10 Basic Financial Concepts You Should Know to Improve Your Economy

On October 7 next year, Financial Education Day 2024 will be celebrated under the theme “Digital Finance: Learn, Innovate, Grow.” According to the Bank of Spain, financial culture means the knowledge, behavior and attitudes that enable us to make financial decisions throughout our lives. However, a study prepared by the same organization states that 8 out of 10 Spaniards do not know or understand concepts such as inflation or the difference between the nominal interest rate (TIN) and annual interest rate.

In this context, Oney, a financial institution specializing in payment solutions and financial services, strengthens its commitment to training and raising awareness about the importance of knowing terms related to economics and finance. For this reason, the company’s experts have prepared a glossary of key financial terms that Spaniards should be aware of in order to be able to understand and manage personal finances, to be able to make informed decisions or to achieve long-term economic stability:

1. Compound interest: This is interest that is added to the original capital, creating new interest on that amount. This concept is key understand long-term investment growth and accumulation of debt.

2. Inflation: This is a general increase in the prices of goods and services in the economy, which reduces the purchasing power of money. A good understanding of this concept is critical to good financial planning. and always keep your savings protected.

3. Diversification: This investment strategy involves allocating capital among different assets to reduce risk. This is a common investment portfolio management practice aimed at minimizing losses in the event of volatility.

4. Liquidity: Liquidity is a financial concept that refers to the holding capacity of an asset. convert into cash without loss of value. Cash savings are an example of liquid assets.

5. Interest rate: This is the interest charged for using borrowed money or paid for keeping money in a savings or investment account. In this sense, it is a fundamental indicator for assessing loans and borrowings.

6. Profitability: profit received from investments. This can be expressed as a percentage of capital invested, it is also one of the key indicators for measuring the success of an investment.

7. Fixed term: bring it in carried out in a financial institution for a certain period in exchange for a fixed interest rate. It is a low-risk investment option that guarantees predictable returns.

8. BNPL (Buy Now, Pay Later): A type of financing that allows consumers to purchase products or services immediately and pay for them in deferred payments, usually interest-free, as long as certain conditions are met, such as payment over a specified period.

9. Nominal interest (INR): The interest rate that a lender or bank charges for a loan or investment, without taking into account inflation or other factors such as additional costs or actual returns.

10. APRIL (Annual Equivalent Rate): A standardized measure that reflects the real value or performance of a financial product (such as a loan or investment) on an annual basis, taking into account not only the nominal interest rate, but also commissions, additional costs and timing of transactions.

“At Oney, we are committed to continuing to promote financial education among our clients and society at large, providing the tools and knowledge that enable them to make more responsible decisions. We believe that an informed customer is an empowered customer. Financial education is the foundation that allows consumers to better manage their resources, take advantage of market opportunities and avoid unnecessary risks,” says Salvador Loscertales, CEO of Oney Spain.

Through initiatives such as this glossary, They strive to contribute to closing the financial knowledge gap that affects a large portion of the population. Access to quality financial information is a powerful tool for building a safer and more prosperous future for everyone.