Knowing the words related to finance is essential to fully understand the growing economy of the country. As new financial instruments are being developed, it is important for the general public to be familiar with basic financial terms.

Inflation: Inflation is the rate at which the price of goods and services increases over time. This reduces the purchasing power of money. It is classified as demand-pull (result of increased demand), cost-push (result of increased production cost) and built-in (wage-price ratio). The inflation rate is measured on the basis of consumer prices (CPI) and wholesale prices (WPI). As inflation increases, income from savings, investments, and interest rates will decrease. Central banks use simple monetary policy tools such as repo rates and cash reserve requirements to control inflation to stabilise the economy.

Liquidity:Liquidity is the ability to convert an asset into cash while maintaining its value. Cash and stocks that can be sold quickly are examples of liquid assets. Conversely, less liquid assets, such as real estate, will require more time to sell. Liquidity becomes crucial in times of emergency when there is flexibility and financial need.

Credit Information Bureau of India Limited (CIBIL) Score: Due to the lack of financial literacy in India, many people do not understand the importance of CIBIL score. The CIBIL score is a three-digit number ranging from 300 to 900, which indicates the creditworthiness and repayment ability of the borrower. This is especially important when applying for loans and credit cards. The CIBIL score will depend on various factors such as payment history, outstanding debts, credit mix, and loan tenure. Those with a score of 700 and above will be given preference to get the loan.

Equity: Stock market equity is the possession of a portion of a firm's stock by buying its shares. Shareholders are allowed to claim the income and assets of the company. Public shares provide voting rights, which allow shareholders to approve or disapprove of the company's actions.

Bonds: A bond can be viewed as a debt owed to a corporation or government. It pays interest on a regular basis and is repaid over a period of time. Bonds are generally relatively safer than stocks because they provide smaller returns. The most common types of bonds are government bonds, business bonds, and municipal bonds.

Mutual Funds: Mutual funds are investment avenues that collect funds from various stakeholders and build a variety of assets such as stocks, bonds, and other securities. The fund managers handle it professionally. This can be done even by small investors. Mutual funds are divided into three categories: equities, debt, and balanced funds, each with a specific risk-taking ability and financial goal.

Sovereign Gold Bonds: Sovereign Gold Bonds (SGBs) were introduced by the Government of India in November 2015 as an alternative to investing in gold. These are issued by the Reserve Bank of India and are denominated in grammes of gold, individuals and HUFs can deposit a minimum of 1 gramme and a maximum limit of 4 kg, while for trusts it is 20 kg limit. Investors will get a fixed interest of 2.5 per cent per annum, which will be paid on a half-yearly basis and will also get the benefit of price increase. These bonds are issued for a period of 8 years and the investor can exit from the 5th year onwards. Being sovereign in nature, these SGBs are free from the problems of theft, storage and purity.

Assets: Assets are items that you own and that your business can benefit from in the future, such as cash, inventory, real estate, and office equipment.

Compound interest: This refers to "interest on interest." When you invest or save, you get compound interest on the amount you have invested and the interest you have accumulated over time. This is the best way to increase your investment. But a compound interest loan can cause your debt to pile up.

Income Statement : An income statement is a financial statement that summarises the income and expenses of a business or individual over a period of time. An income statement is also sometimes called a profit and loss statement.

Everyone should be financially literate because it enables them to manage their money wisely and make informed financial decisions. Understanding the basics of finance will help you create an efficient budget, save money, and spend wisely. This will help you get rid of unnecessary stress. You can make a retirement plan, invest wisely, and accumulate wealth over time. That's why basic financial literacy is important, and by consistently mastering financial terms, you can establish a solid foundation for financial freedom.