Personal savings Flashcards
What is personal savings?
the money a person keeps instead of spending it all
What is an investment?
purchase of property or shares or money saved in the bank in order to earn more money
Give examples of why do people save money?
- to buy expensive items in the future
- for a holiday or outing
- for children’s education
- for unforeseen expenses
- to make more money
- to put money into a pension or retirement scheme.
What is the economic purpose of saving money?
- savings are the most important source for making money in the future
- for creating wealth and jobs
- build new factories and other businesses
- *look at figure 13.1 in book page 167
What is the definition for a bank?
Banks are businesses that act as the middlemen between people who want to save or keep their money safe, and people who want to borrow money
Name the top four banks in South Africa
- Absa Bank
- Standard Bank
- First National Bank
- Nedbank
What is an investment bank?
is a bank that,
- instead of lending money directly to a person or business,
- helps businesses get other businesses to invest in them or lend them money
Name an investment bank in South Africa
- Standard Bank
- Rand Merchant Bank
- Citi Bank
History of banks - read through this….
Banks came into existence before notes and coins were used as a form of money. Banking originated in Ancient Mesopotamia in 2000 BC when the royal palaces and temples were used for the safekeeping of grain. These ‘safe houses’ developed because people felt that they were the safest places to store their grain and other valuables. The palaces and temples were well built and also sacred places, so thieves were too scared to go there. People could withdraw their grain by writing out an order instructing the temple or palace keeper to give them back the grain. These written orders were then used as a medium of exchange just as people use cheques today.
As gold became a popular form of money, people would ask the goldsmith, who made coins, if he would store their gold money for them. Because gold was heavy and difficult to carry around, and because the goldsmith had big secure rooms in which they could safely store the coins, they left their gold with him. The amount of gold coins that the goldsmith received from a person was recorded on a paper document that had to be produced if the owner wanted some of his money.
Because the goldsmiths stored so many gold coins, and knew that most of the depositors would not be collecting their money for a while, they decided to lend out money to people who needed it as long as the lenders paid it back later. To borrow money in this way, the borrower had to pay the goldsmith extra money, known as interest. For example, if someone borrowed 100 coins for a month, they had to pay back the 100 coins plus another two coins. The two extra coins were the cost of borrowing the money. In this way the goldsmith made money by lending out other people’s money. This is exactly what banks do today.
The first modern banks were established in the 17th century. In South Africa First National Bank started as the Eastern Province Bank in Grahamstown in 1838.
What is the role of a bank?
- to help keep money flowing.
- The flow is between:
- people and businesses who save and invest money; -people and businesses who need money;
- between those earning the money and those producing goods and services
-helps consumers and producers transfer money between them almost immediately with very little chance of the money being lost or stolen.
What services are offered by banks?
- ATMs: The bank has special machines at the branch, or in or near shops, where you can withdraw cash, make cash deposits, transfer money or pay accounts. These machines operate 24 hours a day, 7 days a week. This means people have access to their money all day and all night.
- Internet banking: You can now check your bank balance, transfer money or pay accounts using the internet. This allows you to bank from home or from wherever you can get internet access. You can also do your banking at any time.
- Financial advice: Banks will advise you on how best to invest your money.
- Small business support and advice: Banks have people who specialise in helping small businesses.
- Foreign exchange: Customers can buy foreign bank notes and transfer money to other countries.
- Credit and debit card facilities: Customers can apply for credit cards, which allow you to buy now and pay later.
What is the best way for a young person to start saving
is to open a savings account at a bank
What will you need to open a bank account?
You will need to take the following items with you when going to the bank to open an account:
- your birth certificate or ID book
- a bank statement or municipal bill or account that is addressed to the address where you live. If you are over 16 you need to bring this with you, as well as a letter written by your parent/s and stamped by a police station or commissioner of oaths, saying that you live at this address. A law passed in South Africa says that the bank needs you to prove where you live. (FICA)
- some banks require a minimum deposit for example, R50 in the account
You need to help a friend open a bank account, what advice can you give them to help them decide what bank to choose
you need to make sure that you:
- choose a bank that is near where you live or that you have easy access to
- ask them how much money the bank will charge you every month for having the savings account; and whether they will charge you every time you withdraw money
- ask them how much interest they will give you for investing in their bank.
What is Foreign exchange?
The changing of South African rands into another currency, for example American dollars
