Learning about personal finance is not only related to comparing or pricing financial products and services, it is also important to know some basic concepts to make better use of money.
In terms of financial education, there are some concepts that it is essential to familiarize yourself with, because the more information you have on these issues, the more reasoned decisions can be made.
Knowing them does not mean memorizing them as they come in the dictionary, but reasoning and understanding them to develop better habits and good financial health.
Savings, credit, budget, investment, interest rate, yield, income, are some of the basic concepts of financial education that it is important to know in order to manage our money more efficiently, experts consulted on the matter considered.
Alejandro Saracho, director of the financial education consulting firm Reconfiguración Financiera, explained that understanding these words in addition to helping to improve the relationship with the portfolio, also allows people to visualize what resources they have and know how to exploit them to the maximum to reach to your goals.
“We are obliged to know this language and how it works in finance, since everything is linked and knowing these terms allows us to know if we are losing or winning. We have to learn to handle money and when we do not understand how to handle it, many times we make counterproductive decisions for our pocket, “he said.
It is not about learning the concepts as such or just memorizing them, but about understanding and applying them to use money in an intelligent way.
Meanwhile, Juan Carlos Cruz, a teacher at the Banking and Commercial School, highlighted that finances are something we interact with every day and are always immersed in our decisions, so knowing some definitions helps consumers to cope with greater security
From the theory to the practice
According to the experts, basic definitions such as assets, liabilities, savings, investment, interest, CAT, it is important to know what they imply because they allow changing financial behavior.
Saracho explained that, for example, liabilities are those debts or financial commitments that the person has. On the subject of tickets, he pointed out that it refers to all that money that is earned, such as a salary, extra income, utility, performance, which can be understood as ways in which money is obtained.
On the subject of departures, it is what is spent and what is required to live such as fixed, variable and ant expenses, and even those of an emotional type.
Another word is budget that can be defined as a breakdown, biweekly, monthly or annually, about how the money will be used and all the expenses that are had in the month.
In turn, the EBC professor stressed that it is very important to know the difference between saving and investment, since although saving is accumulating resources, investment is when those accumulated resources are intended to be productive and generate returns.
Another essential term is inflation, which although it is defined as the general increase in prices, means that what could be bought before with 100 pesos, this year a little more is required to acquire the same product.
Understand the cost of money
Another concept that is important to know is the credit and the interest rate, since it allows us to know the cost of money.
“Until people understand that nobody lends money for nothing, it is clear what interest is. When that interest is related to the credit card, one realizes that the card is a tool to ask for a loan of someone else’s money and it is not the extension of their salary ”, he affirmed.
The counterpart of interest is performance. It refers to what is earned by lending money to generate a result or place the money in an investment.
Institutions help you
Currently many institutions, both public and private, offer financial education courses and workshops to learn more about these and other topics. The EBC professor pointed out that government agencies such as Banco de México, Condusef, as well as banks, insurers and Afores teach courses focused on financial education.
Reference-www.eleconomista.com.mx