Financial model

A financial model is like playing pretend with money. Just like when you play pretend with toys, you use your imagination to figure out what might happen next. But in financial modeling, you use math to guess what might happen with money in the future.

Let's say you have some money in the bank and want to figure out how much more you will have if you keep saving it for a year. You can use a financial model to make an educated guess. You will start by figuring out how much money you have now, and then imagine what might happen with that money. You might get some interest from the bank, or you might add some more money to your savings each month. Then, you can use math to see how much you will have in one year.

This is a little bit like predicting the future, but you're not really sure if your guesses are exactly right. That's because there are always things that could happen that you haven't thought of. But by using a financial model, you can make better decisions about what to do with your money.