2.1 Why People Save In The Medium And Long Term Flashcards
Why do people save for long periods?
Because they make a decision now to save out of their current income to finance a future medium-term or long-term needs, wants or aspiration.
These needs, wants and aspirations will require significant amount of money and so people must save for a longer period of time to achieve them.
Why might people not get as good a return on their savings as they hoped?
If the economy performs badly
They might even get back less than they paid in
Give the two main ways in which people can use their savings or investment fund when it matures in the future
• They can hope for capital growth
- that the market value of the investment is greater when sold than the amount they paid in.
- when they cash in the investment they will receive a lump sum (full value).
• They can use their fund for income.
- the investment will pay out a regular amount that they can use as part of their monthly income.
