Finance unit 2

• What are investment companies designed for?

  To invest money for profit
• What is the purpose of insurance products?

  To provide financial protection against risks
• What is the premium in an insurance policy?

  It is the payment made for coverage
• How do savings accounts work?

  They pool money together for interest earnings
• What is a current account used for?

  Day-to-day financial transactions
• What is the main role of building societies?

  To provide savings and loan facilities
• What is the purpose of credit unions?

  To benefit their members financially
• What are gilts?

  Government bonds used for borrowing
• What is the risk associated with high-reward investments?

  Potential loss of some or all money
• What is the main benefit of property investment?

  Income from rent and property value increase
• What does diversification of shares mean?

  Investing in multiple companies to reduce risk
• What is the difference between needs and wants?

  Needs are essential; wants are desired
• What is the purpose of financial planning?

  To meet personal financial objectives
• What is the time frame for short-term financial planning?

  Up to 12 months
• What is compounding in finance?

  Interest calculated on initial principal and accumulated interest
• What is the role of a qualified financial planner?

  To help identify and achieve financial objectives
• What is the significance of the Annual Equivalent Rate (AER)?

  It shows the interest rate on savings accounts
• How do attitudes to risk affect investment decisions?

  They determine the level of risk an investor is willing to take
• What are the main life stages affecting financial planning?

  Childhood, teenager, young adult, adult
• What is the purpose of notice accounts?

  To require advance notice for withdrawals
• What is the impact of low interest rates on savings?

  They reduce the returns on savings accounts
• What is the main function of insurance companies?

  To provide financial protection against risks
• What is the role of financial cooperatives?

  To serve the financial needs of their members
• How does financial planning differ for individuals at different life stages?

  It varies based on needs, income, and responsibilities
• What are the two elements of financial planning?

  Personal objectives and financial objectives
• What is the purpose of a financial plan?

  To outline how to achieve financial goals
• What is the significance of setting measurable personal objectives?

  It helps track progress towards financial goals
• What is the difference between short-term and long-term financial planning?

  Short-term is up to 12 months; long-term is over 5 years
• How does the approach to risk impact financial planning?

  It influences investment choices and savings strategies
• What is the main benefit of having an emergency fund?

  To cover unexpected financial emergencies
• What is the role of banks in financial management?

  To provide safe storage for money and loans
• What is the purpose of a savings account?

  To save money and earn interest
• What is the significance of financial objectives?

  They guide individuals in achieving their financial goals
• How do different financial products serve various needs?

  They cater to specific financial goals and situations
• What is the impact of inflation on savings?

  It can erode the purchasing power of saved money
• What is the role of the Financial Conduct Authority (FCA)?

  To regulate financial markets and protect consumers
• What is the purpose of tax planning?

  To minimize tax liabilities and maximize savings
• How does the economic environment affect investment decisions?

  It influences risk assessment and potential returns
• What is the significance of having a diversified investment portfolio?

  It reduces risk by spreading investments across assets
• What is the main advantage of collective investment funds?

  They pool resources to reduce individual risk