WEEK 10 Flashcards
(22 cards)
Building your savings
Savings means giving up current income
Helps to provide security later
Components of financial planning
Set up financial objectives
Budgeting
Man against your debt
Protecting your assets and income
Investing your money
Planning your retirement
Monitor/Review
Reason for saving
Transaction motive
Precautionary motive - rainy day
Speculative motive - speculating
Main types of savings account
Instant access accounts
Regular savings accounts
Fixed rate and fixed term account
Instant access account
Access without penalty
Protecting your assets
To protect your assets and can do insurance planning
Some forms of insurance are a legal requirement (motor buildings)
From where can u get a debt
Bank
Building societies
Peer to peer lending
Hire purchase agreement
Pay day loans
£100-£1000
1000%-1500%
Credit cards
Can be used to pay goods and services instead of using cash or a debit card
Can give more than 30 days of credit
Balance that is not offset carries very high interest rates(7-20%)
Other charges
Annual fees
Withdraws lead to interest
Personal finance
Process of planning one’s own spending financing and investing to optimise your financial situation
Understanding personal finance allows you to make informed decisions anout your own financial situations
Insolvent
Not able to pay our debt
Common forms of personal borrowing
Bank overdrafts
Student loans
Mortgages (4/5 of debt)
Credit card
Fixed rate and fixed term accounts
Better rates but penalty on withdrawals before term
Regular savings accounts
Encourages saving habits
Where to save?
Banks or buildings society
National savings and investments- give memer savings banks (guarantee all savings not only the 85k of the financial services compensation scheme) ISAs - Green bonds, premium bonds
Credit unions (like a cooperative in which generally members have something in common (church; trade union)
Peer peer lending - generally higher return much greater risk (not generally covered by FSCS
Tax and savings and ISA
UK tax payers habe to pay tax on the income of their savings/ investment
Individual savings account do not pay tag (interest or capital gains) you have to be a UK residents
ISA
Wrapper you can open a cash ISA or an investment ISA from aged 18
The amount saver can put into ISA changes every April the allowance for 2024-25 is £20,000 (£4000 for lifetime; 9000 for Junior)
Money can be transferred from cash ISA to an investment ISA but not other than other way around
6 types of ISA
Cash
Shares
Lifetime
Innovative (peer to peer orcrowndfunding)
Junior
British (consultation £5000)?
Lifetime ISAS
Adult under 40 are able to open a lifetime ISA
Up to £4000 can be saved each year and savers receive 25% bonus from the goverment on this money
Money can be saved until 60 and used as retirement income, help buy forst house if u have home u cannot use ISA to buy another
CAP on the house £450,000
If y are using it toward your pensions can only withdraw the money after 60
Investing for longer term
Usually means investing in assets or funds which can be used in the stock market
Long term investors may
Invest direct into an asset class
-shares
-bonds
Invest in pooled investment (Funds and ETFs)
Plan for investing and retirement
Any fund u habe beyond what u need for liquidity should be saved and invested
Retirement planning involves determining how much money will u set aside each year for retirement and how u should invest that money
Retirement planning has to start well before retirement - this money is protected from taxes
RPI
Retail price index
