Exercise 1
Choose the correct word to complete each sentence about money, banking, and personal finance.
Example: She went to the bank to open a savings ___. (account / receipt / loan)
Answer: She went to the bank to open a savings account.
Money, Banking and Personal Finance
Managing money is an essential part of everyday life. Whether you are opening a bank account, paying bills, saving for a holiday, or trying to avoid debt, understanding the language of money, banking and personal finance will help you feel more confident in real-world situations.
Read this short situation first to see some of the key vocabulary in context:
Lucas is 24 years old and has just started his first full-time job. He visits his bank to open a current account and set up a direct debit for his rent. The bank adviser tells him it is a good idea to put some money into a savings account each month. Lucas also wants to apply for a loan to buy a car, so the adviser checks his credit score and explains the interest rate. Lucas leaves the bank feeling much more in control of his finances.
Now let us look at all the key vocabulary you need for this topic.
Key Vocabulary & Meaning Breakdown
1. Bank Accounts & Everyday Banking
| Word / Phrase | Part of Speech & Meaning | Example Sentence | Collocations / Notes |
|---|---|---|---|
| current account | noun phrase — a bank account used for everyday spending, receiving wages and paying bills | My salary is paid directly into my current account every month. | open / close a current account; use a current account |
| savings account | noun phrase — a bank account designed for keeping money and earning interest over time | She puts £100 into her savings account every month. | open a savings account; pay into a savings account |
| balance | noun — the total amount of money in a bank account at a particular time | He checked his balance online before going shopping. | check your balance; account balance; a low / high balance |
| statement | noun — an official document from a bank showing all transactions (money in and out) over a period | I looked at my bank statement and realised I was spending too much. | bank statement; monthly statement; check / read your statement |
| transaction | noun — an act of buying or selling something, or moving money from one place to another | The suspicious transaction was flagged by the bank. | make a transaction; bank transaction; online transaction |
| direct debit | noun phrase — an automatic payment taken from your bank account on a fixed date each month | I set up a direct debit to pay my electricity bill automatically. | set up / cancel a direct debit; pay by direct debit |
| standing order | noun phrase — a regular fixed payment you instruct your bank to make on your behalf | He has a standing order to send £50 to his savings account every week. | set up a standing order; cancel a standing order |
| withdraw | verb — to take money out of a bank account | She withdrew £200 from the cash machine. | withdraw cash / money; withdraw from an account |
| deposit | verb / noun — (verb) to put money into a bank account; (noun) a sum of money paid as a first payment or as security | He deposited his wages into his account on Friday. / We paid a deposit on the flat. | deposit money / cash; pay a deposit; make a deposit |
| transfer | verb / noun — to move money from one account to another | I will transfer the money to you this afternoon. | bank transfer; transfer money / funds; online transfer |
2. Borrowing, Lending & Credit
| Word / Phrase | Part of Speech & Meaning | Example Sentence | Collocations / Notes |
|---|---|---|---|
| loan | noun — money that you borrow from a bank or person and agree to pay back, usually with interest | She took out a loan to pay for her university fees. | take out a loan; apply for a loan; repay a loan; a bank loan; a personal loan |
| mortgage | noun — a long-term loan from a bank used to buy a house or property | They got a mortgage and bought their first home last year. | take out a mortgage; apply for a mortgage; pay off a mortgage; monthly mortgage payments |
| interest rate | noun phrase — the percentage of a loan or savings amount that is charged or paid over a period of time | The interest rate on that credit card is very high. | high / low interest rate; interest rate rises / falls |
| credit card | noun phrase — a card that allows you to buy things now and pay for them later | He paid for the flights on his credit card and paid the bill at the end of the month. | pay by credit card; use a credit card; credit card bill / debt |
| credit score | noun phrase — a number that shows how reliable you are at repaying money you borrow | You need a good credit score to get a mortgage. | check / improve your credit score; a good / poor credit score |
| debt | noun — money that you owe to someone or an organisation | After university, many students are in debt. | be in debt; get into debt; pay off a debt; have debts |
| repay | verb — to pay back money that you borrowed | It took her five years to repay the loan. | repay a loan / debt; repay in instalments |
| instalment | noun — one of a series of regular payments made over a period of time | We paid for the sofa in monthly instalments. | pay in instalments; monthly instalments; the final instalment |
| overdraft | noun — when you spend more money than you have in your account, and the bank allows it (usually with a fee) | He went into his overdraft at the end of the month. | go into your overdraft; have an overdraft; overdraft limit / fee |
| afford | verb — to have enough money to be able to buy or pay for something | I would love a new laptop, but I can't afford one right now. | can / can't afford something; afford to do something |
3. Managing Money & Personal Finance
| Word / Phrase | Part of Speech & Meaning | Example Sentence | Collocations / Notes |
|---|---|---|---|
| budget | noun / verb — (noun) a plan for how to spend money; (verb) to plan how much you will spend | We made a budget for the holiday to avoid overspending. | stick to a budget; set a budget; budget for something; monthly budget |
| income | noun — money received regularly, especially from work | Her monthly income increased after her promotion. | monthly / annual income; household income; earn an income |
| expenditure | noun — the total amount of money spent on something (more formal than "spending") | The company tried to reduce its monthly expenditure. | monthly / total expenditure; reduce expenditure; household expenditure |
| expense | noun — money spent on something; the cost of something | Rent is his biggest monthly expense. | living expenses; daily / monthly expenses; cover expenses; cut expenses |
| save up | phrasal verb — to gradually collect money over a period of time for a particular purpose | They are saving up for a new car. | save up for something; save up enough money |
| invest | verb — to put money into something (e.g. property, shares) with the aim of making a profit | She decided to invest some of her savings in the stock market. | invest in something; invest money; a good investment |
| insurance | noun — an agreement where you pay regular amounts to a company, which pays you money if something bad happens (e.g. illness, accident, theft) | It is important to have travel insurance when you go abroad. | travel / car / home insurance; take out insurance; pay for insurance |
| receipt | noun — a written or printed document showing that you have paid for something | Always keep the receipt in case you want to return something. | keep / get a receipt; show a receipt; a till receipt |
| fee | noun — an amount of money paid for a professional service or to use something | The bank charges a monthly fee for some accounts. | bank fee; charge a fee; pay a fee; service fee |
| currency | noun — the system of money used in a particular country | When we travelled to Japan, we needed to exchange our currency. | foreign currency; exchange currency; local currency |
Collocations & Useful Expressions
These are natural word pairings and common expressions used when talking about money, banking and personal finance. Learning collocations helps you sound more natural in English.
open + a bank account
You need to open a bank account before you start work.
pay + a bill
I always pay my bills on time to avoid extra charges.
take out + a loan / a mortgage
They took out a mortgage to buy their first flat.
get into + debt
It is easy to get into debt if you spend more than you earn.
pay off + a debt / a loan / a mortgage
She worked hard to pay off all her debts within three years.
save up + for + something
He is saving up for a deposit on a house.
stick to + a budget
If you stick to your budget, you will have money left at the end of the month.
make + a profit / a loss
The investment made a profit of 10% in the first year.
invest + in + something
She invested in a small business and it was very successful.
exchange + currency
We exchanged our pounds for euros at the airport.
charge + a fee / interest
The bank charges interest on all credit card balances.
can't afford + to do something / a noun
We can't afford to go on holiday this year.
Important Differences & Confusing Words
Borrow vs Lend
These two verbs cause a lot of confusion because they describe the same action from different points of view.
borrow = to take something (or money) from someone temporarily
Can I borrow some money from you until Friday?
She borrowed £500 from her parents.
lend = to give something (or money) to someone temporarily
Can you lend me some money until Friday?
Her parents lent her £500.
💡 Think of it this way: you borrow FROM someone, and you lend TO someone.
Salary vs Wage
Both words mean money you receive for working, but they are used differently.
salary = a fixed amount of money paid monthly, usually to people in professional or office jobs
Her annual salary is £35,000.
wage(s) = money paid by the hour, day or week, often to people in manual or part-time jobs
He earns a good wage at the factory.
She is paid a minimum wage at her weekend job.
Cost vs Price vs Charge
All three words relate to money paid for something, but they are not always interchangeable.
cost = the amount of money needed to buy or do something (often used as a noun or verb)
The cost of living in London is very high.
How much does it cost?
price = the amount of money a seller asks for a product or service
The price of petrol has gone up again.
The house sold at a very high price.
charge = money asked for a service, or to ask someone to pay for a service
There is an extra charge for using the hotel pool.
The bank will charge you a fee for international transfers.
Savings vs Save vs Safe
These three words look or sound related but have very different meanings.
savings (noun, plural) = money you have saved over time
She used her savings to start her own business.
save (verb) = to keep money instead of spending it; also to rescue someone from danger
I try to save at least £200 every month.
safe (adjective) = not in danger; (noun) a locked metal box for keeping money or valuables
Keep your passport in the hotel safe.
Is it safe to use this website for online banking?
Common Mistakes
❌ I want to lend some money from the bank.
✅ borrow — I want to borrow some money from the bank. (You borrow FROM somewhere, not lend from.)
❌ She earns a wage of £40,000 per year as a manager.
✅ salary — She earns a salary of £40,000 per year as a manager. (Salaried professionals receive a salary, not a wage.)
❌ I made a deposit of money into my current account this morning.
✅ deposited — I deposited money into my current account this morning. (Use "deposited" as a verb, or "made a deposit" without "of money.")
❌ He paid his loan in three instalments of each £500.
✅ of £500 each — He paid his loan in three instalments of £500 each.
❌ I can't afford buying a new car at the moment.
✅ afford to buy — I can't afford to buy a new car at the moment. (After "afford," use the infinitive with "to," not the gerund.)
❌ She put her salary in the savings account for to save for a holiday.
✅ to save — She put her salary in the savings account to save for a holiday. (Do not use "for to" — use the infinitive "to" alone.)
❌ I need to withdraw some money from my savings account in the cash machine.
✅ from the cash machine — I need to withdraw some money from the cash machine. (You withdraw money from the machine, not "in" it.)
❌ The price of this loan is 5% interest.
✅ interest rate — The interest rate on this loan is 5%. ("Price" is used for products. For loans, use "interest rate.")
Money, Banking and Personal Finance: Quick Summary & Review
In this lesson, you have learnt a wide range of vocabulary related to money, banking and personal finance. Here is a quick summary of the main areas covered:
- Bank accounts: current account, savings account, balance, statement, transaction, deposit, withdraw, transfer
- Borrowing and credit: loan, mortgage, interest rate, credit card, credit score, debt, repay, instalment, overdraft, afford
- Managing money: budget, income, expenditure, expense, save up, invest, insurance, receipt, fee, currency
- Key collocations: take out a loan, pay off a debt, stick to a budget, save up for something, open a bank account
- Confusing words: borrow vs lend, salary vs wage, cost vs price vs charge, savings vs safe
Remember: building good habits with personal finance vocabulary will help you in real situations — from visiting a bank to reading a financial document or discussing money with colleagues and friends.
Now practise your money, banking and personal finance vocabulary in the exercises below.
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