5 Personal Finance Terms You Must Know - Part 1

Does financial jargon turn you off? Do you love money but also embarrass yourself when it comes to knowing all about it? Then this blog is for you.

Having a basic understanding of personal finance never hurts. In fact, that's the only thing that can help us manage our lives better and retire early. So why is it so hard to get it right?

One problem is our lack of openness when it comes to discussing matters related to finance. We don't talk about money - especially when it is our own money. The result? We all have friends with poor credit scores and no financial plans.

Okay, enough beating around the bush. Let's learn what we can and prepare for the worst. Eg. Pandemic, inflation, war - or are we going too far?

Here are five personal finance terms you should know about.

1. Employee Provident Fund

Employee Provident Fund or EPF is a savings scheme by the government of India. It is a fund used by employees of an organisation to save money for their retirement.

2. Bonds

Bonds are investment securities where a company or a government borrows money from an investor for a set period in exchange for regular interest payments.

3. Credit Score

A Credit Score is a three-digit score that helps to identify an individual's creditworthiness. It ranges from 300 to 900, depending on the credit scoring model. But generally, a higher score on your credit report indicates that you pay your credit card bills on time. Banks and financial institutions prefer a higher credit score when getting loans and paying interests.

4. Compound Interest

Compound interest is the interest you earn on your principal amount plus the interest earned earlier. It is more commonly known as "Interest on Interest". It rewards reinvesting the money and gives a higher interest rate than simple interest.

5. Return on Investment

Return on investment is a metric used to calculate the return amount on an investment relative to its costs. It is a ratio used to calculate or assess the profitability of an investment.

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