Past Exam Questions Flashcards
State two advantages of regular saving
Saving ensures money is available for essential expenditure such as rent or in the case of emergency or unplanned eventualities e.g. loss of a job
Saving builds a good financial reputation with a financial institution and creates a favourable credit history which is required when applying for loans as it shows an ability to meet payments
Name two saving schemes offered by financial institutions
Demand deposit accounts
Savings bonds
Recommend one type of savings scheme suitable for a family.
Name of institution
An Post
Recommend one type of savings scheme suitable for a family.
Type of savings schemes
Savings bond
Recommend one type of savings scheme suitable for a family.
Interest paid
1% fixed interest rate earned over three years
AER is 0.33%
Interest earned is tax free
Lower interest is paid if encashed before the three years are completed
Recommend one type of savings scheme suitable for a family.
Ease of access to funds
Seven working days’ notice is required for withdrawal
Recommend one type of savings scheme suitable for a family.
Tax payable
Interest earned is tax free
Explain why each of the following are important considerations when selecting a saving scheme
(Security of savings)
Saving schemes with An Post and banks provide a safe saving option as they are covered by the government Deposit Guarantee Scheme.
This protects saving deposits us to 100,000 euro in the case of a financial institution becoming insolvent
Equity-based schemes such as stocks and shares offer the possibility of a greater return but they are less secure as they are dependent on the performance of the stock market
Explain why each of the following are important considerations when selecting a saving scheme
(Interest Earned)
The interest earned on saving schemes varies between financial institutions and within the institution so it is important to shop around
The annual equivalent rate (AER) shows the amount of interest earned in a year
The higher the AER the greater the return
Explain why each of the following are important considerations when selecting a saving scheme
(Tax Payable)
Some saving schemes may charge DIRT which is a form of tax levied by the government on interest earned
DIRT is charged at 41% on all interest earned
Most saving schemes with An Post are exempt from DIRT so returns on savings can be greater
Explain why each of the following are important considerations when selecting a saving scheme
(Access to funds)
Certain saving schemes allow individuals to withdraw money immediately if needed
This is suited to short-term saving e.g. for holidays
Other schemes are not as accessible such as accounts that require money to be invested for three years
Penalties may be incurred for early withdrawal or encashment of long-term savings schemes
What factors should be considered when choosing a saving scheme?
The interest earned
Tax payable
Access to funds
Security of funds
Name a saving scheme suitable for a college student
Demand deposit account with the bank and building society
Why is a demand deposit account suitable for a college student?
Access to savings is instant through ATMs or online
It is state guaranteed
There is no minimum or maximum investment
Q. Describe one saving scheme you would recommend to a young person who is saving to buy a car
(Name of institution)
Bank and building society
