments. If a balance is carried over, interest is charged monthly and added to the outstanding amount.

M: Member

Members of a credit union are accountholders as well as member-owners because they hold shares in the institution. Each credit union has its own criteria for who can join, and members typically have the ability to vote on leadership. While many credit unions now offer membership to the general public, some serve a specific "field of membership.”

N: Not-For-Profit

A not-for-profit credit union, like First Harvest, is a member-owned financial cooperative that is focused on serving their members' financial needs rather than maximizing profits. Instead, any profits made are returned to members in the form of lower fees, better interest rates, and quality services. Membership is usually based on a common bond like working for partnering employee groups or living in specific communities or counties.

O: Overdrafts

An overdraft occurs when there are insufficient funds in an account to cover a transaction or withdrawal, but your financial institution allows it to proceed by essentially extending credit to the accountholder. Overdrafts often come with fees, and while some institutions offer overdraft protections to help accountholders avoid declined transaction, it’s best to avoid over drafting your account altogether.

At First Harvest, you can use our online and mobile banking tools to help you keep track of funds available to avoid over drafting on your account.

P: Principal Balance

The principal is the original amount borrowed in a loan or the dollar amount you invested. It forms the basis for calculating interest or investment returns, and is crucial for amortization schedules, which outline the breakdown of loan payments over time. In bonds, principal refers to the face value returned to the bondholder at maturity.

Q: Quality of Life

Quality of life is often seen as subjective, but it plays a key role in financial decisions, such as choosing a job and where to live. Factors like financial security, job satisfaction, family, social connections, health, and safety are commonly considered.

R: Retirement Planning and Investing

Creating a retirement plan starts with defining your long-term financial goals and risk tolerance, then taking steps to achieve them. It's never too late to start planning for retirement, but the sooner you create a plan, the better. The process involves identifying income sources, tracking expenses, starting a savings plan, and managing assets. Estimating future cash flow will help you determine if your retirement income goal is realistic. Remember, a retirement plan should be regularly updated and reviewed to track progress.

S: Share

Shares in a credit union represent a member's ownership stake. Unlike stocks in a for-profit company, credit union shares are not traded or assigned market value. Instead, they reflect a deposit made to join the credit union. Our First Harvest members establish their share in the credit union with a Primary Savings Account. These shares may earn dividends and offer voting rights, allowing members to participate in decisions, such as electing board members.

T: Taxes or Transactions

Taxes aim to fund the greater good and have existed for over 5,000 years. The three main types of taxes are income, property, and sales, which are levied on earnings, assets, and purchases respectively. Income taxes are withheld from employees' paychecks, while self-employed individuals must pay federal taxes quarterly. Federal income tax returns are due annually, typically by April 15, though this date may vary.

U: Unsecured Loans

An unsecured loan doesn’t require collateral and is approved based on the borrower’s creditworthiness. Since these loans are riskier for lenders, they typically carry a higher Annual Percentage Rate (APR), and therefore are seen as a more expensive loan option. Examples include personal loans, student loans, and credit cards.

V: Variable Interest Rate

A variable interest rate, also known as adjustable or floating, changes based on an underlying benchmark or index such as the " US Prime Rate," which is used by most financial institutions to set their loans and savings rates. If the benchmark rate decreases, your rate and payment will also drop. Variable rates offer flexibility, making them ideal for borrowers like Home Equity Line of Credit (HELOC) holders, who benefit from adjustable payments and the ability to pay-as-you-go—perfect for ongoing projects and expenses.

W: Withdrawal

A withdrawal is the act of taking funds out from an account, pension, or trust. A penalty may be applied for early withdrawals from accounts like IRAs or if you exceed a certain number of withdrawals per month on certain types of savings accounts.

X: Expenses

An expense is any cost incurred to pay for or fulfill a need. Expenses can include things like groceries, rent, transportation, or entertainment. In many cases, a recurring expense, like an auto loan payment, can be automated through a financial institution’s electronic bill payment service, so you can avoid late or missed payments.

Y: Yield

The yield of an asset, such as a stock, bond, or mutual fund, is the income from that asset. This includes interest or dividends paid:

• In stocks, dividend yield is the annual share of profits returned to shareholders.
• In bonds, yield is the interest paid to bondholders.
• In mutual funds, yield is the fund's net income.

The APY (Annual Percentage Yield) reflects the total interest earned on a deposit, factoring in compounding.

Z: 0% Financing

Zero percent financing is a loan that charges no interest for either the entire term or for a specific period of time. These loans can be convenient, but they are not free. Similar to a "buy now, pay later" plan, these loans are used to encourage fast decision-making and large purchases. While they may be appealing, they can lead to financial strain if consumers spend beyond their means.

To explore even more financial education content, our partners at MoneyEDU offer online courses, on-demand content, and convenient tools for First Harvest members! Get started today and register for your free account now.

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