Clarify It To Me Like I’m 5


This Kids’s Day, we determined to dispose of all of the sophisticated finance jargon flying round and have provide you with less complicated and extra enjoyable methods to explain frequent monetary phrases to make finance simpler for teenagers to know.

Children’s Day Special: Explain It To Me Like I’m Five

Let’s face it – monetary phrases are generally arduous to know. Even adults have a troublesome time wrapping their heads round many monetary ideas. Think about what it have to be like for teenagers then? Why ought to children should know something about finance, you ask? Properly, that’s as a result of with regards to monetary literacy, the sooner you begin the higher.

Finance, you might suppose, is for adults and due to this fact, very boring. However give it some thought. As children, you too begin dealing with cash from a younger age within the type of pocket cash, money presents out of your kin on a festive event or a birthday and so forth. So, wouldn’t it’s a good suggestion to know some primary monetary ideas so that you could use this information to start out making clever monetary choices like saving up to your faculty schooling early on?

Let’s take a look at a couple of phrases:

Credit score Rating

Don’t you find it irresistible once you get the best rating within the class social science quiz or your group wins after getting the best rating on annual sports activities day? A Credit score Rating is loads like that. With a excessive Credit score Rating, you’re undoubtedly a winner.

Identical to any rating, a very good Credit score Rating says loads about you. It tells banks that you simply’re a champ with regards to coping with funds. That’s, you pay your payments on time, you don’t borrow more cash than you want and once you borrow cash from the financial institution, you’ve gotten each intention of repaying it. A Credit score Rating of 650+ is taken into account tremendous spectacular. Sounds straightforward, doesn’t it? It truly is.

Mutual Fund

Consider a scenario the place an individual borrows Rs. 100 every from you and your folks and on the time of borrowing, guarantees to pay you and your folks again not Rs. 100 however Rs. 250 every after a couple of years. Sounds unbelievable? Properly, a situation like that’s fairly doable with Mutual Funds.

Mutual Fund is a pool of cash contributed by numerous people who find themselves focused on seeing their cash multiply over a sure time period. However this includes sure dangers too. Generally, you might not get again the sum of money that you simply thought you’d on the time of placing in your cash. So you could select the good friend you resolve to offer the cash to very properly and punctiliously.

Excellent steadiness

Sorry guys, however in contrast to your college report card, excellent right here doesn’t imply that it’s one thing to be tremendous pleased with. Excellent steadiness is the sum of money that you must pay again to the financial institution for all these purchases you made utilizing your Credit score Card.

Generally it may be precisely the quantity that you simply spent utilizing your Credit score Card (for those who pay again the cash inside a sure variety of days as allowed by the financial institution) and generally it may be far more than what you had borrowed. This occurs when the financial institution provides an “curiosity” to the quantity that you simply had initially spent since you didn’t pay again the financial institution on time. So, it’s all the time good to clear your excellent balances on time. You additionally get some brownie factors by doing that. How? With each Credit score Card invoice that you simply pay on time, your Credit score Rating will enhance. Isn’t {that a} good factor?

Equated Month-to-month Instalments (EMI)

Do not forget that time once you needed that costly toy automobile however your pocket cash wasn’t sufficient to pay for it? You cleverly requested your dad and mom to purchase it for you on the situation that you’d pay them again little by little each month out of your month-to-month pocket cash. Properly, Equated Month-to-month Instalments (EMI) work precisely like that.

Whenever you purchase one thing costly and are unable to pay for it completely, you borrow cash or take a ‘mortgage’ from a financial institution to have the ability to pay for it. To pay again the financial institution in flip, you should pay a set quantity each month, also referred to as Equated Month-to-month Instalments (EMI) till you’ve paid again the complete cash that you simply had borrowed.

One factor to recollect right here is that an EMI contains curiosity over and above the quantity that you’ve borrowed. Curiosity is calculated on the borrowed quantity. And the longer you’re taking to repay your financial institution, the upper the curiosity that you’ll have to pay.

Secured and unsecured loans

Most of us would bear in mind bribing our pals with our most prized GI-Joe or WWE trump card for one shot at enjoying their online game. Secured loans are precisely like that. Whenever you take a secured mortgage, you must provide one thing helpful that you simply personal in trade. Banks do that in order that for those who don’t repay the mortgage, the financial institution can take the factor that you simply supplied in trade and promote it to get again the cash they loaned you.

Unsecured loans, however, could be given by the financial institution to you with out taking something in return from you. The financial institution will solely do that if it thinks that you simply’re going to pay again the mortgage and are accountable together with your cash. So, you could pay your payments on time and keep a very good Credit score Rating to indicate the financial institution that they’re reliable.

Sum Assured

Since life is unsure, grown-ups purchase a life insurance coverage coverage for these instances when they could fall sick or in case they aren’t round anymore. ‘Sum assured’ is that sum of money that the insurance coverage firm guarantees to offer the individual’s household after his dying or after a sure time period to make it possible for they will pay for his or her bills like meals, garments, and faculty charges.

Declare Settlement Ratio

Insurance coverage firms get a number of ‘dying claims’ daily. A ‘dying declare’ is the request the corporate receives to pay cash to the individual or his household who has a life insurance coverage coverage with the corporate after his dying. The variety of claims that the insurance coverage firm pays the cash for out of the whole variety of claims or requests that it receives from numerous policyholders (individuals who’ve purchased a coverage from the corporate) is named the declare settlement ratio.


Each month, you obtain pocket cash out of your dad and mom. Since you utilize this pocket cash to your profit, you’re the ‘beneficiary’ of this pocket cash. So, an individual who will get one thing that can profit them is known as a beneficiary. Equally, when an individual buys a life insurance coverage coverage, he or his household can be paid a sum of cash after a sure time period. The one who will get the cash is known as the ‘beneficiary’ of the coverage.

Complete Life Insurance coverage

Identical to your dad and mom promise to maintain you your whole life, a Complete Life Insurance coverage coverage protects a person for his whole life. Some a part of the coverage contains insurance coverage and a few half contains funding.

Time period Insurance coverage

Whenever you be a part of a faculty, your college academics and principal promise to maintain you till you graduate, which implies that they promise to maintain you for a sure time period. A Time period Insurance coverage is loads like that. It’s a kind of life insurance coverage that gives protection for a sure time period or years

Extra Studying: Time period Life Or Complete Life Insurance coverage?

Now that these frequent monetary phrases are at your fingertips, you’re formally able to make some clever and accountable monetary choices sooner or later. However until that point, get pleasure from lately of homosexual abandon and have a splendid kids’s day.

On the lookout for one thing extra?

All info together with information articles and blogs printed on this web site are strictly for normal info objective solely. BankBazaar doesn’t present any guarantee in regards to the authenticity and accuracy of such info. BankBazaar is not going to be held answerable for any loss and/or harm that arises or is incurred by use of such info. Charges and gives as could also be relevant on the time of making use of for a product could range from that talked about above. Please go to for the most recent charges/gives.

Copyright reserved © 2023 A & A Dukaan Monetary Providers Pvt. Ltd. All rights reserved.


Leave a Comment