Bla bla bla. Money. Bla bla

An effective way of making someone stop listening is to use complex terminology,  making things sound unnecessarily more difficult than they really are.

Many financial terms sound a lot harder than they actually are. Try these for example: Financial return, Compound Interest, and risk appetite.

Changing things and ask questions, is a lot easier when you feel comfortable enough to learn more. It all starts with the basics. And remember, it sounds a lot harder than it actually is.

There are two easy ways to avoid feeling intimidated by things you at first don’t understand. First - ask. Second - Learn.

Here are 3 concepts, that are pretty common when within the financial language:

  1. Financial return

  2. Compound Interest

  3. Investment company

1. Financial Return:

  • What you earn from an investment.

  • For example, when you buy shares in a company, and later the value of those shares go up, the money you first invested will be worth more than when you invested them.

    Your financial return would therefore be positive (yah!). But it could go the other way, where the share value goes down below your original investment. Your financial return would then be negative (boo!).

  • The return on shares is not predetermined and vary depending on company performance, but not always. Sometimes share value can go up even if a company seems to be doing poorly, and vice versa.

2. Compound Interest:

Nice stuff and this is how it works:

  1. You save money and get interest from the bank and your money increases.

  2. Because your original money saved has earned interest now added on top of it, the amount of money earned in the future from interest goes up even more.

  3. This means that the more you save, the more money you will gain from interest.

    For example; €10 * 12% interest = a new balance in your account of €11,20.

    Then €11,20 *12% = a new balance in your account of €12.54. And this will continue on like this, provided you are in the right type of account. Easy right?

3. Risk appetite:

  • All this means is how much risk are you willing to take in order to achieve a potential financial return from a specific investment.

  • Any investment can be lost, however all savings accounts are protected by the government up to a certain amount. But if you want to invest in shares and stocks, you must be comfortable with potentially losing everything. And hence your risk appetite will be determined.

  • Usually higher risk means higher potential interest gained, and the opposite is true when you begin to lower your risk appetite.

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