Although there’s definite value in learning about the mitochondria, I think we can all agree that our public school system falls short in teaching us real life financial skills. As of 2007, only seven states required a personal finance course in order to graduate. And only nine states were required to offer a personal finance course to high schoolers. These facts are indicative of the general lack of personal finance knowledge amongst high school students. One of our goals at is to help improve your financial literacy. Here are some financial concepts/terms we think are important for everyone to know:


Cost Benefit Analysis

The first financial concept is cost benefit analysis. Simply put, a Cost Benefit Analysis is the process of assessing your options by comparing  benefits to costs. An example of applying a cost benefits analysis to your personal finances might be determining if an annual gym membership is worth your money. If a $50/month membership is within your budget, and you know you will use the gym regularly, you may decide that your health and personal fitness benefits outweigh the membership cost  Or for example if you want to use all the gym’s offerings and access their classes then paying the membership may actually be cheaper than paying for individual courses. So basically, it’s worth it.



Remember when you got your first real job and you had calculated the amount of money you were going to get paid and then were heart broken when you saw your paycheck? Yeah, that’s an example of withholdings from your income.This is basically the amount of money that is withheld from your paycheck and goes towards paying your taxes. Do you remember when they asked you to fill out a W4 when you were first hired and you marked ‘single’ then ‘no dependents’ then totally how many 1s you had? Yeah, that was all for the government to calculate how much income tax you should have deducted from your salary.

Although it can be disheartening on your paycheck, it does mean you are more likely to get a tax refund when you file your taxes. If you have a job that doesn’t withhold taxes from your paycheck, you might feel good on payday but be sure to have saved some money because you will owe money come tax season (cough, April 15, cough).


Credit Score

This is the number that lets lenders know your credit payment history (timeliness, amount borrowed, etc.) and how likely you are to pay them back if they give you mula. See this article for more details.



This stands for Annual Percentage Rate and it represents the yearly interest rate charged on debt or earned through an investment. If you have a credit card, APR is important because that’s the percentage of interest you are going to be charged on the debt you carry every month (the balance of your credit card).


Financial Security

Some financial concepts are really straightforward. Financial security is one of them. This is exactly what it sounds like. When you’ve achieved financial security you no longer have that little anxious voice in your head worrying about your bank balance. Your mindful money planning is working and you have peace of mind.


Insurance Premium

An insurance premium is the money you pay (usually monthly, sometimes annually) to receive insurance from your insurance provider. Insurance premiums are not the same rate for everyone.The price of a premium is dependent on many factors, including, but not limited to, where you live, your gender, the type of car you drive (if it’s car insurance) and the insurance providers assumption of the likelihood of a claim being filed by or against you. Que younger people having higher car insurance premiums because they are (statistically) more likelihood to get in an accident but lower premiums on health care because they are (statistically) less likely to get really sick. The irony.


Compound Interest

We talk a lot about compound interest at Nav.It, mostly because it’s really important to understand. Compound interest is basically interest compounded on interest and the balance of your account. If you’re being charged compounded interest on debt, your debt is growing fast.   If compound interest is being applied to your investments, you money is growing faster than if just basic interest was being applied. So yeah, make sure you know how this one works!



Investing is an art, but an art that can be learned. Investing in different things (diversification) is important to understand in order to lower your investment risks. If your investments are varied, some may experience high returns while others stay the same or experience a loss. The old “you win some, you lose some” theory.  If all of your investment eggs are in one basket, and that investment fails, your losses will be greater. If you have diverse investments, the theory goes, you will lose and win, but not at the same time, hopefully gaining overall in the long run.


Contribution Plans

401k all day. A 401k is an example of a contribution plan in which an employer facilitates the process for employees to start contributing part of their paycheck to their retirement plan. Contribution plans have certain policies surrounding withdrawal guidelines and matching amounts, but basically it means, you contribute and someone else can contribute into the same account for you.  Definite perk to take if your employer offers it (extra money right there!).


Most financial concepts sound more intimidating than they actually are. Once you’ve broken them down a little, they are much easier to understand and manage. Let us know what financial concepts you need a better understanding of and we’ll gladly help out!


Image credit: Mirjana Jesic


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