The Money Words
Finance hides most of its costs in words people were never taught. Here are the ones that matter most, from a credit card statement to a crypto wallet, each in a few plain sentences, with what to watch for. Ask Fida about any word that is not here. General information, not advice about your own money.
The Money Words
The words on statements, cards and loans: where most of the cost hides.
Annual percentage rate: the yearly price of borrowing, including some fees, as a percent of what you owe. On a credit card it is the rate charged on any balance you carry past the due date.
Watch ForCard interest usually compounds daily, so $1,000 carried for a year at 24.99% APR costs about $284, a bit more than the rate suggests.Annual percentage yield: what savings earn in a year once interest is added to interest. It is the honest number for comparing savings accounts.
Watch ForA higher APY can be a short promotional rate. Check how long it lasts and what it drops to.Interest earned on interest. Over long stretches it does most of the work: $100 a month saved for 30 years is $36,000 put in, and about $83,000 at 5% a year compounded monthly.
Watch ForIt works the same way against you on debt you carry.The smallest amount a lender accepts each month to keep an account in good standing. It is often mostly interest.
Watch ForPaying only the minimum on a large card balance can take years and cost far more than the original purchase.A number lenders use to guess how likely you are to repay. It is built mostly from your payment history, how much of your available credit you use, and how long you have had credit.
Watch ForYou can check your credit reports free at AnnualCreditReport.com. Anyone charging to fix your score fast is a warning sign.A fee a bank may charge when you spend more than is in your account and the bank covers the difference.
Watch ForMany banks let you turn overdraft coverage off, so a purchase is declined instead of costing a fee.Money set aside, easy to reach, for a surprise expense or a lost paycheck, so a bad month does not become new debt.
Watch ForIt works best somewhere separate from everyday spending, but not locked away.The Money Words
The words behind retirement accounts, funds and markets.
A small share of ownership in a company. Its price rises and falls with what buyers will pay for it.
Watch ForAny single company can lose most of its value. No one can promise where a price is going.A loan you make to a government or company, which pays interest and returns the amount on a set date.
Watch ForBonds can lose value when interest rates rise, and a weak borrower may not pay back.A fund that holds the companies in a market index, such as the S&P 500, instead of a manager picking them. It usually costs little.
Watch ForIt follows the market down as well as up.Exchange-traded fund: a fund that trades on an exchange like a single stock during the day. Many ETFs are index funds.
Watch ForSome ETFs use borrowed money or complex bets. Read what it actually holds.A fund's yearly fee, as a percent of what you hold. At 0.5%, $10,000 costs about $50 a year, taken from the fund's value rather than billed.
Watch ForSmall fees add up: over 30 years at 7%, a 1% yearly fee can take about a quarter of the result.Spreading money across many different investments, so one failure does not sink the whole.
Watch ForOwning many coins or stocks that move together is not real diversification.The rise in prices over time, which means the same dollar buys less. Savings that earn less than inflation lose buying power.
Watch ForA return is only real after inflation is taken out of it.Someone legally required to act in your best interest, not their own. The word shares its root with our name: fides, trust.
Watch ForNot every adviser is a fiduciary for everything they sell. Ask in writing, and check them at adviserinfo.sec.gov or brokercheck.finra.org.The Money Words
The words of wallets, chains and decentralized finance, where there is often no one to call.
A shared record of transactions, copied across many computers, that is very hard to change after the fact.
Watch ForA transaction on a blockchain usually cannot be reversed. A mistake or a theft is often final.Software or a device that holds the keys to crypto. The coins live on the blockchain; the wallet proves they are yours.
Watch ForAnyone with the wallet's keys can move everything in it.Twelve or twenty-four words that can rebuild a wallet and its keys anywhere. It is the master key to the money.
Watch ForNever type it into a website, a form or a chat. No real company, exchange or support agent will ever ask for it.Who holds the keys. With an exchange, the company holds them for you. With a self-custody wallet, you do, and no one can recover them for you.
Watch ForMoney on an exchange depends on that company staying honest and solvent. It is often not insured like a bank deposit.A token designed to stay worth a fixed amount, usually one US dollar, backed by reserves or kept steady by code.
Watch ForStable is a goal, not a guarantee. Some have lost their peg, and the backing is only as good as its issuer.A program on a blockchain that moves money by its own rules when certain things happen, with no company in the middle.
Watch ForA bug or a hidden rule in the code can drain funds, and there may be no one to appeal to.Permission you give a smart contract to move a token from your wallet. Connecting to an app often asks for one.
Watch ForAn unlimited approval to a bad contract can let it empty that token later. Approvals can be reviewed and revoked.The fee paid to the network to process a transaction. It rises when the network is busy.
Watch ForA failed transaction can still cost the fee.Decentralized finance: lending, borrowing and trading run by smart contracts instead of banks.
Watch ForHigh yields usually mean high risk: code risk, market risk and the risk of the people behind it.A scam where the people behind a token or project take the money and disappear, leaving the token worthless.
Watch ForAnonymous teams, locked selling and hype with no product are common warning signs.The Warning Signs
Scams change their stories, but not their shape. If you see one of these, slow down and check with someone you trust.
No real investment can guarantee a high return. A promise of steady profits, especially daily or weekly, is the oldest sign there is.
Pressure to act today, or to keep it from your family or your bank, is meant to stop you from checking.
Gift cards, wires, crypto ATMs and payment apps are hard to reverse. A real business or agency will not demand them.
A seed phrase, a password, a one-time code or remote access to your device. No real company ever needs these.
A stranger, a match or an old contact who turns the talk to an investment platform they use. This pattern has cost people their savings.
If a platform says you must pay a tax or fee before you can withdraw, the money is very likely already gone. Do not pay more.
If It Already HappenedStop sending money. Call your bank or card company using the number on the back of your card. Report it at ReportFraud.ftc.gov, and for online or crypto fraud at ic3.gov.
Ask Fida. It explains any money word in plain English, and it never tells anyone what to buy or sell.