Financial Literacy for Future Entrepreneurs: Money Skills for Students
Financial literacy is the understanding and application of essential financial skills, including budgeting, personal financial management, investing, debt management, and retirement planning. Those who are financially literate are empowered to make informed financial decisions and effectively pursue life goals, like saving for education or retirement or running a business. They also reduce the likelihood that they will be victims of fraud. Developing financial literacy early builds a strong foundation for lifelong money management and improves long-term financial outcomes. There are many different ways that someone can improve their financial literacy, including through classes, reading, listening to financial podcasts, subscribing to trustworthy financial content, or consulting with certified financial professionals. In order to get the most out of all of those opportunities for learning, you must first have a firm grasp on some key financial terms.
Financial Literacy Glossary for Students
Asset: Something you own that has substantial monetary value, like money in a savings account, a car, a house, a rental property, or a retirement account, such as a 401(k) or IRA
Bond: A way to lend money to a business or government. They promise to pay back the person to whom the bond is issued at a later date and with interest.
Beneficiary: A person or group who receives money or property when someone dies
Capitalism: An economic system in which businesses and industries are owned by private individuals, not the government
Checking Account: A bank account used for everyday spending, like paying bills or receiving your paycheck. These accounts don't typically earn interest.
Collateral: Something valuable, aside from money, that a borrower offers a lender as a promise to repay a loan. If the loan is not repaid, the lender takes ownership of the asset.
Compound Interest: Interest that builds up over time, earned not just on the original amount but on the total amount, including any interest already earned
Credit Card: A card that allows you to access credit to buy items and then pay for them later. If you don't pay it off in full, usually within 30 days, interest is added to the original balance.
Credit Score: A number that shows how trustworthy you are with money, indicating how likely you are to pay back loans on time. Credit scores are used by lenders as an important factor in their decision to accept a loan application. Credit scores also impact the interest rate of a loan.
Deductible: The amount you pay out of pocket before your health, car, or home insurance starts covering the rest of the cost of a claim
Default: When someone fails to pay back a loan or meet the terms of an agreement
Depression: A serious economic slump during which jobs are lost, consumers spend less, and many individuals and families struggle financially
Economy: How money, goods, and services are made, bought, sold, or otherwise exchanged and used in a country
Federal Deposit Insurance Corporation (FDIC): A government entity that protects your money in the bank, up to $250,000 per person, if the bank fails
Garnishment: When a court rules that a portion of your paycheck must be taken to pay off a debt, like unpaid loans or child support
Identity Theft: When someone steals your sensitive personal information, such as your Social Security number, in order to pretend to be you and commit fraud
Inflation: When the prices of goods and services go up and your money doesn't buy as much as it used to
Interest: Money, either earned or paid, when you save or borrow money. When you save, the bank pays you a specific percentage of the total in your account. When you borrow, you pay a percentage of the debt to the lender.
Interest Rate: The percentage of the original amount that is paid as interest over time
Investment: Putting money into something, like stocks, a business, or real estate, in the hope that it will grow in value or earn more money over time
Lease: A legal agreement that lets someone rent a car, apartment, or other property for a set time and price
Line of Credit: A flexible loan from a bank or lending institution that lets you borrow money up to a certain limit, use it as needed, and pay it back over time, similar to a credit card
Monopoly: When one company controls an entire market and has no competition
National Debt: The total amount of money a government owes from borrowing to cover spending beyond what it collects in taxes from taxpayers
Opportunity Cost: What you give up when you choose one option over another, like spending $10 on lunch instead of saving it
Profit: The money a business keeps after paying all of its operational costs
Rate of Return: The percentage of money you earn from an investment over time
Simple Interest: Interest that's only calculated on the original loan or deposit, not on any interest earned
Tax: Money that is collected by a government from individuals and businesses to pay for public services, like roads, schools, and police
Money Skills for Students and Future Entrepreneurs
- What Is Financial Literacy? This guide covers making smart decisions regarding your financial health and staying in good financial standing with creditors and lenders.
- Financial Literacy: What is financial literacy, and why is it important for young people to start learning early?
- Learn to Create a Budget: Creating an effective budget is key to managing your finances and living within your means without incurring a lot of debt.
- A Basic Budget Worksheet: This simple budget worksheet can help you better track and understand your monthly income and expenses.
- How to Choose a Bank Account: Not every bank account offers the same benefits to account-holders. Learn how to choose the best bank account to support your financial goals.
- Loan Repayment Calculator: Plug in your loan information to see what your total monthly payment will be.
- Basic Investing: Learn more about some of the basic concepts of investing and access investment education resources here.
- The Benefits of Investing Early: Find out about the benefits of starting your investment accounts early and see how they can grow.
- Payback: This game that allows players to see how their choices can impact the amount of student debt they graduate with.
- Build Your Stax: Play this game to learn about saving and growing wealth.
- Spent: Budgeting is even more critical for families that struggle to make ends meet. Practice making decisions about what you'd do with your money with this game.
- Credit Clash: This game teaches how financial decisions impact your credit score.
- Uber Game: Can you make enough money gigging, working several small jobs rather than a traditional nine-to-five job?
- Run Your Own Lemonade Stand: Practice running your own small business with a fun lemonade stand game.
