15 must-know savings terms
By Bankrate.com

You've realized under your mattress is the worst place to stash cash. Now what? If you want to know the best ways to make your money work for you, Bankrate.com can help. We have the rates, research and advice you need on our savings channel. But first, you'll want to brush up on your savings-speak with these 15 must-know savings terms.

Annual Percentage Yield (APY) -- The percentage, required by Truth in Savings regulations to be disclosed on interest-bearing deposit accounts, that reflects the total interest to be earned based on an institution's compounding method, assuming funds remain in the account for a year.

Annuity -- A regular, periodic payment made by an insurance company to a policyholder for a specified period.

Certificate of Deposit (CD) -- A time deposit, FDIC-insured to $100,000 per person, with a fixed maturity date, usually from three months to five years. It usually pays higher interest than a savings account, and a penalty is charged for withdrawing funds before the maturity date.

Compound interest -- Interest that is determined by adding the interest earned in the current period to the principal and computing the next period's interest on this "compounded" total.

Dividend -- Distribution of earnings to shareholders. In credit unions, it's the money paid to members for deposits, similar to the interest banks pay to their customers for deposits.

Federal Deposit Insurance Corporation (FDIC) -- An agency of the U.S. government that manages the bank insurance funds, which insure deposits at banks and other qualifying financial institutions up to $100,000 per account in interest and principal. FDIC insurance is mandatory for all nationally chartered banks and all banks that are members of the Federal Reserve System.

Individual Retirement Account (IRA) -- A special retirement planning account for individuals. All or part of the contribution in a tax-deferred savings account may be deductible from current taxes, depending on the individual's income and coverage by an employer-sponsored qualified retirement plan, such as a 401(k) plan. Penalties usually apply for withdrawals before age 59¼. Withdrawals are taxed as income.

Interest -- Money paid for a borrower's use of money, calculated as a percentage of the money borrowed and paid over a specified time.

Laddering -- Staggering deposits into investments, such as CDs, to vary and better the rate of return.

Maturity -- The date on which the principal balance of a loan becomes due and payable. It also marks the date when a bond pays off its principal.

Money market account (MMA) -- A bank account that restricts the type and number of certain withdrawals and which earns interest similar to that paid by money-market funds.

Passbook Savings -- Liquid account, providing FDIC insurance to $100,000 per person, that generally offers low or no minimum-balance requirements, fewer fees and a low rate of interest. This account typically has few, if any, restrictions on number of transactions and provides the consumer with a booklet that has each deposit and withdrawal stamped inside it at the time of each in-branch transaction. No other account statement is provided.

Rollover -- A time deposit or certificate of deposit that is allowed to be renewed for another investment period at the prevailing market rate of interest. Also the reinvestment of a 401(k) plan or (IRA) within the permitted 60-day period without tax penalty.

Roth IRA -- An alternative to a traditional IRA. The most notable thing about a Roth is withdrawals are tax-free if the account has been open for at least five years and you're at least 59½ when you start to withdraw money. Contributions to a Roth are not tax deductible. The Roth is named for Sen. William Roth Jr., former chairman of the Senate Finance Committee.

Statement Savings -- Liquid account, providing FDIC insurance to $100,000 per person, that generally offers low or no minimum-balance requirements, fewer fees and a low rate of interest. This account typically has few, if any restrictions on number of transactions and sends out monthly or quarterly account statements showing activity during the statement period.

For a complete list of savings terms, check out our savings glossary.

-- Posted: Sept. 18, 2002