PFM: unit 1 & 2 - saving and wealth

how do you use budgets to achieve financial goals sooner?

allows you to spend less than you earn and achieve you financial goals sooner

calculation of simple interest

P x I x N

P = principle (original) amount

I = annual interest rate

N = loan period (no. of years)

calculation of compound interest

P x ( 1 + I/n ) ^nT

P = principle amount 

I = interest

n = compounded numbers

T

why is a savings buffer important?

It helps you build security of your money and allow you to meet unexpected costs and manage financial shocks

What is the role of banks and how do they make money

Financial businesses that collects deposits and lends money to people.

They make money through the interest on deposits, loans, and fees

List the roles of bank accounts

• everyday (transaction) accounts

• Savings account

Everyday account: used as a daily personal use account

Savings account: Offers a safe place to deposit your money. In return for deposits, you receive interest from the bank

What is wealth

the value of all resources and possessions a person owes

what is investing

purchasing a financial product or valued product in hopes of it’s value rising overtime, giving favourable returns

calculation of net worth 

Assets — liabilities

how is investing related to inflation

people who invest desires profit that exceed the rate of inflation

what are shares and why do their prices change overtime?

unit of ownership in a company

they change prices overtime due to the supply and demand of stocks

what are the main ways people use to build wealth through shares?

Dividends: As part ownership to a company, the investor is entitled to a percentage of its profit

Capital gains: when you buy stocks for a certain price and sell it for a higher price

what are mutual funds and exchange traded funds (ETFs)

pools of money invested by an investment company in shares, bonds or other securities

how do people grow wealth by investing in property

1) income from rent or leases (rental yield)

2) Appreciation of the real estate’s value (capital gains)

how do people build wealth through cryptocurrency?

how do people build wealth through nonfungible tokens (NFTs)?

How do people build wealth through commodities?

how do people build wealth through collector items?

how do people build wealth through bonds?