For those who are new to the personal finance world and find it difficult to understand what people around them are speaking about, here are few basic terms you should learn first:

Savings Account:

This is a basic bank account where you can put your money to keep it safe and withdraw from it whenever needed. Though nominal, you can earn certain amount of interest from it.

Fixed Deposit:

If you keep a lump sum with a bank for a specific amount of time, it earns you a bigger interest than savings account. The investment instrument is called the fixed deposit and it is one of the most powerful and safe way of investment. 

Recurring Deposit:

This is another way to grow your money.  Instead of putting a lump sum, you put certain part of your income as your investments for a fixed period. It earns you the same interest as a fixed deposit. Recurring deposits is considered great investment tool for people who have just started earning. 

Contingency Fund: 

Money kept in reserve to cover expenses of any unforeseen or accidental event.  Financial advisors opine that one should keep three to six months of expenses as reserve in his contingency fund.

Insurance:

It is a monetary arrangement where you are compensated in case of loss of life, illness or certain damage. There are several government and private policies which you can opt for. Insurance is not an investment instrument but it acts as a shield during the rainy days.

Mutual Funds:

It is a financial tool where  money is pooled to invest in equity linked products like stocks, bonds and securities.  They usually give you better returns as compared to fixed asset classes and are able to beat inflation. They are a safer bet than stock as they are managed by professional to measure the quantum of loss. 

SIPs:

Like recurring deposits, instead of putting a lump sum you put certain amount of your income as investments in mutual funds . This is one of easiest way of investments and good for people who are new to investments. 

Stocks:

It is a general term to describe the ownership certificate of a company.  They are bought and sold predominantly at stock exchanges. A good investment option if you understand the markets. 

EPF:

EPF is one of the most popular saving instruments. Here the employee contributes 12 percent of their income. The same amount is invested by the company they work for. The individual can withdraw this money during retirement or when they leave the company. 

Public Provident Fund:

It is long-term taxing efficient saving instrument offered by the government of India.  The money invested in PPF is reasonably higher than fixed deposits or savings account and it has a lock-in period of 15 years.  For withdrawal before the maturity period, one has to pay a certain amount of penalty.

Loan/Credit:

When you take money from an individual or an institution to pay for a requirement at a certain interest rate it is called a loan. It is always advisable not to go for uncertain debt but there are certain loans which are referred as good loans like housing loans or educational loans.  These loans come with tax benefits.