Financial Terms Every Woman Should Know (But No One Taught You in School)

As women, we are all too familiar with the juggling act of managing life’s many responsibilities—career, family, health, and yes, finances. But how often have we found ourselves at a crossroads when faced with unfamiliar financial jargon, wishing someone had explained it to us clearly? The good news is that it’s never too late to learn!

April is Financial Literacy Month, a time to celebrate the importance of understanding personal finance. It’s a great opportunity to revisit some key financial terms that will help you feel empowered in your financial decision-making. Whether you’re planning for retirement, managing investments, or simply taking control of your finances, knowing the basics will make a huge difference in your confidence and your ability to navigate the financial world.

Here are 20 essential financial terms every woman should know:

1. Net Worth

Think of your net worth as your financial “scorecard.” It’s the difference between what you own (your assets) and what you owe (your liabilities). Knowing your net worth helps you understand where you stand financially and allows you to track your progress over time.

2. Asset Allocation

When building your investment portfolio, asset allocation refers to how you divide your investments among different categories, such as stocks, bonds, and cash. A balanced asset allocation aligns with your goals, risk tolerance, and time horizon.

3. Emergency Fund

An emergency fund is a savings cushion that’s there when you need it most, whether it’s for an unexpected medical bill, a job loss, or a major home repair. Most professionals recommend setting aside three to six months’ worth of living expenses.

4. Dividends

Dividends are payments made by companies to their shareholders, typically on a quarterly basis. Dividends can be an excellent source of passive income, especially if you’ve built a portfolio of dividend-paying stocks over time.

5. Roth IRA vs. Traditional IRA

These two types of Individual Retirement Accounts (IRAs) offer distinct tax advantages for retirement savings. A Traditional IRA allows you to contribute pre-tax income, while a Roth IRA allows you to contribute after-tax income with tax-free withdrawals in retirement.

6. Credit Score

Your credit score is a number that lenders use to determine how risky it is to lend you money. A higher score typically means you’re seen as a lower risk, which can lead to better loan terms and lower interest rates.

7. Estate Planning

Estate planning involves organizing your finances and legal documents to ensure that your wishes are carried out when you’re no longer able to manage them yourself, or after you pass. This includes having a will, durable power of attorney, healthcare directive, and potentially a trust.

8. Annuity

An annuity is a financial product that provides a steady stream of income, often used for retirement. It can be a good option for women looking for predictable income in their later years, particularly if they’re concerned about outliving their savings.

9. Capital Gains

When you sell an asset like a stock, bond, or real estate for more than you paid for it, the profit you make is called a capital gain. The amount of tax you owe on that gain depends on how long you held the asset before selling.

10. Inflation

Inflation is the rise in prices over time. As inflation increases, the purchasing power of your money decreases. Understanding inflation is important for long-term planning, as it can impact retirement and other savings goals.

11. Tax-Deferred Growth

When an investment grows without being taxed until you withdraw it, it is experiencing tax-deferred growth. This is often the case with retirement accounts like 401(k)s and traditional IRAs.

12. Fiduciary

A fiduciary is someone legally obligated to act in your best interest, particularly when it comes to managing your money. It’s important to know if your financial advisor is a fiduciary, as this ensures they are required to put your needs ahead of their own.

13. Long-Term Care Insurance

As we age, the likelihood of needing assistance with daily activities increases. Long-term care insurance helps cover the costs of care, either at home or in a facility, that regular health insurance doesn’t cover.

14. Mortgage Refinance

Mortgage refinancing is the process of replacing your existing mortgage with a new one, usually with a better interest rate. Refinancing can help lower your monthly payments or shorten the life of your loan, but it’s important to understand the costs and benefits.

15. Liquidity

Liquidity refers to how quickly an asset can be converted into cash without significantly affecting its price. Cash is highly liquid, while real estate or collectibles are less liquid, meaning they may take longer to sell or may not sell for the price you expect.

16. Beneficiary

A beneficiary is a person or entity that is designated to receive assets from your will, life insurance policy, or retirement account when you pass away. It’s crucial to keep beneficiary designations up to date to ensure your assets go to the right people.

17. Dollar-Cost Averaging

Dollar-cost averaging is an investment strategy where you invest a fixed amount of money at regular intervals, regardless of the market’s performance. Over time, this strategy helps to mitigate the impact of market volatility by averaging the cost of your investments.

18. Tax Bracket

A tax bracket is the range of income that is taxed at a particular rate. The U.S. has a progressive tax system, meaning the more you earn, the higher your tax rate. Understanding your tax bracket can help you plan for taxes, both in the present and in retirement.

19. Bonds

A bond is a type of debt investment where you lend money to a government, municipality, or corporation in exchange for regular interest payments and the return of the principal at maturity. Bonds are generally considered less risky than stocks and can help to provide steady income.

20. Social Security Benefits

Social Security benefits may provide a supplemental safety net for retirees, disabled individuals, and survivors of deceased workers. Understanding when and how to claim your benefits can have a significant impact on your retirement income, especially if you work with a financial planner to time your claim appropriately.

Please Note: The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Lauren Smith and not necessarily those of Raymond James. Investing involves risk and you may incur a profit or loss regardless of strategy selected, including diversification and asset allocation. This is not a recommendation to buy or sell any individual security or any combination of securities. Contact your advisor regarding your particular situation before making any investment decision. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.

Like Traditional IRAs, contribution limits apply to Roth IRAs. In addition, with a Roth IRA, your allowable contribution may be reduced or eliminated if your annual income exceeds certain limits. Contributions to a Roth IRA are never tax deductible, but if certain conditions are met, distributions will be completely income tax free. These policies have exclusions and/or limitations.

The cost and availability of Long Term Care insurance depend on factors such as age, health, and the type and amount of insurance purchased. As with most financial decisions, there are expenses associated with the purchase of Long Term Care insurance. Guarantees are based on the claims paying ability of the insurance company.

There are special risks associated with investing with bonds such as interest rate risk, market risk, call risk, prepayment risk, credit risk, reinvestment risk, and unique tax consequences.