Saving And Investing Money Flashcards
What are savings?
Savings can be defined as the part of our income we choose not to spend.
It is money set aside with the plan to spend it at some point in the future.
Also called ‘deferred spending’.
What is Investing?
Investing is putting money aside in order to make more money at a later date.
It is like saving, but you receive some sort of reward for investing money.
Examples: Investing money in a company (buying shares), buying a house
Liquidity:
means how quickly we can get access to and get our money back when we want to.
Reasons for Saving
For future planned spending e.g a holiday
For emergencies
For major family events e.g a family wedding
For retirement (when you stop working)
To improve your credit rating
Factors to consider when saving or investing
Risk - Will your savings be safe and secure?
Reward - Will your savings earn interest?
Liquidity - How easy is it to take out or access your money when you need it?
Taxation - Will you have to pay tax on the interest you earn on your savings (DIRT)?
Ease of Access - is it easy to make regular lodgements and withdrawals from your account?
Terms and Conditions - Are there any fees on your account?
Where to Save
Commercial Banks e.g AIB, Bank of Ireland
An Post (The Post Office)
Credit Unions
Building Societies: e.g EBS
Simple Interest
A percentage of the principal is calculated and added to it, making your money grow.
Compound Interest
Compound interest is when interest is added to the savings and that added interest also earns interest from then on.
The saver is earning interest on their interest.
Annual Equivalent Rate (AER)
The AER shows you the real interest you will have gained on savings at the end of the year.
The higher the AER, the more interest you will earn
Deposit Interest Retention Tax (DIRT)
DIRT is a tax on interest that a person earns on a deposit (savings) account.
It is deducted at source by the financial institution and paid over to the Revenue Commissioners - this means customers do not have to calculate the DIRT they have to pay and pay it to the Revenue themselves.
What does risk mean
refers to the how safe and secure our money is in the place we decide to save or invest it in.
What is Interest
is extra money you receive on top of the money you have saved in a financial institution.
What is DIRT
Tax that must be paid by an individual on interest earned in a savings account.
What does Dirt stand for?
(Deposit Interest Retention Tax):
What does (AER) mean
Annual Equivalent Rate
