Saving + Investment Flashcards
Expenditure
The amount of money you need to cover all your expenses/outgoings e.g. bills and mortgage
Shareholder
Someone who has invested in a company in return for equity, i.e. a share of the business
Individual Saving Account (ISA)
This is a type of saving account where the holder is not charged income tax on the interest received
+ Interest rates are sometimes slightly higher than in alternative savings accounts
- Notice is required to make withdrawals and there may be a limit set on the number of withdrawals made
Deposit & Savings Account
Accounts where interest is paid on the balance and normally the holder needs to give notice before withdrawing funds
+ Interest is earned on a positive balance
- Interest earned is taxed
Premium Bonds
A government scheme that allows individuals to save up to a set amount by buying bonds. The bond holder does not receive interest on their savings but each bond is placed into a regular draw for cash prizes
+ Chance of winning substantially more than could be earned with interest
- No guaranteed return on investment
Bonds & Gilts
Fixed term securities where the lender (an individual) lends money to companies and governments in return for interest payments
The money is invested for a specified period of time
+ Regular fixed payments
- Risk of losing some or all of the value of the investment if the bond or gilt value falls
Shares
Shares involve investment in a business in return for equity, i.e. the shareholder becomes a part owner of the business. The shareholder will receive dividends from the company’s profits
+ Share prices fluctuate offering a potential high reward
- There is no guarantee of any reward or return as all of an investment can be lost
Pensions
These are long-term savings plans where individuals make regular contributions, called premium payments, throughout their working life. This is then repaid as either a lump sum, regular payments or a combination of the two upon retirement.
Pensions can be state, company or private
+ Encourages individuals to save throughout their working life for retirement
- Movement between jobs may mean that one policy stops and another starts, thus reducing the overall cumulative value of the savings
Saving Risks
- Inflation can reduce the spending power of money saved
Saving Rewards
+ Interest payments
+ Financial security/peace of mind
Investment Risks
- Investments can go wrong and all or some of the value may be lost
- No guarantee of a return
Investment Rewards
+ If successful, there is potential for a high financial return
