Understanding the vocabulary and language associated with financial literacy is crucial to making the first step in managing and maintaining your money. Maybe you’re a student thinking of taking out a few federal loans to pay for college; you might already know how to start that journey, but what happens to those loans when you graduate? Or perhaps you’re thinking of making a major purchase, such as buying a house or leasing a car. Will you know how to read the agreements and documents presented to you at the time of signing?
Whether you’ve just graduated high school, are starting a new job, or thinking of retiring, taking the initiative to educate yourself about complex financial decisions will help you achieve your next major milestone. After all, managing money in the midst of life’s other priorities is no easy task. Every informed financial decision you make gets you closer to your goal, but it’s important to understand what these choices actually mean. Having the tools for financial success provides you with the confidence you need to navigate the world of financial responsibility, but first, those tools need to be identified and defined.
As you practice money management, you may encounter some of these basic finance terms and keywords:
- Down payment
- FICO score
- Income statement
- Interest rates
- Loan deferment
Did you know that the United States Department of Education reports that 3.8 million American adult women possess financial literacy skills below a “basic” level? This lack of financial education may affect choices and habits which can often lead to mismanaging credit card balances and perpetuating the gender wage gap. Furthermore, women’s lives are dramatically impacted by low finance-related reading comprehension rates, too. This may make it difficult to understand bank statements, credit card agreements, interest rates, loan repayment methods, and other common financial documents. Women of all ages and backgrounds struggle with the pressure of making enough money, accessing education, caring for a family, and planning retirement, and a lot of this has to do with being fluent in financial literacy.
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