Chapter 10 - Saving and Investing

Question 0

Why do we save?

Answer 0

1. To have money to buy something in the future e.g. New Car/Holiday.
2. To have money for unexpected bills e.g. Replace broken items.
3. To have money available for children’s education or family weddings.
4. To have an income when we retire.

Question 1

What are savings?

Answer 1

Savings are the part of our income we do not spend.

Question 2

Where can we save?

Answer 2

We can save in commercial banks, a building society, the credit union and An Post.

Question 3

What should we consider when choosing a place to save?

Answer 3

1. Rate of interest we get on our savings.

Question 4

What is investing?

Answer 4

Investing means using our money to earn a greater return than is possible from an ordinary savings account.

Question 5

What should you consider before investing?

Answer 5

1. How much money could we make on the investment.

2. Is the investment risky - could we lose our money.

Question 6

What are the ways to invest?

Answer 6

1. Investment Accounts - pay a higher interest then ordinary savings accounts.
2. Buying Shares in a Company - may pay dividend at end of each year.
3. Buying Property - pay us rent and may increase in value.

Question 7

What do building societies specialise in?

Answer 7

Building societies specialise in lending money to help their customers to buy their home.

Question 8

Name 2 advantages of saving with a building society.

Answer 8

1. They have longer opening hours than the commercial banks.

2. There are many branches around the country.

Question 9

Name 2 disadvantages of saving with a building society.

Answer 9

1. DIRT must be paid on net rest earned on savings.

2. You may have to give a certain days notice if you want to make a large withdrawal.

Question 10

Name three advantages of saving with the credit union.

Answer 10

1. Flexible opening hours.
2. Interest rate on loans is very low.
3. Some employees are volunteers, which keeps running costs down.

Question 11

Name a disadvantage of saving with the credit union.

Answer 11

1. Credit union offer less services than the commercial banks.

Question 12

What are the types of credit union accounts?

Answer 12

1. Savings Account: Dividend payed at the end of the year.

2. Deposit Account: Interest payed on savings.

Question 13

Name five of the services offered at An Post.

Answer 13

1. Prize Bonds
2. Stamps
3. Passport Express
4. TV License
5. One4all vouchers

Question 14

What are the ways to save with An Post?

Answer 14

1. Savings Bonds - must hold for 3 year period, receive 10% interest, no DIRT, no charges or fees.
2. Savings Certs - must hold for 5 years six months, receive 21% interest, no DIRT, no charges or fees.

Question 15

What are the advantages of saving with An Post?

Answer 15

1. Open six days a week.

2. Withdrawals and lodgements made at any An Post.

Question 16

How do you find Simple Interest?

Answer 16

Mary lodged €13,500 in a deposit account for 2 years. The bank offered her interest at 6%.
CALCULATE:
1. Amount of simple interest she will earned over the 2 years.
2. Total amount of investment at the end of the 2 years.
13500/100 x 6 x 2 = €1,620 -> Answer to q.1
€13,500 + €1,620 = €15120 -> Answer to q.2

Amount invested on Day 1X Rate of Interest X No.Years of investment
100

Question 17

How do you find Compound Interest?

Answer 17

Mary lodged €13,500 in a deposit account for 2 years. The bank offered her interest at 6%.
CALCULATE:
1. Amount of compound interest earned over 2 years.
2. Total amount of investment at the end of the 2 years.

Calculate interest earned over 1 year (€13,500/100 x 6 = €810) (€13,500 + €810 = €14, 310). Then find what interest over 2nd year
(€14,310/100 x 6 = €858.60) (€14,310 + €858.60 = €15,168.60)