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16 Cards in this Set
- Front
- Back
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Define saving |
Putting money aside for future uses; the opposite of spending. The difference between the money you earn and the money you spend. |
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Define investing |
Using savings to earn extra income |
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What are the two major advantages of investing over savings |
Investments usually yield a higher rate of return and Investments can grow at or exceed the rate of inflation |
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What are two disadvantages of investing? |
The yield is not guaranteed and There is some risk of losing part or all of the money |
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What is a savings plan? Why is having one necessary? |
A savings plan is a systemic method of putting away money to reach a financial goal. Saving money is a good way to plan for the future and practice budgeting |
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Why do people save? (3 key reasons) |
Emergency needs, Security, Future needs |
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What is the difference between a short-term and long-term goal with regards to timeline? Provide an example of each. |
-Short term goals are usually the purchase of inexpensive items. For example, concert tickets, bike-Long term goals require you to save for a year or more, examples are a car or a house. |
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What are the benefits of a savings plan? |
Earn interest on your money, Keep money safe, Insured against loss |
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What is interest (related to a deposit)? |
Interest is money that you recieve over time for letting others borrow your money |
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What if rate of return or yield? |
When interest is expressed as a percentage of the original investment. |
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Simple interest vs Compound interest (know how to calculate each). |
Simple- calculated only on the principleCompound- calculated on principle plus any interest already earned $1000.00+(5% of $1000.00=$50.00)= $1050.00 $1050.00+(5% of $1050.00=$52.50)=$1102.50 |
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Why is Compound interest better than simple interest when saving or investing? |
Compound interest makes your savings grow faster than simple, because you earn more interest in each payment. |
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What is meant by safety, liquidity? |
Safety- Insurance and protection against losing moneyLiquidity- Being able to quickly withdraw money in an emergency |
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What is CDIC? How much of a deposit do they insure? |
CDIC is the Canada Deposit Insurance Corporation. They insure $100,000 of a deposit |
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Savings accounts - pros and cons |
Pros- safe, earns some interest Cons- Lowest interest rate, |
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What are the 3 main reasons why corporations (like individuals) also invest their money? |
To accommodate excess cash until it is needed, To generate income, To advance corporate strategy |
