8 Important Financial Terms to Learn for Young Adults

Young adults should understand the importance of financial education in life to live within the means. It will help them secure their future from unexpected crises and financial risks. Moreover, they often find themselves short of explanation when encountering standard financial terms during a critical decision.

You will learn many lessons from your experience to get financial education. Though, it is recommended to learn before relying on experience to teach a new lesson. It can have a serious impact on your life in case of a disastrous financial decision.

How to Get Financial Education in Your Early Days as a Professional

Unfortunately, our education system doesn’t focus on financial education for young students. We are left to understand the different concepts on our own or from a guiding figure. Though, you can learn before making a huge mistake with the right strategy and content.

Find a mentor in your life to ask for suggestions and advice before making an important financial decision. Learn from the books, videos, articles, blogs, and online communities about different aspects of money management. Even if you fail, you can take out loans for bad credit with no guarantor and no fees from direct lenders.

Financial Terms to Learn for Young Adults

You can start your financial education by learning about the basic terms. You will encounter their use in the future while trying to manage your budget or achieve long-term goals. Thus, go through the following definition as the first lesson towards a financially secure future with proper knowledge.

  1. Net Worth

Your net worth is the total value of your personal and business assets. It helps represent your financial freedom after deducting the liability from your total assets. The formula that allows people to find their net worth is incredibly simple, Assets – Liabilities = Net Worth.

You need to make sure the net worth remains positive throughout your life. There are multiple applications available for smartphone users to help them find net worth. People work hard over the years to increase the value before they retire with no income to rely on.

  1. Assets

Assets are everything in your possession with a monetary value. It can include real estate, stock market investments, cash, gold, and business assets. However, you should not add something to the list of assets if the lender has some equity over it.

You need to work hard to increase the count of assets to help solidify the finances. They are helpful during the time of need. You can even use them as a security for loans to get better interest rates.

  1. Liabilities

Liabilities are the debts, mortgages, credit card bills, and similar types of payments owed by you. They are the result of unavoidable financial conditions or the unaffordable lifestyle for the majority of people. It is hard to avoid the debts in your life, but you should preserve them for requirements only.

You should have a plan of repayment if you are trying to get a loan. Make sure to search the alternatives before accepting the offer from a lender. For a sudden cash requirement, you should contact a direct lender for emergency cash loans instead of credit cards.

  1. Capital

If you dream to live on your terms without the 9-5 job, you need to start your own business, startup, or freelance career. It will require investment in different assets and required resources. The investment is called capital for a business or startup.

Many entrepreneurs get investment from the industry for their ground-breaking idea. At the same time, others save money or take business loans from financial institutions. Therefore, you should start early to save money for your business idea to avoid relying on investors and banks to raise capital.

  1. Cashflow

Cash flow is an important concept to manage personal and business finances. It involves tracking the transaction where money is received or send. Therefore, you should learn about optimizing the cash flow to ensure there is enough money in your account to spend.

The focus on cash inflow is essential to ensure the money is received for your services and products. While the outflow ensures there are no needless spending to derail your budget. Again, you can use an application to keep track of the transactions without manually entering the details.

  1. Interest Rate

Interest rate is a concept that we have gone through in the mathematic classes during school. When you apply for a loan, the lenders go through your credit profile to assess the risk and affordability. They offer an interest rate based on your profile that decides the installments and overall cost of the loan.

Therefore, you need to learn about interest rates and the factors that affect them. There are two types of interest rates offered by lenders, floating and fixed. The floating interest rate will change throughout your loan tenure, while the fixed interest rate will remain the same until the loan is repaid.

  1. Loan Types

You should have a line of credit available at all times to manage expenses during an emergency. It can range from credit cards to instant loans from direct lenders. However, you should not use them for unnecessary costs to put stress on your finances.

There are different types of loans for various purposes. You should try them instead of a personal loan to get flexible terms or easy installments. Do not trust the words of a lender without reading the fine prints of agreement.

You should also know the difference between secured and unsecured loan types. Lenders will not ask for an asset to use as security for an unsecured loan. In comparison, the unsecured loan will require an asset for repossession in case of a secured loan.


To sum up, it is never late to start learning about the different factors that affect your finances. You need to make sure the concepts are clear to make the right decision during difficult times. Nevertheless, it is impossible to guarantee success, but you should avoid failures because of common mistakes.