Teenagers are at the height of financial pressure as they start to steer away from their parents and gain financial independence.
This can be powerful however, with independence also comes risk especially for those who don’t understand the in’s and out’s of financial literacy. Here are six financial words every teen must know:
Also known as present value, refers to the original amount borrowed or the amount owed on a loan, not including interest.
This term may sound simple however teens often fail to understand how much money they’ve gained or lost because they forget what money they started with. The amount that is gained or lost can be calculated by subtracting the principal from the final amount.
The interest that is added to the principal amount and reinvested so that the amount of interest increases. In other words, it is the interest which is added on the principal amount and then at the end of each month interest is added on the new principal.
Money can be compounded weekly, monthly or annually. This term is imperative for teens to understand to ensure they’re choosing their type of interest rate wisely so they can accumulate the maximum amount of interest on their investments and the least amount on their loans.
Can also be referred to as shares or equity. Stocks gives the buyer ownership in a company resulting in the buyer being a shareholder which allows them to claim part of the companies assets and earnings.
Having stocks can increase a person’s financial value if they have capital gains. It is beneficial for young people to broaden their financial portfolio by investing in stocks.
The increase in the value of an asset or investment above the original purchase price. However, the asset is only increasing in value on paper until it is sold. In contrast, capital loss is the decrease in the value of an asset or investment.