Money

The Five Basics of Financial Literacy

Credit and debt

Understanding the ways credit and debt work for and against you are some of the first steps toward understanding personal finance. While it’s not useful to be scared of credit and debt and avoid it entirely, there are some things to look out for.

Debt

Debt is like any tool: when used correctly, it can be quite useful. When used incorrectly, debt can easily spiral out of control. Missing payments may negatively affect your credit score, and that can take years to recover from. Missed payments, for example, can stay on your credit report for seven years.1

Credit Score

Your credit score is one of the factors lenders use to judge your trustworthiness and qualification for mortgages, auto loans, and other lending. Landlords and employers may also check your credit before renting to you or offering you a job.

Interest

Interest can work against you, but it can work for you, too. When you take out a loan with an interest rate, it’s working against you, but when you invest early and take advantage of compound interest, it’s working for you.

Compound Interest

爱爱电影When you’ve got an account that’s accruing interest, the interest earned gets added to the principal. Then, interest is earned on the new, larger principal, and the cycle repeats. That’s compound interest, baby!

The Value of Time

It's never too early to start saving. In fact, the earlier you start, the better your result. By getting started with retirement savings sooner rather than later, you can leverage the value of time to your advantage.

Cindy vs. Charlie

Consider the case of Cindy and Charlie, who will each invest a total of $100,000. Cindy starts right away, depositing $10,000 a year at a hypothetical 6% rate of return. After 10 years, Cindy stops making deposits. Charlie, on the other hand, waits 10 years before starting to invest. He also puts $10,000 a year away for 10 years, at the same hypothetical rate as Cindy. After 20 years, who has more money? Shockingly, Cindy's balance is nearly twice as big as Charlie's, thanks to the extra time her investment returns had to compound.2

Inflation

Inflation has the potential to eat away the purchasing power of your money. That means, with inflation, the dollar you earn today may not be worth a dollar in the future. Here some things to keep in mind when thinking about inflation.

Cash in a Mattress

爱爱电影Keeping all your cash under a mattress is not only unsafe, it literally costs you money. Assuming the rate of inflation is a hypothetical 2%, every dollar you squirrel away will shrink in value to just $.98 next year.

Rate of Return

Because inflation erodes the purchasing power of your money, any returns you earn on your accounts may not be the “real” rate of return. If your account earned a hypothetical 6% rate of return over the last year, but inflation was 1.5%, your real rate of return was 4.5%.3

Sources

  1. Experian.com, 2017
  2. This is a hypothetical example of mathematical compounding. It’s used for comparison purposes only and is not intended to represent the past or future performance of any investment. Taxes and investment costs were not considered in this example. The results are not a guarantee of performance or specific investment advice. The rate of return on investments will vary over time, particularly for longer-term investments. Investments that offer the potential for high returns also carry a high degree of risk. Actual returns will fluctuate. The types of securities and strategies illustrated may not be suitable for everyone.
  3. This is a hypothetical example used for illustrative purposes only. It is not representative of any specific investment or combination of investments. Past performance does not guarantee future results.
Share |

Have A Question About This Topic?

Thank you! Oops!
 

Related Contents

The Power of Compound Interest

The Power of Compound Interest

Learn how to harness the power of compound interest for your investments.

Your Emergency Fund: How Much Is Enough?

Your Emergency Fund: How Much Is Enough?

爱爱电影Having an emergency fund may help alleviate the stress and worry associated with a financial crisis.

Your Cash Flow Statement

Your Cash Flow Statement

爱爱电影A presentation about managing money: using it, saving it, and even getting credit.

秒速赛车【gd1133.com光大彩票】-新闻 秒速赛车【gd1100.com光大彩票】-法治 秒速赛车【gd1144.com光大彩票】-案件 秒速赛车【gd1155.com光大彩票】-检察 秒速赛车【gd1166.com光大彩票】-理论 秒速赛车【gd1177.com光大彩票】-新媒体 秒速赛车【gd9900.com光大彩票】-视频 秒速赛车【gd9911.com光大彩票】-评论 秒速赛车【gd9922.com光大彩票】-文化 秒速赛车【gd9933.com光大彩票】-人物 秒速赛车【gd9944.com光大彩票】-舆情 秒速赛车【gd9955.com光大彩票】-装备 爱爱电影 秒速赛车【gd9977.com光大彩票】-今日推荐 秒速赛车【gd1133.com光大彩票】-图片聚焦 秒速赛车【gd1100.com光大彩票】-以案说法 秒速赛车【gd1144.com光大彩票】-检察视界 秒速赛车【gd1155.com光大彩票】-城东区 秒速赛车【gd1166.com光大彩票】-城中区 秒速赛车【gd1177.com光大彩票】-城西区 秒速赛车【gd9900.com光大彩票】-城北区 秒速赛车【gd9911.com光大彩票】-大通县 秒速赛车【gd9922.com光大彩票】-湟中县 秒速赛车【gd9933.com光大彩票】-湟源县 秒速赛车【gd9944.com光大彩票】-经济技术开发区 秒速赛车【gd9955.com光大彩票】-城南新区 秒速赛车【gd9977.com光大彩票】-高新技术开发区 秒速赛车【gd1133.com光大彩票】-海湖新区 秒速赛车【gd1100.com光大彩票】-爱爱电影 秒速赛车【gd1144.com光大彩票】-滚动 秒速赛车【gd1155.com光大彩票】-国内 秒速赛车【gd1166.com光大彩票】-国际 秒速赛车【gd1177.com光大彩票】-军事 秒速赛车【gd9900.com光大彩票】-社会 秒速赛车【gd9911.com光大彩票】-财经 秒速赛车【gd9922.com光大彩票】-产经 秒速赛车【gd9933.com光大彩票】-房产 秒速赛车【gd9944.com光大彩票】-金融 秒速赛车【gd9955.com光大彩票】-证券 秒速赛车【gd9977.com光大彩票】-汽车 秒速赛车【gd1133.com光大彩票】-IT 秒速赛车【gd1100.com光大彩票】-能源 秒速赛车【gd1144.com光大彩票】-港澳 秒速赛车【gd1155.com光大彩票】-台湾 秒速赛车【gd1166.com光大彩票】-华人 秒速赛车【gd1177.com光大彩票】-侨网 秒速赛车【gd9900.com光大彩票】-经纬 秒速赛车【gd9911.com光大彩票】-English 秒速赛车【gd9922.com光大彩票】-图片 秒速赛车【gd9933.com光大彩票】-视频 秒速赛车【gd9944.com光大彩票】-直播 北京PK10【gd9955.com光大彩票】-娱乐 PK10开奖【gd9977.com光大彩票】-体育 pk10平台【gd1133.com光大彩票】-文化 Pk10计划【gd1100.com光大彩票】-健康 pk10网址【gd1144.com光大彩票】-生活 pk10开户【gd1155.com光大彩票】-葡萄酒 pk10赛车【gd1166.com光大彩票】-微视界 PK10投注平台【gd1177.com光大彩票】-演出 PK10注册【gd9900.com光大彩票】-专题 PK10开户【gd9911.com光大彩票】-理论 北京PK10【gd9922.com光大彩票】-新媒体 PK10开奖【gd9933.com光大彩票】-供稿 pk10平台【gd9944.com光大彩票】-新闻 Pk10计划【gd9955.com光大彩票】-时事 pk10网址【gd9977.com光大彩票】-视频 pk10开户【gd1133.com光大彩票】-评论 pk10赛车【gd1100.com光大彩票】-股票 PK10投注平台【gd1144.com光大彩票】-区块链 PK10注册【gd1155.com光大彩票】-港股 PK10开户【gd1166.com光大彩票】-科创 北京PK10【gd1177.com光大彩票】-基金 PK10开奖【gd9900.com光大彩票】-私募 pk10平台【gd9911.com光大彩票】-理财 Pk10计划【gd9922.com光大彩票】-信托 pk10网址【gd9933.com光大彩票】-P2P pk10开户【gd9944.com光大彩票】-科技 pk10赛车【gd9955.com光大彩票】-债券 PK10投注平台【gd9977.com光大彩票】-互金 PK10注册【gd1133.com光大彩票】-期货 PK10开户【gd1100.com光大彩票】-原油 北京PK10【gd1144.com光大彩票】-大宗 PK10开奖【gd1155.com光大彩票】-期指 pk10平台【gd1166.com光大彩票】-保险 Pk10计划【gd1177.com光大彩票】-银行 pk10网址【gd9900.com光大彩票】-黄金 pk10开户【gd9911.com光大彩票】-外汇 pk10赛车【gd9922.com光大彩票】-行情 PK10投注平台【gd9933.com光大彩票】-数据 PK10注册【gd9944.com光大彩票】-房产 PK10开户【gd9955.com光大彩票】-汽车 北京PK10【gd9977.com光大彩票】-博客 PK10开奖【gd1133.com光大彩票】-农金 pk10平台【gd1100.com光大彩票】-名家 Pk10计划【gd1144.com光大彩票】-消金 pk10网址【gd1155.com光大彩票】-美股 pk10开户【gd1166.com光大彩票】-创投 pk10赛车【gd1177.com光大彩票】-游戏 PK10投注平台【gd9900.com光大彩票】-滚动 PK10注册【gd9911.com光大彩票】-新浪 PK10开户【gd9922.com光大彩票】-正义网