Here are 20 important financial terms that people should know:
Asset: Anything of value that is owned by an individual or a business.
Liability: Any debt or obligation that an individual or a business owes.
Budget: A plan for managing income and expenses over a certain period of time.
Credit score: A numerical representation of a person’s creditworthiness, based on their credit history.
Interest rate: The percentage of the principal that is charged as interest on a loan or credit card.
Compound interest: Interest that is calculated on the principal amount plus any accumulated interest.
Investment: The purchase of an asset with the expectation of earning a return on it.
Stocks: Ownership shares in a publicly traded company.
Bonds: Debt securities issued by a company or government.
Mutual funds: A collection of stocks and bonds that are managed by a professional investment company.
ETFs: Exchange-traded funds, which are a type of investment fund that trades on a stock exchange.
Diversification: Spreading out investments to reduce risk.
Capital gains: Profits earned from selling an investment for more than its original cost.
Dividends: Payments made to shareholders of a company out of the company’s profits.
Net worth: The difference between a person’s assets and liabilities.
APR: Annual percentage rate, which represents the cost of borrowing money over a year.
Inflation: The rate at which the general level of prices for goods and services is increasing over time.
401(k): A retirement savings plan offered by employers.
Roth IRA: A type of retirement savings account that allows individuals to contribute after-tax income.
Insurance: A contract that protects against the risk of financial loss due to unexpected events.
Jeff Mankin teaches financial literacy and Excel. He is the founder of Finally Learn.