Financial key terms have been dominating the news cycle recently, but what do these terms actually mean and how can they affect you?
Chancellor Kwasi Kwarteng's mini budget announcement was met with wide-spread criticism after the pound sunk to a record low of 1.03 against the US dollar on Monday (26 September). The Prime Minister and Chancellor Kwasi Kwarteng held crunch talks with experts from the Office for Budget Responsibility (OBR), the body that provides economic forecasts and independent analysis of the public finances.
The chancellor pledged to abolish the 45p rate of tax from his mini-budget proposal, which is paid by people who earn more than £150,000 a year.
READ MORE:
-
'Gorgeous' mum mauled to death by American bulldogs named locally
-
Man knocked unconscious in violent attack outside bar smoking area
Here are some of the phrases you may have heard and what they mean:
Inflation
Inflation is the way we describe increasing prices, with the higher the inflation rate, the quicker the prices go up. Inflation is measured by the Bank of England who evaluate over 700 things that members of the public regularly shop for, such as a loaf of bread, a bus ticket, a car and even a holiday. They then compare those prices to the price level last year to find out the rate of inflation.
The more the prices have increased, the higher the inflation rate.
Interest Rate
An interest rate is the percentage charged on a total amount you borrow, or the percentage paid to your bank account when you save.
If you borrow money in the form of a loan or mortgage, the interest rate will be an additional amount you are charged for when borrowing. With interest rates currently at 2.25%, if you borrow a loan of £1000, you would have to pay back £1,022.50 in total, if the interest rate remained at that set by the Bank of England.
On the other hand, if you are a saver, this interest is paid to you by the bank as they use your money to create profits. With interest rates at 2.25%, a saving of £1000 would actually give you an extra £22.50.
Emergency Fund
It’s often also known as a rainy day fund and is the money people put away for unplanned events, such as the cost-of-living crisis.
READ NEXT:
- Aldi launches new Christmas drink that tastes like a Quality Street favourite
- Pantos and Christmas shows taking place in Merseyside in 2022
- I tried a £16 Primark 'Oodie' dupe and haven't put the heating on since
- I tried Aldi's £1 'gold dust' protein snack shoppers are bulk buying - review
- Primark shoppers desperate to buy 'gorgeous' £6 knitted vest
