Savings/Investment Part 1 Flashcards
What is saving?
Putting aside money on a regular basis for future use
What do you decide to do when you invest?
Commit your money for a certain time period in the hope that it will grow in value
What is a budget?
A financial plan which shows where you are spending and earning money
Why should you prepare a budget?
To estimate how much money you expect to have at a certain time, in order to plan for a purchase or expense, or to prepare for worst-case scenarios financially
What is a budget deficit?
When you spend more money than you earn
What is a budget surplus?
When you earn more money than you spend
What are some important budgeting tips?
Not depriving yourself completely, avoid using ATM’s when possible, leaving your credit card at home, shopping during sales and paying bills on time
Why do people choose to invest?
To earn extra income, save for a major purchase or plan for retirement
What are some examples of investment?
Share market, managed funds, superannuation funds, real estate, government bonds or bank accounts
What are the two types of returns which an investment may include?
Capital gain or income stream
What is a capital gain?
The investment increases over time so it can be sold for more than what it was purchased for, such as property
What is an income stream?
The investment generates some form of income, such as rent, interests or dividends
What are the disadvantages of investing in capital gain investments?
It attracts capital gains tax, can be expensive, may require maintenance and can be difficult to sell
What are the benefits of investing in income stream investments?
It is an extra source of income and requires little to no maintenance
What are the benefits of investing to the Australian economy?
The government benefits from taxes, economy is stimulated, creates more jobs and allows businesses to expand
