Video Toolkit
Animated videos in Sign Language to explain 10 different financial skills
These include: How do I plan my household expenditure? What can I do with my savings? How can I access my bank account online?
Our videos are signed and subtitled. The content of every video is also available in a plain language text.
Different types of income
Ali soon starts his first job.
He will earn his own money for the first time.
But can you only earn income through work?
Or are there other ways?
What means income?
Income is the money
that you earn for an activity or work.
This is usually a wage or salary.
Gross income is what you earn before taxes are deducted.
After the deduction of taxes, the net income remains.
There are different meanings for income.
In the USA you use the word income for:
The money a company earns
after the deduction of taxes, costs etc.
In Europe this is called profit.
Types of income:
There are different types of income.
The main difference is:
How is the income earned?
The three main types of income are:
• Active income
You earn this income by performing an activity.
For example: working.
• Portfolio income
A portfolio is a collection of different financial investments.
Portfolio income is generated by the profit from financial investments.
• Passive income
This income is generated, for example
if you own a house
and you rent it out.
The rental income is passive income.
Wage
A wage is money that an employer pays to an employee
in exchange for work.
If you are paid for completing a task.
This is called a piece rate.
For example:
A confectioner gets money
for each cake they bake.
Most people work for wages.
We use the word wage to describe all forms of employee payment.
Nevertheless, wages and salaries are different
Salary
A salary is an arranged amount of money.
An employer pays it to an employee
at regular intervals.
For example: every week or every month.
Financial support
There are many types of financial support.
It is usually paid by the state.
When do people get financial support?
For example:
• If they are unemployed.
• If they are on parental leave
• If they have children
• If they are a single parent.
• If they are studying
• If you are doing further training
• If they are ill
• If they have a disability
• If they need help paying the rent
• If they have a low income
You must apply for most financial support.
You must fulfil requirements.
For example:
Only if you have children,
you can apply for child benefit.
There are organisations.
They can help and advise you:
What financial support can you apply for?
How do you fill out an application?
Some organisations offer financial advice
in sign language for deaf people.
Now Ali understands:
There are different types of income.
He is happy:
He will soon be earning his first salary!
Household budget
At the end of the month Ivan’s account is always empty.
But he doesn´t know:
• What does he spend the money on?
• Where can he maybe save money?
Ivan, a household book can help you with this.
In a household book you list your income and expenditure.
In this overview you can see:
How much money do you spend on what?
Where can you save money?
The overview helps you
• Plan your budget
Your budget is the amount of money
that you have at your disposal.
• Build up reserves for emergencies.
Reserves are money you have saved.
For a household book you need to know:
What is my income?
What are my expenses?
You can see this, for example, on
• bank statements
• payslips
• invoices
You write your regular income in the household book.
For example:
• wages
• pocket money
You also write your regular expenses in the household book.
For example:
• rent
• costs for electricity
• internet costs
• costs for your mobile phone contract
These regular expenses are also called fixed costs.
Then there are variable expenses.
These expenses are not always the same amount,
but you still have them regularly.
For example:
• Buying food, clothing, electrical appliances.
• Expenses for free-time activities such as restaurant or movies.
Then there are one-off expenses.
These are larger expenses.
You only have them irregularly.
For example:
• holiday
• buying of a new laptop
How can you calculate:
How much money can you spend per month?
Subtract your fixed costs from your income.
Then you can see:
How much money do I have left for variable expenses?
If you still have money left over
after paying for variable expenses,
you can save this money.
You can keep your household book by hand
but also digitally on the computer or with an app.
A household book gives you control over your finances.
You can save money better.
You avoid debt.
The household book helps you to
change your purchasing behaviour.
Purchasing behaviour means:
– What do you buy?
– Which services do you use?
– What do you spend money on?
You can see immediately in the household book:
Where can you save money?
Saving doesn´t have to mean:
you cut your expenses.
You can also take a look:
Can you buy the same thing for less money?
That´s how you reduce your spending.
What is important for a household book:
You enter expenses immediately.
You enter them regularly.
This works best with a routine.
For example:
Take stock on the first Saturday of the month.
Taking stock means:
Getting an overview of your income and expenditure.
Ivan now knows:
How can I keep a household book.
He is looking for an app.
He wants to enter his income and expenses there.
Financial life planning
Samira still lives with her parents,
so she manages well with her money.
But she wonders:
Will she need more money in the future?
For example:
If she wants to have her own apartment?
When she has a family?
If you want answers to these questions,
then financial life planning will help you.
Financial life planning means
You take a look at
• your personal finances
• your financial goals
• your ideas and plans for achieving these goals
You think about:
• short-term goals
• long-term goals
in different phases of life:
• youth
• young couple
• family
• old age
under different life circumstances
• education
• Further education
• work
• retirement
With good financial life planning, you can:
• better control and manage your finances
• plan for important or unexpected life events
For example:
• having children
• sudden serious illness
• buying a house
• old age
• making good financial decisions
Financial life planning helps you
• to recognise:
What is most important to
me when it comes to finances?
• develop a realistic budget
Your budget is the amount of money
you can spend.
• Saving money for major expenses
For example:
– Buying a car
– buying a house
• managing debts
• planning for old age and retirement
With financial life planning you can achieve
an independent and stable financial situation.
Tips for better financial planning
1. keep track of your money
This is easier,
if you pay with cash.
2. learn to manage your money well.
For example:
Create a household budget.
This is the amount of money
you can spend on the household.
3. do not get into debt
For example:
Don’t borrow money,
so that you can buy a new smartphone.
4. set yourself financial goals.
For example:
What do you want to save for?
How much do you want to save?
5. save money
Pay the money regularly into a savings account.
6. build up a financial reserve for emergencies
Reserves are money you have saved.
7. Do your tax adjustment.
Maybe you’ll get money back?
8. plan for old age
For example:
Pay regularly into a pension scheme.
9. increase your financial well-being
Now Samira knows:
It’s good to start thinking
when you’re young:
When in life will you need more money?
Then you can prepare well for it.
Credits
Irina wants to buy a new mobile phone.
She doesn’t have enough money for it.
Irina thinks about it:
Should I take a credit for the mobile phone?
What exactly is a credit?
Credits are borrowed money.
Private individuals and companies can borrow money through credits.
A person or a bank gives a credit.
They are called lender.
A person or a company receives a credit.
They are called borrower.
There is a credit agreement.
It says:
How do borrowers have to pay back the money?
• By when?
• In how many rates?
A rate is a part of the money borrowed.
Borrowers must repay the rates regularly.
• How high is the interest?
Interest is the cost of borrowing money.
You have to pay back interest in addition to the money you borrow.
The amount of interest is the interest rate.
The amount is expressed as a percentage.
There are collateral and unsecured credits.
A collateral credit means:
If the borrower cannot repay the money,
then the bank gets something else in return.
For example: the borrower’s house.
An unsecured credit means:
If the borrowers cannot repay the money,
then the bank still gets nothing.
There are different types of credits:
Personal credits:
This involves a small amount of money.
For example:
• for medical bills
• for the renovation of a house
Personal credits are unsecured.
Student credits:
Students can pay for their studies with student credits.
Student credits have low interest rates.
The borrowers repay the student credits,
when they have completed their studies
and when they have found a job.
Credit cards:
Private individuals and companies can have a credit card.
If you buy something with a credit card,
you only pay for it the next month.
The total of all purchases made with the credit card is called the balance.
You receive a credit card invoice with the balance.
The credit card company withdraws the balance from your account.
Credit cards have a fixed credit limit.
This means:
It is fixed:
How much you can pay per month with the credit card.
If you don’t pay the balance,
then you have to pay interest.
Before you take out a credit:
Think about:
Do you need to take out a credit now?
Or:
Can you save the money first
and then make the big expenditure?
That’s also cheaper,
because you don’t have to pay interest.
If you take out a credit,
find out about the terms and conditions of the credit:
• What are the interest rates?
• By when do you have to repay the credit?
• How high are the monthly rates?
• How high are the administration fees?
• If you do not pay an instalment:
How much is the contractual penalty?
Check:
Can you repay the credit on time?
Will you have enough money left to live on
after paying off the monthly credit rate?
Now Irina knows what a credit is.
Irina has made up her mind:
A mobile phone is not a good reason to take out a credit.
Tips on saving money
Ali wants to go on a 3- week round trip in the summer holidays.
The trip is expensive.
Ali wants to know:
How can I save money for the trip?
Here are some tips on how to save money:
Budgeting:
First:
Look at what you earn?
This is your income.
Secondly:
Look at what you spend?
These are your expenditures.
Then:
Write a budget.
You can use a spreadsheet.
Or:
You can use an app.
A budget helps you to see:
Where can you cut costs?
For example:
• eat out less
• spend less on free time activities
Then you can put money aside for your saving.
Expense Tracking:
Control your expenses regularly on a spreadsheet.
You can also use an app.
Keep a written record about your expenses.
Then you see:
Where are you spending too much?
Where can you cut costs?
Automate Savings:
Set up a regular automatic transfer
from your bank account to a separate savings account.
If you do this every month
when you get paid
it becomes routine.
The amount of money saved builds slowly.
Another advantage is:
If the money is on a different account,
you are less likely to spend it.
Cut Unnecessary Costs:
Don’t buy things on impulse.
Don’t spend money you do not need to spend.
Think about:
Do you really need the newest phone?
Do you need to go out three times a week?
Do you need the latest fashions?
Smart Shopping:
Look for discounts.
Use coupons that give you money off.
Compare prices before buying anything.
Consider buying in bulk.
This means: buying more of one item at a time.
For example: a multipack
Choosing non-brand products.
They are cheaper.
Home Cooking:
Eating fast food or restaurant food is expensive.
Cook at home to save money.
It’s healthier too!
Subscriptions:
Subscription means:
You pay a monthly fee for a service.
Think about your subscription:
For example:
• subscription for the gym
• subscription for film and TV show steaming
• subscription for apps.
Do you really use them regularly?
If not:
Cancel the subscription.
Manage Your Debt:
Try to avoid credits and debt.
You have to pay interest for them.
That makes them expensive.
Try to save money first,
Then buy something.
You already bought something on credit?
For example: a phone?
You already owe money for a personal loan?
Repay any money that you owe quickly.
If you pay back slowly,
you will pay more money back in the end
because of the interest.
Emergency Fund:
Make sure you save money for emergencies.
This might include:
• something you need breaking (such as your dishwasher),
• you lose your job or apprenticeship
• you get ill
• you need dental treatment.
Following these tips
will help you save more money.
Then you can afford
that thing you really want.
For example:
• a game
• a car
• an apartment
• travel around the world
Now Ali has many ideas
how to save money.
He will start with them today!
Insurances
Ivan thinks about
whether he should take out insurance.
But what types of insurance are there?
And what are the advantages of insurances?
Insurance protects people from costs,
if something bad happens.
For example:
If you fall ill,
your health insurance pays for your stay in hospital.
If you want to have insurance,
then you have to pay a premium for it.
The insurance premium is the price
you pay for the insurance cover.
How can you pay the premium?
• monthly
• quarterly
This means: Every 3 months.
• annually
If a claim occurs,
then the insurance pays the costs.
There are different types of insurance:
• Statutory insurance:
Everyone must take out this insurance.
It can depend on various conditions.
Which insurances are required by law,
may be different in each country.
• Supplementary insurance:
These insurances can be taken out additionally.
They are voluntary.
Here are explanations for the most important insurances.
• Statutory health insurance:
If the person falls ill,
the insurance pays the costs of
a visit to the doctor, for example.
• Private health insurance:
This is a voluntary supplementary insurance.
If the statutory health insurance does not pay for something,
then private health insurance covers the costs.
For example:
a single room in hospital.
The private insurance company can decide
whether to insure a person or not.
This depends, for example, on
– age
– previous illnesses
• Car insurance:
This insurance is for car.
• Private liability insurance:
It protects policyholders from high costs,
if they cause damage to another person.
For example:
You borrow a mobile phone from a friend.
The cell phone falls out of your hand.
The display breaks.
Then the liability insurance covers
the cost of repairing the mobile phone.
• Household contents insurance:
This covers all items in a house or apartment:
If damage occurs for certain reasons,
the insurance covers the costs.
Causes of damage are, for example
– Lightning strike
– Fire
– Burglary and theft
– Hail and storm
– Water damage
• Legal expenses insurance:
This insurance covers the costs for lawyers.
• International health insurance:
This insurance is for people abroad.
For example, if you have to go to hospital there,
the insurance pays the costs.
• Private old-age provision:
You pay a monthly contribution to the insurance company now.
When you are old and retired,
you receive money from the insurance company every month.
Now Ivan has an overview.
What types of insurance are there?
What are the advantages of insurance.
He will think about it:
Which insurance is important for me?
Investments
Samira lives very thrifty.
She has money left over every month.
She wants to invest this money,
so that it becomes more.
But what investments are there?
A financial investment means:
You invest money now
you get more money back later.
For example, you can invest money in,
• shares
• bonds
• commodities
For example: oil, gold, grain
You expect:
Your money will grow over time.
What is the difference between investing and saving?
Saving:
If you save money in a bank account,
it will certainly increase.
Because of the interest.
But:
Interest rates on savings are usually low.
That’s why your money will only grow a little.
Investing:
When you invest money,
it can become more.
The interest rates for investing are higher than for saving.
But:
You can also lose your money.
There are high-risk investments.
This means:
In the worst case, you can lose all your money.
But if the investment is successful,
then you can make a large profit more quickly.
Here are 4 types of investments:
• Stocks
A stock is an investment in a company.
When you buy a stock
you own a share of a company.
This means:
If the company makes a profit,
you receive a share of the profit.
You also own a share of the company’s assets.
Assets are the property of a company.
For example: computers, desks, machines
Shareholders also have a say:
There is a general meeting once a year,
where they can cast their vote on company decisions.
• Bonds
A bond is a loan.
You give a loan to a company.
If you buy a bond,
then the company can borrow your money.
The company can use your money.
Later, the company has to pay you back the money.
It also has to pay you back interest.
You can also buy a bond from a government.
• Mutual funds
The money of several investors is collected in a fund.
Investors are people
who invest money in a fund.
The fund has a fund manager.
The task of the fund manager is
to decide how the money in the fund is invested.
For example, in shares or bonds.
Fund managers receive money for this task.
All investors pay a fee for it.
With a fund, your money is invested in several companies.
This means the risk is lower:
If one company makes a loss,
you don’t lose all your money.
Because the other companies may make a profit.
• Options
An option is a contract to buy or sell a stock.
There is a fixed price for the stock.
The buying or sale takes place on a specific date.
With an option you can buy or sell a stock,
but you don’t have to.
If the current value of the stock is higher than the fixed price
then investors buy the share.
If the current value of the share is lower than the fixed price
then investors do not buy the share.
Options are a very risky investment.
This is why they are rarely used by private investors.
Samira now knows
what different investments there are.
She would like to seek advice from a bank.
Then she will decide.
Mortgage
Irina wants to buy a flat.
But she doesn’t have enough savings.
Irina therefore wants to take out a mortgage.
But what exactly is it?
A mortgage is a loan.
A loan is a large sum of money you borrow.
It is repaid over a long period of time.
A mortgage is a loan for the purchase of:
• a flat
• a house
• another property
A property is a building or a plot of land
A mortgage is also for refinancing.
Refinancing means:
You already have a loan.
You want a new and better loan.
For example: A loan with less interest.
You pay off the old loan,
by taking out a new loan.
This is refinancing.
When you take out a mortgage,
then you have obligations:
• You have to repay the principal.
The principal is the money borrowed.
• You have to pay back interest.
Interest is the cost of borrowing money.
• You have a certain amount of time to repay the mortgage.
For example:
15, 20 or 30 years.
There are different types of mortgages in the EU:
1. fixed-rate mortgages
This means:
The interest rate remains the same for the entire time.
The interest rate is the amount of interest.
It is expressed as a percentage.
Your monthly instalment therefore remains the same.
The interest rate is higher for fixed-rate mortgages.
2. adjustable rate mortgage:
The interest rate changes.
This means:
Your monthly instalment can go down.
Or:
Your monthly instalment can go up.
You get a mortgage from a bank.
Therefore the bank is called a lender.
If you want to take out a mortgage,
you have to prove to the lender your credit ranking.
This means:
Can you repay the loan?
How do you proof it?
You show your salary, for example.
The salary is the amount you earn per month.
You need collateral for a mortgage.
The collateral is the house you want to buy.
The consequence is:
If you don’t pay back the rates,
then the bank gets the house.
The bank may also want to inspect the house.
This means:
A professional has a look at the house.
You may have to take out homeowner’s insurance.
Homeowner’s insurance means:
If your house is damaged for a certain reason.
For example, because of
• a storm
• a fire
• a flood
Then the insurance pays for the damage.
Now Irina knows:
What is a mortgage?
She will ask her bank:
Can I take out a mortgage?
Financial fraud
Ali receives an e-mail.
In the e-mail there is an investment offer.
You put money in an investment
The money can get more.
The offer is:
Pay € 1,000 into this account today.
Enter your personal data,
Personal data are for example
– Name
– your address
– date of birth
Then you will get 5,000 euros back in one year.
Ali is unsure:
Is this a serious offer?
No, Ali! It’s financial fraud!
Financial fraud is the use of scams and tricks.
Criminals use them,
to steal money or personal data.
There are many different types of fraud.
For example:
• Phishing:
This means that someone sends fake emails or messages.
• Identity theft
This means that someone pretends to be someone else.
They use your name and address, for example.
• Offering fake investment offers.
Today, technology is advanced.
There is more and more online banking.
This makes fraud more difficult to recognise.
That’s why it’s important:
You can recognise a fraud.
Some people rely heavily on:
• technology
• social media
There is a danger:
Becoming a victim of financial fraud.
If you fall for a fraud,
There are big problems for you.
For example:
• Loss of money
• Identity theft
If you are the victim of fraud,
you can report the fraud to the police.
But please do not lose confidence
in all banks and financial institutions.
Learn:
How can you make secure financial transactions with trustworthy banks?
Inform yourself about the following topics
so that you do not easily become a victim to fraud:
• Financial products
For example:
Savings account
investment funds
Financial services
For example:
Advice on investments
Management of existing investments
• Financial providers
These are: Banks, insurance companies
• Consumer protection
This means:
What rights do you have as a consumer?
• Rights and obligations:
What rights and obligations do you have in financial transactions?
What rights and obligations do providers of financial transactions have?
• Fraud
• Information and advice,
• Taxes and public spending
• External influences
For example:
What influence does the current economy and politics
have on finances?
How do you recognise financial fraud?
A company contacts you.
They want to sell you something.
You don’t know this company.
There is no information about the company on the Internet.
There is no legal notice on the company’s website.
The legal notice is the address of the company’s management.
The company promises you:
You will make a high profit in a short time.
You must accept the offer immediately.
If you don’t, the offer expires.
The company sends you messages.
There are many spelling mistakes in the messages.
The content of the messages is strange.
You are unsure,
whether it’s a real company or a scam?
Search for the company on the Internet.
Are there any warnings about the company?
From the police?
From other customers?
You should not accept such offers!
Another type of fraud is:
You have met someone online.
After a short time, they ask you:
Can you give me money for an emergency?
You shouldn’t do that!
Ali searches for information about the company
from which he received the e-mail.
There is a warning from the police on the Internet:
The company’s offer is a fraud.
Ali deletes the e-mail.
Now he can recognise financial fraud!
Taxes
Ivan receives his first payslip.
He is shocked:
His wage is lower than expected,
because the state is deducting taxes.
Why does the state do this?
And what types of taxes are there?
Taxes are money citizens and companies have to pay to the state.
The state uses this income to finance public expenditure.
For example:
• Infrastructure
Like:
– public transportation
– hospitals
• education
• social security
Taxes create a social balance between the population.
For example:
People with high incomes have to pay more taxes
than people with a low income.
What are the main types of tax?
• Income tax or wage tax:
Everyone who earns money
has to pay this tax.
The amount of tax depends on the amount of income or salary.
Self-employed persons pay income tax.
Employees pay wage tax.
Self-employed persons must pay income tax to the tax office themselves.
In the case of employees, the employer transfers
the wage tax to the tax office.
• Value-added tax:
The abbreviation for it is VAT.
This tax is also called sales tax.
This means:
When a person buys something,
the seller cannot keep all the money.
He has to pay part of it to the state.
Therefore, the tax is calculated into the sales price.
• Capital gains tax:
This tax applies, for example,
if you have money in a savings account.
You receive interest on your savings.
The bank deducts part of the interest from your account.
This is the capital gains tax.
The bank pays this amount to the state.
Other types of tax are
• Alcohol tax
• Motor vehicle tax
A motor vehicle is, for example, a car.
• Digital tax
• real estate transfer tax
• Insurance tax
• Church tax
• Dog tax
Every country has its own tax system.
That means there are rules for taxes.
The rules are based on the laws and the culture.
Some countries are more tax-friendly.
This means:
The country levies only few taxes.
Or there are exceptions for taxes.
For example:
• Tax relief
• concessions in general
Now Ivan understands:
Taxes are used by the state to pay for public spending.
Everyone benefits from this.
Security features in the financial sector
Samira wants to use her online bank account.
She wants to shop and pay online.
But Samira is afraid:
Maybe I’ll get scammed online?
Don’t worry Samira!
Let’s take a look:
What are security features in the financial sector?
There are many security features in the financial sector.
They ensure that
financial transactions and personal data are protected
from fraud and theft.
Fraud happens very often with online financial services.
Today, many people do their banking, shopping and investing online.
That’s why security is very important.
There are various security measures.
They protect users’ financial data when banking online.
For example:
• Encryption
This means
Other people cannot read your data,
if they obtain it by mistake.
• Two-factor authentication
This means:
Users must provide two types of identification.
For example:
Password and confirmation in the app from your bank.
• Secure Sockets Layer
The abbreviation for this is SSL.
This means:
The connections between a web server and a browser are encrypted.
This ensures that
all data exchanged remains private.
These security measures protect you online.
But it’s also important:
You use safe online practices.
What does that mean?
• Create strong and unique passwords.
A strong password consists of:
– at least 8 characters
– Capital letters
– Lowercase letters
– numbers
– special characters
For example: question mark, exclamation mark
Use a unique password for each online account.
• Beware of suspicious e-mails or messages.
This may be phishing.
Phishing means:
Someone is sending fake emails or messages.
• Only carry out financial transactions on secure and trusted websites.
A financial transaction is, for example
– a transfer from your online account
– an online payment with a credit card
What is a secure and trusted website?
– The website URL starts with https://
This means:
The website is encrypted.
– There is a legal notice on the website.
The legal notice states:
The address of the company.
The owners of the company.
– You can find positive reviews on the internet or on social media about the website.
What else is important for secure financial transactions:
The use of a unique PIN.
PIN is the abbreviation for personal identification numbers (PINs).
A PIN is like a password.
There are various tools available in the EU.
They help you learn about online safety:
– Better Internet for Kids
There you will find:
Information, instructions and materials on the topic of internet safety.
Internet safety means:
Behaviour and procedures to protect yourself online.
– Cyber A.C.E.S.
This website teaches you about cyber security.
Cyber security means:
Computers, servers and mobile devices are protected against
attacks, damage and access by strangers.
– Be Internet Awesome
There is an online game.
There are materials for learning and teaching.
The game and materials are about online safety.
Now Samira knows:
What do I have to watch out for when making online payments and transfers?
She wants to learn more about the topic.
Inflation
Irina realizes:
Everything gets more expensive.
She asks herself:
Why?
The opposite of inflation is deflation.
With deflation, prices fall.
Inflation means:
You need more money to pay for something.
In other words:
A currency, for example the euro
is worth less than it used to be.
This is a reduction in purchasing power.
Purchasing power means:
How many goods can I buy with 1 euro, for example.
If purchasing power decreases,
I get fewer goods than before for 1 euro.
Consumers have to pay more money for the same goods.
Consumers are buyers.
What are the reasons for inflation?
Demand-Pull:
The reason for inflation is demand.
Demand is greater than supply.
This means:
Consumers want to buy more goods and services
than are available on the market.
Therefore, prices rise.
Cost-Push:
The reason for inflation is rising costs.
The cost of producing goods is rising.
For example:
• Because the wages of employees are rising.
• Because the price of raw materials is rising.
Raw materials are, for example:
– coal
– oil
– gas
– wood
When production costs rise,
companies pass this on to consumers.
As a result:
Consumers have to pay more for goods.
Inflation therefore rises.
How does inflation affect the economy?
Lower purchasing power:
Prices rise.
In other words:
You can buy fewer goods and services
with the same amount of money.
For example:
You used to be able to buy 1 kilo of apples for 3 euros.
Now you can only buy half a kilo of apples for 3 euros.
Consumers therefore have to pay a higher price.
In other words:
They can buy less for the same amount of money.
Interest rates:
The interest rate is the amount of interest on a loan.
All countries have a central bank.
The state is the owner of the central bank.
Central banks print money.
Central banks take care:
The financial market is stable.
The central bank can raise interest rates.
This slows down inflation.
Why?
If the interest rate is high:
• then people are unlikely to take out a loan.
• Then people spend less money.
As a result:
Economic growth slows down.
Inflation falls.
Fixed-Income concerns:
Some people have a fixed income.
This means:
The wages stay the same.
For them a high inflation is difficult.
They have to pay more for less.
Their purchasing power drops.
Governments and central banks are watching:
Is inflation rising?
Is inflation falling?
Why are they doing this?
They want to keep the economy stable.
Moderate inflation is okay.
If inflation rises too quickly,
then the government and the central banks have to do something.
Now Irina understands.
The reason why everything is getting more expensive
is inflation.
