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Finance 101 Refresher Guide

Updated: Mar 6, 2023

Remember to always Think BIG. Dream BIG.

Biddles Investment Group

Even if you know some of these things, it's always good to have a refresher. Or if this is all new information, it's a fantastic time to learn this now.

The topics below will be covered in a lot more depth in later lessons. If you want to jump to a topic just click the concept you'd like to jump to: For the purposes of this lesson however we will review the most crucial concepts as a starting point - including:


Banking is the backbone of the modern economy. Banks have evolved from being only brick and mortar like Chase, to online only like CaptialOne and SoFi, as well as peer to peer options that are now available that have expanded into banking services like CashApp, Venmo, Square, and Robinhood. Simply put, a banks main functions are:

1.) To store your money in a checking account (for easy access and everyday use) or a savings account (for longer term holding)

  • Checking Account: A bank account that allows you to deposit and send money, to write checks, e-checks, perform cash transfers, make purchases using a debit card and potentially obtain credit.

  • Savings Account: A bank account that earns interest, meant for saving money rather than spending it.

2.) To provide loans to people, which allow people to do things like go to school, buy a home, grow their business, etc. Most of the money in the bank are numbers on a ledger, like really secure digital IOU's.

  • Ledger: A book or document to keep track of money coming in and going out.

Benefits of Banking

Banking is beneficial to individuals because:

1.) It's safer than keeping cash - the money is harder to steal, and if something happens, it's FDIC insured (meaning they'll pay you back up to $250,000

  • FDIC - Federal Deposit Insurance Company: is the government agency that insures banks, so if the bank fails, you don't lose your money.

2.) The bank will pay you, although a very low sum, to park your money there in the form of interest

  • Interest - the fee charged for borrowing money.

3.) With an account you will be able to write checks, get a credit card, pay bills online, or use an ATM.



When it comes to finances, 'credit' means the ability to borrow money, with the understanding that you'll repay it.

"Borrowing on credit," essentially means taking out a loan, so you have enough money now to purchase whatever you are trying to obtain such as a home, car, video game, bike, vacation or even just day-to-day items.

BIG TIP: Credit cards are called "credit" cards, because you're borrowing from the credit card company every time you swipe.  They foot the bill , and you pay them back when you pay your balance at the end of the month.

Credit Score

Your "credit" also refers to how trustworthy you are when it comes to borrowing money. This is a score that determines how likely you are to pay the loan back on time.

This concept of creditworthiness is measured by your credit score.

  • Creditworthiness - how much a person is considered suitable to receive in financial credit.

  • Credit Score - your 'real world financial GPA' - this is a number assigned to you based on your credit history that conveys to lenders how risky it is to lend you money.

If you have a good credit score, it is easier and less expensive to get a loan, because the lender feels more confident that you'll pay them back.



When you take out a loan, you are promising to pay the money back, plus a "little extra". This is sort of like a fee for the ability to take the loan out - this "little extra" is interest.

  • Interest - The fee charged for borrowing money

It's almost always a percent of the loan, called the interest rate. For example,, 10% interest on a loan of $1,000 would be $100. So you would end up paying $1.100 after repaying the loan.

  • Interest Rate - a percentage of a loan that is charged to the borrower as a fee in return for being able to borrow money

BIG TIP: A loan is less expensive if you have good credit because you'll get a lower interest rate on your loan the higher your credit score. 

Compounding Interest

To add a bit of complexity, most lenders won't charge interest just once, they charge it on a routine schedule.

With compounding interest, you owe money on the original amount you borrowed, PLUS on any additional money you owe due to interest so far.

  • Compounding Interest - This can work in your favor or not in your favor but is a magical financial concept. Compounding interest is the process by which an asset increases in value due to the interest earned on both what you started with and the interest you've already earned (bottom line: it means that starting to invest earlier in your life can lead to exponentially more money over time)

Referring to our previous example of 10% on a $1K loan example. After 1 year you'd owe $1,100. If you don't pay any of it off, the 2nd year, it'll grow by 10% or $110 instead of $100 and this amount will continue to compound until the loan is paid off.

If you are the one lending money, compound interest can work in your favor. You're "lending money with compounding interest" whenever you have money in the bank!

Usually the interest rate is pretty low. It's better for savings accounts than checking accounts, and even better for high-yield savings accounts.

  • High Yield - A type of savings account that has higher than average interest rates


When people talk about "investing" they're referring to the financial markets - where people and businesses can buy and sell assets like stocks, bonds, forex, crypto, etc.

If your money is in a retirement savings account, it's invested in the financial markets. And you can invest your money in the financial markets directly too!

BIG TIP: It's almost all digital these days, but this used to happen at physical locations like the New York Stock Exchange.


The basic building block of the financial markets is stock, which is like ownership of a small portion of the company.

  • Stock - a type of investment that represents a specific amount of ownership in a company

The company's stock is divided into a set number of pieces called shares, and the price of each share is the value of the company divided by the number of shares.

  • Shares - fractional ownership of a business enterprise, employees might have the option to purchase shares as an employment benefit.

You can buy shares in an IPO, or after the fact on the secondary market.

  • IPO - an "initial public offering" or when "a company goes public" - this is the first time a company issues stock for the public to buy on the public stock exchange, and is used as a form of raising money.

  • Secondary Market - the trading of stocks anytime after the IPO, when someone interested in buying shares purchases it from another party who already own it (rather than from the company directly)


Bonds are a type of investment where you're giving a loan to an institution or organization (often a government org) in exchange for a predetermined interest rate.

  • Interest Rate - a percentage of a loan that is charged to the borrower as a fee in return for being able to borrow money

The interest is paid to you in installments over a set period of time, and then the initial amount is given back to you at the end of the time period.

Other Asset Types

Lots of types of assets are built based on stocks.

  • Mutual Funds are a pool of money from a bunch of investors that gets invested in a range of various stocks.

  • Index funds and ETF's are a specific type of mutual fund that mirror popular indexes. In the case of ETF's they can mirror indexes, industry sectors, and/or themes such as artificial intelligence and robotics or green energy. Index Funds and ETF's are a group of companies that act as an indicator of how the market is doing more generally (you've probably heard of the S&P 500, NYSE, NASDAQ, or Dow Jones, these are indexes.

Owning Assets

You can buy a financial asset, which makes you it's owner. If the value of the asset goes up, your money has grown.

You can sell a financial asset that you own, meaning you transfer the ownership to someone else in exchange for its value in cash - this is called "capital gains"

  • Capital Gains - The profit you make when you sell an asset (like a stock, bonds, property, etc.) that has gained value. A capital loss would be an asset that has lost value.

BIG TIP: If you buy a stock at $50 and the value goes up to $60, you've earned $10!  Though you won't actually see that money until you sell the stock at the new price. 

Quicker Growth

The financial markets can be a great place to Save & Grow your money because your money can grow much faster than it might just sitting in a bank account barely earning interest.

As of writing the best banks provide an interest rate of 3-4%, but that is only higher because the Federal Reserve has raised interest rates. Prior to the fed monetary policy easing interest rates earned on bank accounts were a mere 0.5% -2%. The stock market grows on average between 7-12% each year and this is the reason why your money will grow faster with investments.


The best known advice when it comes to investing is "diversify your portfolio." This means that you don't concentrate all of your money on Apple stock for example, but that you invest across a range of companies and industries.

The concept of diversification means investing in a bunch of different types of assets with different risk levels. That way, if one asset loses value, you don't lose all your money! If you remember the old saying "don't put all your eggs in one basket" this is exactly what that means.

Congratulations! You've Completed Financial Literacy 101


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