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Saving
| Question | Answer |
|---|---|
| Savings | This is income that we choose not to spend. It is also known as postponed spending (We make the decision to put money aside with the intention of spending it in the future). |
| Reasons for saving: | 1.Emergencies 2.Credit rating 3.Education 4.Retirement 5.Entertainment/Holidays Mnemonic to remember: 'Everyone Can Earn (money) Really Easily'. |
| Where can you save? (Financial institutions) | 1.Commercial banks 2.Credit union 3.An Post 4.Building Societies |
| Demand deposit account | This allows you to withdraw your money in the account when you choose to. You don't need to give any notice. Typically low interest rates. |
| Term deposit account | This requires you to leave your money in the account for a certain length of time. The agreed time could be anything from 7days to 5years. Higher rate of interest compared to demand deposit accounts. Penalty (lower interest) for taking money out early. |
| Notice deposit account | This requires you to give the bank advanced notice of your intention to withdraw money. (E.g 10day notice means that the saver must let the bank know 10 days in advance of the withdrawal). |
| 2 Ways of calculating interest rates on your savings: | 1.Simple Interest 2.Compound interest |
| Simple interest: | This is paid each year only on the amount saved in that year. |
| Compound interest: | This is paid each year on the total sum of the money accumulated in the account (the amount saved plus the amount earned in interest). |
| Annual equivalent rate (AER) | This is the rate of interest you could earn on your savings in a full year with a compound interest rate. |
| Deposit interest retention tax. | This is a tax on the interest earned on deposit accounts. It is deducted by the bank and transferred to the Office of the Revenue Commissioners. It decreases the rate of interest earned on savings. |
| Interest | This is a reward for saving with a financial institution. It is extra money you will receive on top of the money you have saved. |
| Investing | This means putting your money into shares, property, insurance policies and other potentially risky activities in the hope that you will earn more money than a regular savings account. |
| 3 Ways of investing your money | 1.Stock Market 2.Property Market 3.Insurance Companies |
| 2 Ways of making money from stocks/shares | 1.Capital Gain: This involves selling the shares at a higher price than you paid for them. 2.Dividend: This is a payment to the shareholder based on the amount of profit earned by the business. |
| Property market | This involves buying property in order to make additional income. The property owner can rent out the property. If the value of the property increases, the property could also be sold at a higher price, making a larger profit. |
| Insurance companies | Endowment life assurance policies are a form of investment that you buy from a life assurance company. It is similar to a fixed-term savings account but without any guaranteed interest rate. |
| Credit rating | This reflects how likely a person can repay a loan. |
| Questions to ask yourself when considering saving or investing money. | 1.How much money do I have? 2.How much money can I earn from my savings or investment? 3.How much tax will need to be paid? 4.How easy will it be to get my money back? 5.What is the risk? 6.How ethical is my choice? |
Created by:
MsHayes1
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