2ND YEAR - Saving And Investing Money Flashcards
Savings
Part of Income we choose not to spend. Also called “deferred spending”.
Investing
Putting money aside in order to make money out of it at a later date. e.g investing money in a company (buying shares)
Liquidity
How quickly we can get access to our money and get it back when we want to
Risk
How safe or secure our money is in the place we decided to save or invest it in
Interest
Extra money you receive on top of the money you have saved in a financial institution
DIRT
Deposit Interest Retention Tax
-Tax the must be paid by an individual on Interest in a savings account
Reasons For Saving
- For future planned spending (e.g holiday)
- For emergencies
- For major family events (e.g wedding)
- For retirement
- To improve your credit rating
Factors to consider when saving or investing
- Risk
- Reward
- Liquidity
- Taxation
- Ease of Access
- Terms and Conditions
Where To Save
- Commercial Banks (Savings, Interest, DIRT)
- An Post (Saving, State guaranteed, Interest, DIRT may be paid)
- Credit Union (Interest rates are good, DIRT, Dividends)
- Building Societies (Lends money, property, usually for mortgages)
Simple Interest
You earn money by investing a sum of money called principal.
Percentage of principal is calculated and added. Money grows. You DO NOT earn interest on your Interest.
Simple Interest Formula
Principal x Rate x Time
Compound Interest
You earn interest on your Interest.
See hardback to find out how to calculate.
Annual Equivalent Rate (AER)
Shows you the real interest you will have gained on savings at the end of the year. Allows customers to compare different financial institutions.
How to calculate DIRT
See hardback
