Personal Finance and Financial Literacy

Name: Personal Finance and Financial Literacy
Author: Derek Przywalny

Discover the importance of developing your financial literacy so you can stay ahead of your financial future

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Course: On-Demand

(upbeat music) Welcome to Personal Finance and Financial Literacy. In these lessons, you'll learn about the fundamentals of finance and some key financial concepts. These concepts include the effects of inflation, time value of money, and the risk versus reward relationship. You'll also learn about passive and active income, as well as personal net worth. By the end of these lessons you will understand the importance of financial literacy. The definition of finance can be quite broad. Usually people think of finance in terms of money but it also involves the many ways in which most societies operate such as economics and accounting. Generally, there are two types of finance, personal and corporate. Personal finance involves individuals making financial decisions and transactions such as saving and spending money, taking out loans, and investing. It also encompasses personal budgeting and financial security. Corporate finance involves businesses making major financial decisions. This usually involves capital investments and operational expenses needed to run a business as cost efficiently as possible. There are various professionals known as money managers who operate in a financial area known as investment management. For example, this might be someone with a mutual fund who invests on behalf of their clients or a financial advisor who advises individuals on how to allocate their earnings and resources. There are also banks and other financial institutions that allow people to deposit, borrow, and withdraw money, or make payments to third-parties. To gain a better understanding of finance, there are a few concepts and factors to discuss. First, there's inflation, which is the gradual increase in the pricing of goods and services. This gradual increase in pricing affects the value of money. Inflation also affects the actual value of your investments. For instance, imagine you earned a 10% gain on an investment. Let's say you had to pay taxes on your gain and your gain is now reduced to 8%. If inflation led to a 5% decrease in value during the time of your investment, your actual return would only be 3%. Taking inflation into account is particularly important when it comes to your finances and investments. Another essential factor to consider is time. Due to inflation, the money you spend today may be worth more than the money you spend tomorrow. However, if you choose not to spend your money and instead you invest your money in places that aren't as easily affected by inflation such as the stock market, you could actually allow your money to build value through interest earned, dividends or capital gains. You will also need to consider that some aspects of finance such as certain financial transactions or investments involve risk. As an investor, you'll wanna ensure you're compensated for the level of the risk. Typically the higher the risk, the higher the return you should expect. If there's a low return, then this often means your investment is considered low risk. And the chances of losing money are lower. When investing, if you don't want to take high risks, then you probably shouldn't expect higher returns. While finance is a broad term and encompasses many categories, it is important to have a general knowledge and understanding of finance. So you can be successful both as an individual and in a business setting.

Beginner Provider : Derek Przywalny 5 Lessons · 17m in Arabic, German, English, Spanish, French, Portuguese, Urdu, Chinese

Course Description

The word finance is a broad term that makes most people think about money, but it involves much more than. Finance involves many of the ways that most societies today operate, from economics to accounting, and there are generally two types of finance: personal and corporate. Being financially literate can help you determine how your finances affect you and your ability to manage your money and credit, plan for retirement, invest and budget. Financial literacy also means understanding the differences between active and passive incomes, as well as the meaning of personal net worth.

In these lessons on Personal Finance and Financial Literacy, you’ll learn the basic concepts of finance, including what the effects of inflation can be, the time value of money, and the risk vs. reward relationship. You will also learn about the differences between passive and active income and personal net worth to help boost your financial literacy.

What You'll Learn

Understand the concepts of finance, financial literacy, and personal net worth
Distinguish between active and passive income
Identify the difference between an asset and a liability
Explain the importance of financial literacy
Describe basic finance concepts including inflation, the time value of money, and the risk vs. reward relationship

Key Takeaways

Finance is a broad field that involves much more than money, spanning areas such as economics and accounting, and is generally divided into personal and corporate finance.
Financial literacy helps you determine how your finances affect your ability to manage money and credit, plan for retirement, invest, and budget.
Financial literacy includes understanding the differences between active and passive income as well as the meaning of personal net worth.
Basic finance concepts covered include the effects of inflation, the time value of money, and the risk vs. reward relationship.
Knowing how to identify an asset versus a liability is part of building financial literacy.

Frequently Asked Questions

What will I learn in this course?

You will learn the basic concepts of finance, including the effects of inflation, the time value of money, and the risk vs. reward relationship, as well as the differences between passive and active income and personal net worth to help boost your financial literacy.

What topics do the lessons cover?

The lessons cover defining finance, defining financial literacy, income and personal net worth, and the importance of financial literacy, followed by a Test Your Knowledge assessment.

Why is financial literacy important?

Being financially literate can help you determine how your finances affect you and your ability to manage your money and credit, plan for retirement, invest, and budget, and it includes understanding active versus passive income and personal net worth.

What is the difference between active and passive income covered in this course?

The course teaches the difference between active and passive incomes as part of building your financial literacy, though the specific definitions are presented within the lessons.