Financial Literacy Terms of Focus
Some good financial literacy terms to become familiar with:
Annual Percentage Rate (APR)
APR, or Annual Percentage Rate, represents the yearly cost of borrowing money, expressed as a percentage. Understanding APR helps you compare loan offers to find the most favorable interest rate.
Asset
Assets are items that can be converted into money, such as savings, 401(k) accounts, real estate, securities, and even art. They are often discussed alongside liabilities.
Budget
A budget is your financial blueprint. It outlines how you allocate your income to cover expenses and save towards your financial goals.
Credit
Credit is borrowed money that you must repay, often used with credit cards or loans. In banking, credit also refers to deposits or interest earned.
Credit Score
Your credit score is a numerical representation of your creditworthiness. Higher scores improve your chances of getting approved for loans and better interest rates.
Debt
Debt is the money you owe to lenders or individuals. Managing debt effectively is crucial for financial health.
Debit
A debit is a transaction where money leaves your account, such as withdrawals, bill payments, and transfers.
Interest
Interest is the fee charged by financial institutions for lending you money. Conversely, it's the money you earn from deposits in your savings account.
Liability
Liabilities are debts or obligations, like a mortgage or car loan, that you need to repay.
Net Worth
Your net worth is calculated by subtracting your liabilities from your assets. It gives a snapshot of your financial health.
Principal
In loans, the principal is the original amount of money borrowed. In investments, it's the initial amount of money you invest.
Repayment
Repayment is the period during which you pay back borrowed money. For instance, a 30-year mortgage is structured to be paid off in 30 years.
Return
Return is the profit or loss from an investment or savings. It's the gain or loss you experience from putting your money to work.
This introduction sets the stage to understand the importance of the terms in achieving financial literacy. We are here to help guide you towards financial wellness, understanding and growth. #GrowingGreatnessLLC