Financial terms explain like your 12 years old

Financial terms explain like your 12 years old 1. Stock Imagine a pizza cut into 100 slices. Buying a stock means you own one tiny slice of a company. If the company does well, your slice can become more valuable. 2. ETF (Exchange-Traded Fund) Instead of buying one type of candy, you buy a bag with lots of different candies. An ETF is a bundle of many stocks all in one investment. 3. Dividend Some companies say, "Thanks for owning part of us!" and send you a little bit of money. That's called a dividend. 4. Compound Interest Imagine a snowball rolling down a hill. It gets bigger and bigger because snow keeps sticking to it. Your money can grow the same way when it earns money, and then that money, earns more money too. 5. Inflation Remember when candy cost $1? Now it's $1.25. Inflation means things slowly get more expensive over time so your money doesn't buy as much. 6. Budget Think of your allowance. A budget is just a plan that tells your money where to go instead of wondering where it went. 7. Emergency Fund It's like keeping an extra battery for your flashlight. You hope you never need it, but you'll be glad you have it if the power goes out. 8. Roth IRA Think of it as a special piggy bank for your future. You put money in now, invest it, and when you're older, you can take it out without paying taxes on the growth. 9. Risk Imagine riding a bike down a steep hill. You might get there faster, but you also have a bigger chance of falling. Some investments have more risk than others. 10. Diversification Don't put all your eggs in one basket. If you carry five baskets and one falls, you still have most of your eggs. Investing in many different companies helps lower your risk.