A financial crisis occurs when the value of financial assets drops sharply, leading to a loss of confidence in the economy. This can happen due to various reasons, such as poor banking practices, excessive debt, or sudden market changes. When people and businesses panic, they stop spending and investing, which can cause a recession, affecting jobs and savings. During a financial crisis, institutions like banks may struggle to stay afloat, and governments often step in to stabilize the situation. For example, they might provide bailouts or implement stimulus packages to help restore trust in the economy and encourage consumers to spend again.