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In April, we launched a blog series in aid of Financial Literacy Month that aims to promote financial inclusion and literacy by breaking down the most commonly talked-about jargon within the financial community.
So far, in each part of this series, we have covered the following:
And now, for Part Five, we're back to talk about inflation, saving challenges, a Cash ISA and different types of expenses!
1) “Inflation"
Official definition:
Noun: the action of inflating something or the condition of being inflated: a general increase in prices and fall in the purchasing value of money. -Oxford Languages
Our definition:
In basic terms, inflation is the rate of increase in prices of goods and services over a given time.
The 'purchasing power' of money loses its value, and you most likely will have seen this play out in your daily life each time you go to fill up your car's petrol tank and go on your weekly shop to the supermarket: it feels like you're getting less for your money as everything is more expensive!
But why does inflation happen? It can be caused by many different factors, but primarily, when demand for goods or services is greater than the economy's ability to produce them, or when the cost of raw materials, wages, or manufacturing increases and therefore increases the prices of the end product or service.
Read more:
2) A "Cash ISA"
Official definition:
Noun: a type of savings account that offers tax-free interest. -Yorkshire Building Society
Our definition:
A Cash ISA is like a regular savings account, except you'll never have to pay tax on the interest you earn through it. So, when interest rates are particularly high, you'll be thankful to not have to pay tax for the interest earned on your savings!
A Cash ISA is available for adults over the age of 18, and you can open one with as little as £1. You can also deposit up to £20,000 in a tax year, and there are two types of Cash ISA you can choose from:
Fixed Rate Cash ISAs – your interest rate stays the same for the term of your Cash ISA
Variable Rate Cash ISAs – the interest rate can change during the term of your Cash ISA.
Read more:
3) "Fixed" Expenses
Official definition:
Noun: Expenses, like bills, that must be paid each month and generally cost the same amount. -consumerfinance.gov
Our definition:
Fixed expenses include anything you pay for each month that usually costs the same amount. For example, car finance, general household bills or direct debits. They are typically the easiest expenses to budget for because you already know what is coming out each month.
However, some fixed expenses may also be classed as a variable expense because the amount you pay each month changes depending on your usage: for example, a utility bill (like your water bill or electric bill), or phone bill.
Read more:
4) A "Savings Challenge"
Official definition:
Noun: a strategy to help you save money.
Our definition:
A savings challenge is an activity/commitment you take part in to challenge yourself by saving as much money as possible within a given time.
There are many different types of savings challenges to choose from depending on anything from how long you want to take part and how much you can afford to set aside at a time. Here are some of the most notable ones that people take part in:
The 365 Day Challenge: involves saving a certain amount each day, typically starting from the 1st of January to the end of December.
The £1 Challenge: simply put away £1 each day for a whole year - that's £365 saved in 365 days!
The 52-Week Challenge: start by depositing £1 in week one, £2 in week two, £3 in week three and so on. By week 52, you'll have added £1,378 in savings!
The No-Spend Challenge: Usually attempted for one month, the no-spend challenge challenges you to go a whole 30 days without spending money (making exceptions for emergencies, bills, groceries etc.).
The 1p Challenge: Similar to the "52 Week Challenge", save 1p on day one, 2p on day two etc. and by the end of the year you could save over £650.
Read more:
8 Saving Challenges to Try in 2024
What Type of Saver Are You? The 6 Personality Types of Saving Money
What money jargon would you like to see us break down next?
Join the conversation over on our Instagram and let us know if you would like to see more of this series!
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