Savings, Income & Borrowing

Question 1

Why do people borrow?

Answer 1

To pay other debts
Overcome a shortfall of cash
Travel
To buy necessities you can't afford
To buy things they don't have money for

Question 2

How much you can borrow depends on?

Answer 2

Income
Past credit history
Assets that you own
What your buying
Job (how secure) 
Existing liabilities

Question 3

Advantages of borrowing

Answer 3

Be able to buy something you need now/fast

Buy something expensive eg: house

Question 4

Disadvantages of borrowing

Answer 4

Have to pay back more than you borrow with interest and fees

Encourages you not to save for something

Question 5

Ways to save?

Answer 5

Piggy bank
Under the bed
Savings account
KiwiSaver
Shares
Bonus bonds

Question 6

Define income

Answer 6

Money or assets we receive

Question 7

Define wealth

Answer 7

The assets a person owns (after deducting liabilities/debt)

Question 8

Examples of earned income

Answer 8

Commission
Salary
Wages
Pocket money (sometimes)
Profit
Fees
Royalties fringe benefit

Question 9

Examples of unearned income

Answer 9

Benefit
Interest
Scholarships
Gifts
Pocket money (sometimes)
Selling property *capital gain*
Gambling
Dividends
Rent

Question 10

Wages are paid

Answer 10

Based on how many hours you work

Question 11

Salaries

Answer 11

Are a fixed amount for the year

Question 12

Rent is

Answer 12

Paid to the owners of land or property

Question 13

Interest is paid to

Answer 13

People who have money saved or invested in a bank

Question 14

Profit is

Answer 14

Paid to the owners of SUCCESSFUL businesses

Question 15

Commission is paid

Answer 15

As a percentage of what the person sells eg: real estate agent, insurance sales person

Question 16

Fees are charged

Answer 16

By professional people for services provided at a set rate eg: doctors, lawyers

Question 17

Dividends are

Answer 17

Unearned income received from having shares

Question 18

Superannuation is paid to people

Answer 18

When they retire

Question 19

Social welfare is a

Answer 19

Benefit from the government given to the economically disadvantaged

Question 20

Capital gains is when

Answer 20

You buy property and sell it for more

Question 21

Inheritance is when

Answer 21

The wealth of people who die is passed onto others

Question 22

Gambling is when

Answer 22

People sometimes win when they invest in lotto or races

Question 23

Royalties is for people

Answer 23

Who write books or songs and are paid according to the number sold

Question 24

Fringe benefits are

Answer 24

Extra benefits that people get such as free meals, company cars etc.

Question 25

What are the the two types of income tax in New Zealand?

Answer 25

P.A.Y.E pay as you earn | RWT residents withholding tax

Question 26

The more income you earn in NZ the more ______________

Answer 26

Tax you pay

Question 27

Limitations on income include

Answer 27

``` Time Endowment - what people are born with Skills Lifestyle Cultural and family responsibilities Government policies ```

Question 28

16-19 years olds earn a minimum wage of?

Answer 28

$11

Question 29

Types of borrowing include

Answer 29

``` Credit card Fixed term contract or hire purchase Bank loan Student loan Mortgage Borrowing from family and friends Bank overdraft ```

Question 30

Bank overdraft definition

Answer 30

When you take out more money from your bank account than you have in there you go into overdraft which is a debt

Question 31

Mortgage definition

Answer 31

Borrowing large amounts used for buying a house. The house becomes collateral

Question 32

Personal loan definition

Answer 32

Just money loaned for whatever use

Question 33

Secured loan definition

Answer 33

Assets/security items are used as collateral/safety for they bank. They can reposes those items if you don't pay.

Question 34

Unsecured loan definition

Answer 34

A loan in which the bank takes your word that you'll pay it back. Penalty fees if you don't pay

Question 35

Student loan definition

Answer 35

Money lender to pay for education

Question 36

Fixed term contract (hire purchase) definition

Answer 36

Pay back in regular instalments. You get what you wanted straight away and have to pay it back while you're using it

Question 37

Credit cards definition

Answer 37

Plastic card you use to but things on credit. You get what you WANT NOW but have to pay it back later on set amounts. Interest if you don't pay it within 30 days or so

Question 38

Store charge card definition

Answer 38

A card issued by the store you use for purchases in that store

Question 39

Bank overdraft interest rate

Answer 39

Medium ~15%

Question 40

Mortgage interest rate

Answer 40

Low ~5.75%

Question 41

Personal loan interest rate

Answer 41

Medium

Question 42

Secured loan interest rate

Answer 42

Lower than unsecured loan

Question 43

Unsecured loan interest rate

Answer 43

Medium

Question 44

Student loan interest rate

Answer 44

No interest

Question 45

Fixed term contract (hire purchase) interest rate

Answer 45

Can have very high interest

Question 46

Credit card interest rate

Answer 46

Highest interest rate 20%+

Question 47

Store charge card interest rate

Answer 47

May have high interest on unpaid amounts