APR. AER. RMB.
These aren’t obscure code words that try to explain why I haven’t published a single post for the first half of autumn term. These are all acronyms found within financial and currency discourse. You can find their meanings at the bottom of this post.
I’ve put these here because I started a financial reporter job last month and have found the transition terrifying.
I love my job, but acknowledge that I am the typical accidental financial journalist. I have two arts degrees and hated mathematics at school. Yet here I am writing day in day out about insurance linked securities and the like. But there you go.
The closest I came to studying anything regarding commerce, finance, or enterprise was my GCSE in economics. Now I’m wondering: whether it’s time to teach young people compulsory finance until they’re 14, in the manner of drama or music.
The personal finance section of a paper is always full of tips and tricks for the everyday consumer. However how many young people will know what many of the terms found in this section mean? I only learned what an annuity was a few months ago. I have a bank account and still don’t know the difference between APR and AER. I wasn’t aware until a few years ago that some banks just charge you for having an account. Perhaps I’m thick, but perhaps I should have received some of this knowledge in school.
The economy and all things finance, has arguably been the story of the past five years or so. Handling your coins is now more important than ever. Payday loans are all over the news and stubbornly low interest rates are messing up people’s savings. I think it might be time to start thinking about teaching youngsters – even if it’s for one hour a week – about very basic financial concepts: mortgages, interest, budgeting, pensions, overdrafts. You know what I mean.
I write about catastrophe bonds and reinsurance, but I only just learned what a bond was, about three weeks ago. I’m not saying that we should be teaching children about parametric triggers and risk. Just some helpful basics to get them started in life, like what a bond is, practising how to write a fun business plan, and that car insurance is something that is mandatory.
*APR – Annual Percentage Rate: The annual rate that is charged for borrowing (or made by investing).
I did not fully understand what this was or what distinguished it from AER.
**AER – Annual Equivalent Rate: Interest that is calculated under the assumption that any interest paid is combined with the original balance and the next interest payment will be based on the slightly higher account balance.
I still don’t know if I understand this definition.
***RMB – is also known as CNY. This is the currency abbreviation for the China yuan renminbi (CNY), the general term for the currency of the People’s Republic of China (PRC), one of the hottest and most important economies right now.
The definitions above are taken from Investopedia, a great resource.