Unit 3 - personal finance continued Flashcards
6 factors affecting borrowing
income savings amount needed length of time needed credit score outgoings
individuals savings account (ISA)
Savings account you don’t pay tax on
ISA pro
No tax
Low interest
Access money at any time
ISA con
Saving is slow
deposit and savings account
Where you put your regular savings
deposit savings account pro and con
Earn interest +
Easy to access +
Some have monthly fees -
premium bonds
Chance of winning a lot more than could be earned in interest
premium bonds pro and con
Easy to withdraw +
Tax free +
Doesn’t always work
bonds and gilts
Lend money to government/businesses to try and earn interest back
bonds and gilts pro and con
Can invest long term +
can be directly affected by change in interest rates
shares
buy a part of a company to gain a profit. can be sold/traded
shares pro and con
Can vote on company decisions +
Not guaranteed to gain money
Easy to lose money
pension
Paying part of your salary into an account to be able to access when you’re retired
pension pro and con
compound interest +
Can’t access until a certain age
Can be complicated
saving def
Not spending money, but instead keeping it for a later date
investment def
Putting money into something to get more out of it later
saving risks
inflation can reduce spending power in future
saving rewards
interest
financial security/peace of mind
investment risks
1) can go wrong - could lose some/all of the money
2) no guarantee of a return
investment rewards
1) potential for high return (better than interest)
2) can be exciting e.g shares, art, antiques
insurance def
a form of protection. Specific items as well as individuals and pets can be insured. Insurance policies cover the cost of loss, damage or illness up to prearranged level in return for regular payments called premiums.
6 types of insurance
travel pet health car life home
car insurance pros
assured for repairs/replacement
assured for medical claims
car insurance cons
legal requirement
prices vary depending on age, experience, car engine etc
home/contents insurance pros
one insurer policy rather than 2 (lower cost)
protects from all incidents (natural disasters to robbery)
home/contents insurance cons
may need additional coverage for some items
may need to pay extra for safety net cover to avoid being underinsured
life assurance/insurance pros
favourable tax rates compared to other insurance
protects deceased’s family
life assurance/insurance cons
doesn’t directly affect insured
