Money Words for Kids

Money has its own language. Here are the words grown-ups use constantly — each explained in a sentence or two you can actually use for homework.

Earning & Spending Words

• Income — money coming in to you: jobs, allowance, birthday cash.
• Expense — money going out: things you buy or pay for.
• Budget — a plan that gives every dollar a job before you spend it.
• Wants vs. needs — needs keep you alive and functioning (food, home); wants are everything else. Both are fine — needs just go first.
• Taxes — money everyone pays to the government to fund shared stuff: roads, schools, parks, firefighters.

Saving & Growing Words

• Interest — money paid for using someone else’s money. A bank pays you interest for keeping money there; you pay interest for using someone else’s money.
• Compound interest — when your interest starts earning its own interest. The snowball. (Watch it happen.)
• Investing — using money to own things that can grow in value, like a home or pieces of companies.
• Stock — one piece of one company like Amazon or Apple. It gives you a piece of their earnings and a voting right in the company.
• Index fund — One stock is like owning one player; an index fund is owning the whole team. It is a bundle of stocks in one purchase. You still get the earnings but you give up your voting right to the index fund who actually owns the stock.
• Inflation — prices slowly rising over time, which is why a dollar buys less than it did when your parents were kids — and why money needs to grow, not just sit. Own the company that sells the toys that raise in price over time.

Borrowing Words

• Credit — buying now with borrowed money and a promise to pay later. Best example is a credit card.
• Debt — the money you owe after borrowing. If you do not pay your credit card balance every month you are in debt. Debt charges you interest — the snowball working against you.
• Credit score — a number between 300–850 that tells a lender how reliably someone repays their debts. Grown-ups with high scores get better deals on almost everything that involves credit.
• Loan / mortgage — borrowed money with a repayment plan that charges you interest. A loan is taken out to buy a car. A mortgage is the house-sized version.