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Educational savings account (ESA)

You can put up to $2,000 a year into a Coverdell education savings account (ESA) that you establish in the name of a minor child. The assets in the account can be invested any way you choose. There is no limit on the number of accounts you can set up for different beneficiaries, but no more than a total of $2,000 can be contributed in a single beneficiary's name in any one year. If you choose, you may switch the beneficiary of an ESA to another member of the same extended family.

Your contribution is not tax deductible. But any earnings that accumulate in the account can be withdrawn tax free if they're used to pay qualified educational expenses for the beneficiary until he or she reaches age 30. The costs can be incurred at any level, from elementary school through a graduate degree, or at a qualified post-secondary technical or vocational school. There are no restrictions on using ESA money in the same year the student uses other tax-free savings, or the student, parent, or guardian uses tax credits for educational expenses. But you can't take a credit for expenses you covered with tax-free withdrawals.

To qualify to make a full $2,000 contribution to an ESA in each tax year, your modified adjusted gross income (MAGI) must be $95,000 or less, and your right to make any contribution at all is phased out if your MAGI is $110,000 if you're a single taxpayer. The comparable range if you're married and file a joint return is $190,000, phased out at $220,000.

Electronic Funds Transfer (EFT)

An Electronic Funds Transfer (EFT), which is regulated by the Securities and Exchange Commission (SEC), allows the exchange of billions of dollars every day without physically moving paper money. One type of EFT, the Automated Clearing House or ACH system, handles all electronic credit and debit transactions, direct deposits, ATM transactions and online bill payments between financial institutions. According to the U.S. Department of the Treasury, it costs the federal government only 29 cents for an ACH payment but $1.22 for a traditional check payment.

Emergency fund

An emergency fund is money you set aside in a savings account or other easily accessible account that you can use as a backup if you have a financial emergency, such as an illness or job loss. Ideally, your emergency fund should be fairly liquid, which means it can be quickly converted to cash with little or no loss of value. As a rule of thumb, you may want to consider setting aside three to six months' worth of income, although your needs will depend on your particular circumstances.

Equity

In the broadest sense, equity means ownership. If you own stock, you have equity in, or own a portion - however small - of the company that issued the stock. Having equity is the opposite of owning a bond or commercial paper, which is a debt the company must repay to you.

Equity also means the difference between an asset's current market value - the amount it could be sold for - and any debt or claim against it. For example, if you own a home currently valued at $300,000 but still owe $200,000 on your mortgage, your equity in the home is $100,000.

The same is true if you own stock in a margin account. The stock may be worth $50,000 in the marketplace, but if you have a loan balance of $20,000 in your margin account because you financed the purchase, your equity in the stock is $30,000.

Equity fund

Equity funds invest primarily in stock. The stock a fund buys - whether in small, up-and-coming companies or large, well-established firms - depends on the fund's investment objectives and management style. The general approach may be implied by the fund's name or the category in which it places itself, such as large-cap growth or small-cap value. However, a fund's manager may have the flexibility to invest more broadly to meet the fund's objectives.

Estate

Your estate is what you leave behind, financially speaking, when you die. To figure its worth, your assets are valued to determine your gross estate. The assets may include cash, investments, retirement accounts, business interests, real estate, precious objects and antiques, and personal effects.

Then all of your outstanding debts, which may include income taxes, loans, or other obligations, are paid, and those plus any costs of settling the estate are subtracted from the gross estate. If the amount that's left is larger than the amount you can leave to your heirs tax free, you have a taxable estate, and federal estate taxes may be due. Depending on the state where you live and the size of your taxable estate, there may be additional state taxes as well.

After any taxes that may be due are paid, what remains is distributed among your heirs according to the terms of your will, the terms of any trusts you established, the beneficiaries you named on certain accounts - or the rulings of a court, if you didn't leave a will.

Exchange traded fund

Exchange traded funds (ETFs) are listed on a stock exchange and trade like stock. You can use traditional stock trading techniques, such as stop orders, limit orders, margin purchases, and short sales when you buy or sell ETFs.

But ETFs also resemble mutual funds in some ways. For example, you buy shares of the fund, which in turn owns a portfolio of stocks. Each ETF has a net asset value (NAV), which is determined by the total market capitalization of the stocks in the portfolio, plus dividends but minus expenses, divided by the number of shares issued by the fund.

ETF prices change throughout the trading day, in response to supply and demand, rather than just at the end of the trading day as open-end mutual fund prices do. The market price and the NAV are rarely the same, but the differences are typically small. That's due to a unique process that allows institutional investors to buy or redeem large blocks of shares at the NAV with in-kind baskets of the fund's stocks.

Executor/Executrix

When you die, your executor administers your estate and follows the directions provided in your will. Among the executor's duties are collecting and valuing your assets, paying taxes and debts out of those assets, and distributing the remaining assets to your heirs. You may want to appoint a family member or close friend as executor. Or you may choose a professional, such as a lawyer or bank trust officer.

What some people do is name a professional and a friend or family member to work together, especially if the estate is large or there are potential complications. Executors are entitled to be paid for their work, which ends when your estate is settled, usually anywhere from one to three years after your death. Professional executors always charge, while friends and family may or may not.