2.2 The Differences Between Savings And Investments Flashcards
Name the two ways in which people can put away their surplus money and earn a return on it
Savings
Investments
How do savings / investments have the element of risk?
There is a risk that the saver could either gain or lose money.
-> the higher the risk, the higher the potential return.
Which financial services providers offer savings accounts?
Banks
Building societies
Credit unions
Can a saver ever lose the capital sum they deposit?
No.
The saver will not get back less money than they paid in.
Can a saver ever lose the capital sum they deposit even if the provider fails?
No.
Deposits up to £85,000 are protected by the Financial Services Compensation Scheme.
Do savings accounts pay high interest rates? Why?
No.
Because the capital sum is not at risk.
Do short term savings accounts or long term savings accounts offer higher interest rates?
What’s the catch?
Long term savings accounts usually pay slightly higher interest.
BUT
Savers usually have to give the provider a specified amount of motive before they can withdraw the money.
If this notice is not given, interest is lost.
Are investments suitable for people who are prepared to invest for the medium or long term?
Yes
Do savings accounts or investment products tend to result in higher gains?
Investments
Are investment products higher risks than savings accounts?
Why?
Yes.
Because their value depends on the performance of the assets in which the money has been placed and also on general movements in the financial market.
Why do people who invest in funds usually choose where they want the provider to put their money into?
So they can choose the balance of risk and return that suits them
What is a portfolio?
The combination of different long term savings and investment products chosen by an investor when saving for a large item / their retirement.
Does the value of money in stocks and shares remain stable?
No.
The value continuously moves up and down.
