As we have seen during Financial Literacy Month, this topic covers a lot of ground. Here is a review of some key terms behind two personal finance areas: student loan repayment and building an emergency fund.
Key Financial Literacy Terms: Student Loan Repayment & Emergency Funds
Whether you are facing the start of student loan payments or working on building an emergency fund, having a strong foundation of financial knowledge is beneficial.
Student Loan Repayment Key Terms
Student loan repayment look different for nearly everyone. One thing is the same: repayment is not optional. Here are the terms that are important when navigating student loan debt.
- Private vs Federal Loans: Private loans are backed up private financial institutions while federal loans are backed by the government and typically receive better interest rates and student loan forgiveness programs.
- Grace Period: This is the time before you are expected to start sending in your student loan repayment. Interest may or may not accrue.
- Student Loan Forgiveness Programs: There are a variety of programs, typically only for Federal loans, that allow certain borrowers to have part of their debt forgiven. Loan forgiveness may seem like an amazing thing! However, there are several qualifications you must meet. Visit the Federal Student Aid website for more details.
Emergency Fund Key Terms
If you find yourself free of debt, congratulations! That is a huge financial milestone. The next step is to start building up savings. There are many ways to make this happen. Take a look at these financial terms as you build your emergency fund.
- Liquid Assets: A liquid asset is very easy to access and won’t lose value once it’s converted to cash. Since you never know when an emergency is going happen, it’s important your emergency fund is highly liquid. Basically, don’t invest your emergency fund; put it in a savings account that doesn’t have fees or restrictions for accessing your funds.
- Living Expenses: Living expenses are any cost that you need to survive day-to-day. These include housing (rent or mortgage, utilities, taxes, etc.), food, clothing, and probably automotive. If you have life insurance policies or other regularly paid items that are essential, count those as well. Total all these costs for 3-6 months to calculate your emergency fund goal.
- SMART Goals: Goals should be specific, measurable, achievable, realistic, and timely. Consider these SMART goal qualifiers when working on building savings. Establishing an emergency fund and eliminating debt are achievable goals if you plan properly.
Having a strong, working knowledge of your financial situation and understanding these and other key terms–financial literacy!–will enable you to reach your personal finance goals.
To speak to a credit counselor today about budgeting and managing your finances, call 800-769-3571.