2Y: Savings and Investing

Question 1

What is the difference between Saving and Investing?

Answer 1

Saving means not spending some of your income. Investing means making your money work so that it will earn interest.

Question 2

Name some reasons for saving money? (7)

Answer 2

1. To purchase some expensive item in the future e.g. car, holiday.
2. To prevent impluse buying.
3. To earn interest.
4. For unforeseen events e.g. car repairs, illness.
5. Childrens education.
6. To provide for retirement.
7. To earn a credit rating for possible future borrowing.

Question 3

Factors to consider when choosing a saving or investment scheme? (7)

Answer 3

1. Risk: are you savings guaranteed?
2. Interest Rate: shop around for best rate.
3. Liquidity: is it easy to withdraw money?
4. Convenience: opening hours, online access, access viat ATM.
5. Tax: is it subject to DIRT?
6. Future Benefits: credit rating for a loan.
7. Terms and Conditions: Aer there fees and banking charges?

Question 4

What is DIRT?

How do you pay it?

What is the current rate if DIRT?

Answer 4

• Deposit Interest Retention Tax
• DIRT is a tax on interest earned.
• It is deducted by the financial institution and transferred to revenue.
• DIRT is currently 37%

Question 5

What are the 3 types of Deposit A/C’s in a Building Society?

Answer 5

Deposit accounts are a form of savings account, where money earns interest which is subject to DIRT. Money can be withdrawn by ATM or at the counter.

3 Types:

1. Demand Depost Account - money can be withdrawn at any time.
2. Term Depost Account - must leave money in account for a specified amout of time, penalised if you withdraw money early.
3. Notice Deposit Account - must give notice of withdrawal of money .e.g. 7 days. suitable for large sums of money.

Question 6

What is a Credit Union?

What type ot account is there in a CU?

Answer 6

• A credit union is a financial cooperative owned by a group of memebers who live in the same area.
• Loans are given out at affordable amounts of interest

Regular Share Account:

• Members receive a share of the profits earned by the CU called a dividend.
• The dividend is subject to DIRT.

Question 7

What type of Savings Schemes are in the Post Office? (5)

Answer 7

1. Savings Certificates - save a lump sum of money. offers an interest rate fater 5 years, DIRT free.
2. Savings Bonds - save a lump sum of money over a shorter period. 1% after 3 years. DIRT free
3. Instalment Savings - save a regular amount per month for a min of 12 months. Money left on deposit for 5 years. Earns 5.5%. DIRT free.
4. National Solidarity Bond - safe a lump some of money, 2% after 4 years.
5. Prize Bonds - sold in units of €6.25 each. Minimum purchase of €25. Max holding limit of €250,000. Weekly Draw. You can cash in your Prize Bonds at any time. DIRT Free.

Question 8

What is a Life Assurance Scheme?

Answer 8

• Endowment Life Assurance Policies are a form of investment.
• Premiums are invested in shares.
• They have good returns over a longer period of time. Values may decrease if share prices go down.

Question 9

How do shares work?

Answer 9

There is a possibility that you could sell shares in the future at a greater price that you paid for them. The profit is called Capital Gain and is subject to Capital Gains Tax.

Question 10

What types of interest do you have? (3)

1. SI
2. CAR
3. EAR or AER

Answer 10

1. Simple Interest.
2. Compound Annual Rate - interest in year one is added to the amount saved and next years is worked our on new principal.
3. Equivalent Annual Rent or Annual Equivalent Rent - the full rate of interest if the full sum of money is left in the account for the year.