Types of saving and investment

Question 1

Two advantages and disadvantages of individual savings account?

Answer 1

+ Access and availability, easy to open and can withdraw money at any time.
+ Automated bill payments, helps avoid late fees or missed appointments.

• Falling below the minimum balance requirement will result in the bank deducting fees from your account.
• Long term saving is difficult in terms of availability.

Question 2

Two advantages and disadvantages of deposit and savings account?

Answer 2

+ No penalties for early withdrawal.
+ Can close the account at any time.

• Pay lower rates than ‘risk free’ investments such as treasury bonds.
• Little opportunity for capital to appreciate in real value.

Question 3

Two advantages and disadvantages of premium bonds?

Answer 3

+ No risk of losing money as it’s supported by the government.
+ Tax free returns.

• No interest or returns on investments.
• Low odds to win prizes of money.

Question 4

Two advantages and disadvantages of bonds and gilts?

Answer 4

+ Opportunity to invest in very long term debt.
+ Minimal default risk.

• Inflation will decrease the real return on the security.
• Tax benefits have been withdrawn.

Question 5

Two advantages and disadvantages of shares?

Answer 5

+ Capital can grow, gaining a greater degree of ownership over a company.
+ Entitled to certain discounts and benefits.

• It can take as long as 10 years till money has been made back, long term venture.
• Unpredictable, plenty of studying needs to be done.

Question 6

Three advantages and disadvantages of pensions?

Answer 6

+ Tax relief.
+ Guaranteed income at the end which increases with inflation or rises by a fixed % each year.
+ Bigger pension pot.

• Funds cannot be accessed until a certain age.
• Risk of poor returns.
• Too complicated and many decisions to be made.