Understanding basic financial terms is essential for managing money effectively. Here are a few key terms:
1. **Asset**: Anything you own that has value, like cash, property, or stocks.
2. **Liability**: Financial obligations or debts you owe, such as loans or credit card balances.
3. **Equity**: The difference between assets and liabilities; essentially, your ownership value in an asset.
4. **Interest**: The cost of borrowing money or the return on investments, typically expressed as a percentage.
5. **Inflation**: The rate at which prices increase over time, reducing purchasing power.
6. **Dividend**: A portion of a company’s profit paid to shareholders, usually on a regular basis.
7. **Net Worth**: Total assets minus total liabilities; a measure of personal financial health.
Knowing these terms helps make informed decisions about budgeting, investing, and saving.