Reference

Glossary of compounding and savings terms.

The vocabulary that recurs in compound-interest math and personal-finance practice. Each entry is short, written in working English, and links to the longer treatment where one exists on this site.

Annuity: A series of equal payments at fixed intervals. The future value of an annuity is the second term in the compound interest formula on the formula page.
APR: Annual Percentage Rate. The nominal annual interest rate without compounding. Required disclosure on US consumer credit. See the APY vs APR page.
APY: Annual Percentage Yield. The effective annual rate after compounding. Required disclosure on US deposit accounts.
Basis point: One one-hundredth of a percentage point (0.01 %). 50 basis points = 0.50 %. The conventional unit when discussing changes in interest rates because saying “50 basis points” is unambiguous in a way that “a half-percent change” is not.
CAGR: Compound Annual Growth Rate. The constant annual rate that takes an initial value to a final value over t years: CAGR = (V_final / V_initial)^1/t − 1. The right number to use with the Rule of 72 on volatile assets.
Compounding frequency: How many times per year interest is credited to the balance and starts earning interest itself. See the compounding frequency page for impact at common frequencies.
Continuous compounding: The mathematical limit as compounding frequency approaches infinity. Future value becomes P × e^r·t. No real bank account compounds continuously, but it is the upper bound for any nominal rate.
Drawdown: The peak-to-trough decline of a portfolio. Used in retirement planning to size emergency reserves; also the input to sequence-of-returns risk modelling.
Effective annual yield: Synonym for APY. The rate that, if compounded annually, would produce the same future value as the nominal rate at the actual compounding frequency.
Future value (FV): The value of an investment at a future date given a rate of return. The output of this site's calculator.
Geometric mean return: The compounded average return over a series of periods. For a sequence of single-period returns, geometric mean = ((1+r₁)×(1+r₂)×...×(1+r_n))^1/n − 1. Always less than or equal to the arithmetic mean and is the correct figure for long-horizon projection.
Glidepath: A scheduled change in portfolio asset allocation over time, typically de-risking from equities to fixed income as the investor approaches a target date. Reduces sequence-of-returns risk near withdrawal.
HYSA: High-Yield Savings Account. A FDIC-insured deposit account paying a higher rate than a standard savings account, typically offered by online-first banks with lower overhead.
IRA: Individual Retirement Account. A US tax-advantaged retirement account. Traditional IRAs offer pre-tax contributions and taxed withdrawals; Roth IRAs offer post-tax contributions and tax-free qualified withdrawals.
Inflation-adjusted (real) return: The nominal return minus inflation. A 7 % nominal return in a 3 % inflation environment is roughly a 4 % real return, the figure that reflects actual change in purchasing power.
Nominal rate: The stated annual interest rate, before adjusting for compounding (to get APY) or inflation (to get real return). The input the calculator expects.
Period: One compounding interval. For monthly compounding the period is one month; n = 12 periods per year.
Principal: The starting balance, before any interest accrual or contributions. Symbol P in the formula.
Rule of 72: A back-of-envelope approximation: years to double ≈ 72 / rate. See the Rule of 72 page for accuracy by rate.
Sequence-of-returns risk: The risk that a poor return early in retirement (when balances are largest) does disproportionate damage to a portfolio's longevity, even if the average return is acceptable. Mitigated by glidepaths and bond ladders.
Time horizon: The number of years until you need the money. Drives the appropriate asset allocation: short horizons cannot tolerate equity volatility, long horizons can.
Truth in Lending Act / Regulation Z: The US federal regulation requiring lenders to disclose APR and certain fees on consumer credit.
Truth in Savings Act / Regulation DD: The US federal regulation requiring deposit account providers to disclose APY using a uniform method.