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Consumers Grade 11 > Financial Management > Flashcards

Financial Management Flashcards

(53 cards)

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1
Q

Define savings

A

Putting money aside for short to medium term needs. Low risk and easy access

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2
Q

Define investing

A

Using money to buy assets that grow over time. Higher potential return, riskier

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3
Q

Define insurance

A

A contract where you pay monthly premiums so that an insurer covers financial risks like illness.

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4
Q

Why should you save?

A

1) To reach goals
2) Emergency buffer
3) avoid debt
4) Start investing to build wealth
5) financial independence

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5
Q

Why should you invest?

A

1) grows money
2) save for retirement
3) earn better returns
4) achieve long term goals
5) support family or start business
6) reduce taxes legally
7) enter new ventures

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6
Q

What are popular SA savings and investment options?

A
  • Savings/fixed deposits ((low risk and steady)
  • Tax free saving account
  • RSA retail bonds(government backed)
  • Unit trusts (invest in group shares)
  • JSE shares (riskier but with high returns)
  • Stokvels (group saving scheme)
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7
Q

Why does insurance matter?

A
  • protects belongings and income
  • supports families during emergencies
  • financial comfort after retirement or disability
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8
Q

What is short term insurance?

A

Covers items like cars, phone

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9
Q

What is long term insurance?

A

covers life, disability and retirement

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10
Q

What is premium insurance?

A

monthly payments

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11
Q

`What is excess insurance?

A

what you pay when claiming

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12
Q

What is an everyday savings account?

A
  • easy to open
  • great for emergencies
  • interest varies with economy
  • low interest but has bank fees
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13
Q

What is a fixed/notice deposit?

A
  • Locked money (32days - 5 years)
  • higher interest
  • penalties for early withdrawal
  • great for varsity fees or saving
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14
Q

What is an employer pension/provident fund?

A
  • You and employer contribute monthly
  • Tax benefits up to 27.5% of income
  • 2-pot system: can access 1/3 before retirement
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15
Q

What is a retirement annuity?

A
  • Personal retirement plan
  • tax benefits like pension fund
  • locked till age 55
  • Choose funds that match your risk level
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16
Q

What is an endowment policy?

A
  • 5 year investment - insurance plan
  • taxed at 30% inside
  • helps with estate planning
  • penalty for early withdrawal
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17
Q

What is life insurance?

A
  • pays out if you die
  • can be for a set term or whole life
  • price depends on age/health
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18
Q

What is disability insurance?

A
  • lump sum or monthly payments if disabled
  • income protection usually pays 75% of salary
  • wait 1-6 months before payout
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19
Q

What is group insurance?

A
  • offered by employers or groups
  • cheaper, fewer health checks
  • ends when leaving job
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20
Q

What is unit trusts /ETFs?

A
  • basket of assets in one buy - instant diversity
  • ETF’s trade like shares on JSE, low cost
  • Good beginner investment
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21
Q

What are Stokvels?

A
  • Group savings
  • monthly contributions shared out on rotation
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22
Q

What are smart money habits?

Study These Flashcards
A

1) Pay yourself first
2) Budget
3) build credit score
4) research providers
5) use compound interest

23
Q

What are the 4 regulators and what do they do?

Study These Flashcards
A

1) FSCA - protects financial consumers
2) SARB - controls interest rate, oversees banks
3) Pension and insurance - sets rules for retirement
4) National credit act - limits loan interest rate and protects borrowers

24
Q

What is a savings account?

Study These Flashcards
A
  • Safe
  • short term investments
  • withdraw anytime
  • low interest
  • monthly statement
  • Deposit 0-50 rand
25
What is a current account?
- min income required is 1500 rand - little interest - monthly statement - fees on transactions - can apply for overdraft facility - debit card can link to credit card
26
What is a fixed deposit account?
- good form of saving - deposit money at a fixed rate for months/years - good interest - can add money anytime - penalty charges if withdrawn early
27
What is a call account?
- withdrawal/deposit as you need - minimum at all times is 1000 rand - no fixed investment period - interest based on account amount
28
What is a money market account?
- investment account - higher interest rate - maintain balance between R5000-R25 000 - No charge on withdrawals/transfers - Withdrawal/deposit anytime
29
What are the different types of bank charges?
- Cheque books - Transaction fees - exceeding overdraft limits - debit/stop orders - lost card - interest on amounts not paid in full
30
How can you keep bank charges down?
- transactions to a minimum - try avoid withdrawing from bank - Use bank ATM - Draw large amounts less often - know bank fees - link accounts - monitor accounts with digitally, not ATM
31
What are the 2 purchasing methods?
Cash and Credit
32
Define cash payments
Cash payments are made with coins or notes, anything physical
33
Define credit payments
Method of obtaining goods and services in the present and paying for them in the future. Essentially you borrow the money from a credit provider.
34
What are the advantages of Cash payments?
- Shop anywhere - Cash discount - less likely to part - saving - shops with cash only charge less - less administration - save credit for emergencies
35
What are the disadvantages of cash payments?
- unsafe - discipline required for keeping track - No credit score - cash stores do not deliver - unwilling to refund - may receive preference where you have an account.
36
Talk about notes and coins
- can be used to settle an transaction - Safety is an issue - Impractical for large amounts
37
Talk about cheques
- most do not accept cheques anymore - they get send back for you to check - nobody else can cash the cheque
38
Talk about postal orders
- Written order to a specific person - small commission charged - payee cashes it - secure and impossible for unauthorized person to cash it
39
talk about cash with order (CWO)
- Payment accompanies order - mail/internet purchases - goods not seen - takes time - no discounts
40
Talk about cash on delivery (COD)
- Payment made when goods delivered - Applies to large items that need to be delivered - Reduced risk of fraud or non-payments
41
Talk about debit cards
- Alternative method to cash - electronic withdrawal from funds in account - ATM's + shops - effective immediately
42
Talk about credit
when you use another persons money, like a loan that you pay back later so that you get the goods immediately
43
What are the advantages of Credit?
- Able to purchase goods/services - more sales for business - can be beneficial if managed - good credit record
44
What are the disadvantages of Credit?
- No cash discounts - buy unnecessarily - easy to exceed budget - easy to get into debt - can get blacklisted
45
What are monthly accounts?
- purchases made without paying at the time - month following is the statement to pay in full - no interest unless account overdue
46
What are budget accounts?
- Repayments spread over time - card limit - buyer pays a minimum balance - Interest on outstanding balance
47
What is higher purchase?
- Lent money to buy good - paid deposit - paid over time - only last payment foes buyer own
48
What is lay-by?
- Flexible system - buyer pays deposits - Seller sets aside the product - when paid fully buyer takes it home - Buyer entitled 90% refund
49
What are credit cards?
- purchase anything - convenient, eliminates cash need - credit limit - transaction collected and pain together
50
What are the advantages of Credit cards?
- some shops only take card - credit card history = loans - useful in emergency - statement acts proof payment - convenient - only pay end of month
51
What are disadvantages of Credit cards?
- Stolen lost - unauthorized purchases - large interest if not paid - not paying = blacklisted - terms/conditions complicated - increase debt - costly if not paid on time - drawing money = higher interest
52
What is the cost of credit?
Seller 'lends' money to buyer and pays back with additional; costs.
53
What is granting credit?
Seller before, must be assured they will get money back. Buyer receives rating.

Consumers Grade 11 (4 decks)

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