what are the 6 types of personal borrowing?
mortgages, hire purchase, payday loans, overdraft, personal loans, credit cards
personal loan
gives yo... [Show More] u the ability to borrow a set amount of money, normally for a specific purpose, to be repaid in regular instalments.
payday loan
short term source of finance used to bridge the gaps between now and next receiving a wage
credit card
goods are paid for by card and can be paid for either at the end of a set period, normally a month, when a statement is issued
overdraft
allows you to withdraw money that you don't have in a current account
mortgage
long-term loan to fund the purchase of assets, normally paid back over a long time, usually 25 years. it is secured against an item like a house.
hire purchase
allows you to have use of an item immediately but pay for it in regular instalments. the item remains the property of the seller until all instalments have been made
what are the 6 saving and investment options?
ISA, deposits & savings account, premium bonds, bonds & gilts, shares, pensions
when are saving and investment options available?
when you are earning or receiving more money than you need to cover your expenditure
Individual savings account (ISA)
a type of saving account where the holder is not charged income tax on the interest received.
deposit and savings account
accounts where interest is paid on the balance and normally the holder needs to give notice before withdrawing funds
premium bonds
government scheme that allows individuals to save up to a set amount by buying bonds. the bond holder doesn't receive interest on their savings but each bond is placed into a regular draw for cash prizes
bonds & gilts
fixed term securities where the lender lends money to companies and governments in return for interest payments. the money is invested for a specific period of time
shares
involve investment in a business in return for equity. the shareholder will receive dividends from the company's profits and will also want the value of the shares to increase
pensions
long term saving plans where individuals make regular contributions, called premium payments, throughout their working life. this is then repaid as either a lump sum, regular payments or a combinations of the two upon retirement.
how is inflation a risk to your savings?
inflation can reduce the spending power of any money saved.
what is the risk of saving money?
low or zero risk as the money saved is guaranteed to be available in the furture
what are the benefits of saving money?
provides financial security/peace of mind and there are interest payments
why are investments a risk?
they can go wrong and all or some of the value may be lost and there is no guarantee of a return
what are the benefits of investing your money?
if it's successful, there is a potential for a high financial return and they can be exciting for some people, some invest in shares, antiques or art.
what is insurance?
a form of protection where specific items, as a well as individuals and pets can be insured.
what do insurance policies cover?
the cost of loss, damage or illness up to prearranged levels in return for regular payments called premiums
what are the advantages of car insurance?
meets legal requirements, protects oneself against theft or damage and protects against damage caused to a third party.
what are the advantages of home & contents insurance?
replaces items that may have been lost or damaged, covers accidents that happens, covers large damage they you may not otherwise be able to cover, eliminates some stress from worrying about life and low deductible compared to cost of repair
what are the advantages of life insurance?
provides permanent protection, flexible, tax benefits, low premiums for new policies
what are the advantages of travel insurance?
good for emergencies (can get booking costs back if your flights are cancelled), if you contract a disease your travel insurance will cover treatment costs that your medical insurance might not, may policies provide coverage for lost, stolen or damaged luggage
what are the advantages of pet insurance?
can cover unexpected vet bills, provides peace of mind, can save the life of your pet, allows you to know your veterinary costs ahead of time
what are the advantages of health insurance?
gives you the opportunity to maintain or improve your health by providing a low cost way to attend your physician visits and buying affordable prescription drugs, flexible plans that can be customised, covers surgery and emergency bills, provides peace of mind
what are the disadvantages of car insurance?
premiums can be high depending upon assessed level of risk, normally there is an excess that must be paid
what are the disadvantages of home & contents insurance?
doesn't cover flood damage or freezing of plumbing, extra monthly payment, high monthly premium because of low deductible, coverage of jewellery costs more to get.
what are the disadvantages of life insurance?
fixed periods of coverage, prem [Show Less]