scorecardresearch7 important financial terms you must teach your child

7 important financial terms you must teach your child

Updated: 25 Oct 2022, 08:23 AM IST
Key term we use in a particular field is important to understand as one word has different meanings in different contexts. Key terms help in understanding the meaning in financial context. In this article, we will discuss a few financial key terms to begin with the journey of financial literacy.
Important financial terms you must teach your child

Important financial terms you must teach your child

The increasing requirements of financial literacy among students is definitely a good sign not only for the economic growth of the country as a whole but also helps an individual to bring financial stability in their lives. But, when it comes to children, we cannot inculcate heavy concepts of finance in their minds as their minds are not developed enough to understand complex calculations of finances.

Let’s understand a few financial terms from which you can start your journey of financial literacy for your child.


Taking a portion of your income and setting it aside for utilising it in the future is known as saving. Our savings are extremely important because we do not know when we will need money for something unexpected. Your child needs to know what saving is and why we should save money, so that he/she can also know the importance of it and learn how to save.


An asset is anything that can help you financially to generate income in future. In personal finance, your assets can be anything that helps you in generating passive income and protect your future. It could be an investment, protection plan, or buying a car for the purpose of renting it. Your child needs to understand the concept of prioritising assets.


The importance of budgeting cannot be emphasised more. In life, it is not only about how much money we make, but also how we manage it. Budgeting is knowing how to allocate money, how to manage expenses, and how to set money aside for investments. Your child needs to understand how much to spend in a particular section of your budget.


A loan is a sum borrowed by an individual or an organisation from another individual, organisation, or bank. Your child must know how much debt is necessary and decent enough for their financially stable life.


The interest component of a loan is the amount that the borrower must repay to the lender along with the principal. In other words, it is the amount that the borrower has to pay to get a loan. Interest calculation is one of the basic yet important aspects of finance which helps your child develop a cognitive ability.


Tax is simply a portion of your income that you must pay to the government. It is levied based on income slab, and source of your income. The government collects taxes to spend on different public expenditures and administration. Your child must know the importance of their contribution towards domestic economic development.


The purpose of investment is to create wealth and passive income by acquiring various assets. Investments can be made in the stock markets, real estate, and banking investment avenues. Your children must know the importance of investing to protect their future financially, as investing is the only way to create wealth.

Making your child understand the above-mentioned key financial terms could be the best way to start the financial literacy journey of your child. These financial terms help your child develop cognitive ability to understand further complex calculations used in finance.

Anushka Trivedi is a freelance financial content writer. She can be reached at

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First Published: 25 Oct 2022, 08:23 AM IST