Money glossary: finance words explained

Finance hides behind its own vocabulary, and that is often the point. Here are 42 of the terms you will actually meet, defined in plain English. No product is trying to sell you anything on this page. Bookmark it and come back whenever a word trips you up.

Last updated 1 July 2026 · 42 terms and growing

Everyday banking and saving Debt and credit Investing Superannuation Home loans and property Tax and income

Everyday banking and saving

Emergency fund: Cash set aside for genuine surprises like a job loss or a medical bill, usually kept in a separate savings account. The goal is to avoid going into debt when life happens.
High-interest savings account: A savings account that pays a higher rate of interest, often if you meet conditions like depositing a set amount and making no withdrawals that month.
Compound interest: Interest earned on both your original money and the interest it has already earned. It works for you when you save and against you when you borrow.
Offset account: A transaction account linked to your home loan. The balance is subtracted from your loan before interest is calculated, so it reduces the interest you pay while staying accessible.
Redraw: A feature that lets you pull back extra repayments you have made on a loan. Similar to an offset in effect, but usually less flexible.
Direct debit: An automatic payment you authorise a company to take from your account, often for bills or subscriptions.

Debt and credit

Interest rate: The price of borrowing money, shown as a yearly percentage. Lower is cheaper for you.
Minimum payment: The smallest amount you can pay on a credit card or loan without penalty. Paying only the minimum keeps you in debt far longer and costs far more in interest.
Buy now pay later: A service that splits a purchase into instalments. Often interest free if you pay on time, but late fees and overspending are the real risks.
Comparison rate: A single rate that combines the interest rate with most fees, designed to make loans easier to compare honestly.
Good debt and bad debt: An informal split. Debt used to buy something that may grow in value or income, such as a home, is often called good debt. High-interest debt for everyday spending is usually called bad debt.

Investing

Share: A small unit of ownership in a company. If the company does well, the share can rise in value and may pay you a dividend.
Dividend: A portion of a company profit paid to shareholders, usually as cash.
ETF: An exchange traded fund. A single investment that holds many companies or assets at once and trades on the sharemarket like a share. A common, low-cost way to diversify.
Index fund: A fund that simply tracks a market index rather than trying to beat it, which keeps costs low. Many ETFs are index funds.
Diversification: Spreading your money across many investments so that one bad result does not sink you. The financial version of not putting all your eggs in one basket.
Dollar cost averaging: Investing a fixed amount at regular intervals regardless of price, so you buy more when prices are low and fewer when high, and avoid trying to time the market.
Capital gain: The profit when you sell an investment for more than you paid. It may be taxable.
Brokerage: The fee a broker charges to buy or sell an investment for you.
Franking credit: A credit attached to some Australian dividends that reflects tax the company has already paid, which can reduce the tax you owe on that income.
Risk tolerance: How much ups and downs you can handle, financially and emotionally, without panic selling. It guides how you invest.

Superannuation

Superannuation: Money invested for your retirement, contributed by your employer at a legislated rate and topped up by you if you choose. For many people it is their largest investment.
Super fund: The organisation that holds and invests your super. You can usually choose your own.
Concessional contribution: A before-tax contribution to super, such as employer payments and salary sacrifice, taxed at a lower rate than most income, up to a yearly cap.
Non-concessional contribution: An after-tax contribution to super that you make from money already taxed, up to a separate cap.
Salary sacrifice: An arrangement where you direct part of your before-tax salary into super, which can lower your taxable income and boost your retirement savings.
Investment option: How your super is invested, for example growth or conservative. Growth options carry more short-term ups and downs but often more long-term return.
Preservation age: The age from which you can generally start accessing your super, subject to the rules that apply to you.

Home loans and property

Deposit: The cash you put toward a property purchase upfront. A larger deposit usually means a smaller loan and lower repayments.
LMI: Lenders mortgage insurance. A cost charged when your deposit is below 20%, which protects the lender, not you, and can add thousands to your costs.
Pre-approval: A lender indicating in advance roughly how much it may lend you, so you can shop with confidence. It is not a final guarantee.
Principal: The amount you actually borrowed, separate from the interest charged on it.
Fixed and variable rate: A fixed rate stays the same for a set period. A variable rate can move up or down with the market. Some loans split between both.
Stamp duty: A state tax on property purchases. First-home buyers often qualify for concessions or exemptions.
Conveyancing: The legal process of transferring property ownership, usually handled by a conveyancer or solicitor.
Equity: The share of your home you truly own, being its value minus what you still owe on the loan.

Tax and income

Taxable income: The income you pay tax on after allowable deductions are subtracted.
Marginal tax rate: The rate of tax you pay on your next dollar of income. Australia uses tax brackets, so higher income is taxed at higher rates only on the portion above each threshold.
Tax deduction: An expense you are allowed to subtract from your income before tax is worked out, which lowers your tax.
Gross and net: Gross is before deductions such as tax. Net is what actually lands in your account.
PAYG: Pay as you go. The system where tax is withheld from your pay throughout the year rather than in one bill.
Financial year: In Australia, the 12 months from 1 July to 30 June, used for tax.

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