Update: Once you’re read this post, you can review these words with the help of David Recine’s mnemonic comics: Magoosh Comics: Reviewing Financial Vocabulary.
Cash. Dough. Moola. We have a lot of slang for money in English, probably because it’s one of the most important parts of our lives. And we even have an old expression that says that fact, too: “Money makes the world go around.” If there was no money, everything would stop.
The TOEFL is not a test of your knowledge of slang, of course. You don’t need those words I started with. But you might need a number of other words that describe how we use money.
Below are four relatively academic words. You’ll see these in newspapers often, and possibly in lectures, conversations, or texts in the TOEFL, too.
“To invest” is similar to “to spend,” but there’s one very important difference. When you invest, you expect something good to happen later. Usually, when we invest money, we expect to get more money back after some time. For example, if you had invested in Apple Inc. before they created the iphone, you would have a lot more money today.
But we also use the word “invest” for things other than money, especially time and energy. For instance, you’ll have to invest a lot of time in your TOEFL studies if you want to see a big increase in your scores.
TOEFL example: Have you heard the university is finally going to invest in new equipment for the chemistry labs? It’s about time!
“Class” is a great word because it has a few different meanings. Obviously, one of those meanings is related closely to school. But more generally, it is a group of things that all have something in common. In other words, it is a category.
In terms of money, a “class” is a group of people who have similar incomes (who earn similar amounts of money). You might hear about the “upper class,” for example, meaning rich people, while the “lower class” is made of people who don’t have much money.
TOEFL example: Europe in the pre-modern times was organized in what was essentially a class system, dividing the wealthy nobility from the common people.
(to be) Economic
First, you should definitely know what “the economy” is. That refers to how good the money situation is in a specific country (or around the whole world). America has a very strong economy, but it has had many problems since 2008. Meanwhile, China’s economy is growing quickly.
Now, what about the word “economic”? That can refer to the economy, of course—you could say that America has had economic trouble, for example. Be careful not to use it in the same exact way as “financial,” though. That word is similar, but “economic” refers specifically to a large scale, whereas “financial” can refer to a very small scale. If I talk about my personal financial situation, then I’m referring to the money I have in the bank. But if I refer to my economic situation, then I’m talking about how much money I have in comparison to everybody else in my country—what economic class I’m in.
TOEFL example: Although the early 1930s were characterized by one of the largest economic downturns in history, that era plays an important cultural role even today.
“To compensate” basically means “to give in return.” For example, if you do work for me, I might compensate you with money. That is, I give you the money in return for the work.
Generally speaking, it means that you receive or do something positive to balance something negative. The work you do is hard and tiring, but the money you receive in return is useful.
That general meaning fits with another usage of “compensate.” It can be unrelated to money and giving/taking. Instead, it can mean that you do a positive thing because you have a flaw. For example, panda bears eat only bamboo, which gives them very little energy. They compensate for that lack of energy by eating very large amounts and sleeping often. They don’t fix the problem (bamboo still gives very little energy), but they make it okay by doing something else.
TOEFL example: I know that my essay is a little bit short, Dr. Lieberman, but I hoped the amount of research I did would help to compensate for that.