I was asked today what I thought was the one bit of economic knowledge anyone should know..... and I said this:
'interest is the price of risk'!
so if a higher interest rate is being changed there is more risk of non-repayment.
If you know this, you can recognise why some people are charged more for loans & why some 'investments' are offered with higher interest rates.
This simple piece of knowledge helps make sense of loans & investments.... and is a useful scam warning
@ChrisMayLA6 Oh... and I'd add compound interest to your price of risk.
Ha ha, yes compound interest is another thing that many people seem to struggle with (as in not quite sure how important it is)
@ChrisMayLA6 Very much true. It is a powerful weapon. One of my favourite examples is the calculation of how much the social security taxes of a worker would be worth, if, instead of going into the governments coffers, it was invested over a lifetime at 7% in the stock market. It would be a significant chunk at the end of a working life.
