Saving

What do both saving and investing require?

Require an individual to forfeit current spending in the hope of gaining greater wealth in the future.

What is saving?

It involves placing money in a secure place (e.g. savings account) so it grows in value and can be used in the future.

What is investing?

Involves committing money to a business venture (e.g. share dealing) in hope it generates large financial rewards into the future.

What is an ISA?

A savings account which allows people to save up to £20,000 and not be charged tax on earnings from interest.

What are some advantages of ISAs?

• No tax.

• Interest rates are higher.

What are some disadvantages of an ISA?

• Hard to withdraw money.

• Limit on how much can be saved.

What is a savings account?

Accounts which allow money to be stored securely and interest paid on the balance.

What are the advantages of a savings account?

• Interest earnt.

• Can need regular deposits so forced to follow a savings plan.

What are the disadvantages of a savings account?

• Interest is taxed.

• Lower interest and lower than borrowing.

What are premium bonds?

A government scheme which allows people to buy bonds.

Each month the bonds are invested into a cash draw with cash prizes available.

What are the advantages of premium bonds?

• Chance of winning.

• Can be easily withdrawn.

What are the disadvantages of premium bonds?

• No guaranteed return.

• Maximum amount reviewed annually.

• Your money decreases in real terms due to inflation.

What are bonds and gilts?

An individual loaning money to a business for a defined period of time at a variable or fixed rate.

What are the advantages of bonds and gilts?

• Regular fixed returns.

• Spreads risk across a range of markets.

• Usually money is taken up for a period of time - not instant access.

What are the disadvantages of bonds and gilts?

• Risk of losing it all.

• Interest not paid if business cannot afford it.