Unit 2 1.3

• Main types of financial product that people use to satisfy their medium-term and longer-term needs, wants and aspirations

  • Medium-term and longer-term savings
  • Investments
  • Pensions
  • Longer-term borrowing
  • Insurance
• Medium-term and longer-term savings


  Financial products that allow people to save over a longer period - more than three years - to cover future needs and wants and to allow them to fulfil their aspirations
• Example of medium-term and longer-term savings


  • A young person aiming to open a business in five years' time needs to save money for the capital (that is, funds to pay for premises, equipment and any other costs needed to set up the business)
• Investments


  A longer-term form of saving where people invest to save for a longer-term want or aspiration, which is more risky but can bring in a higher return
• Example of investments


  • A parent might save money in an investment scheme while their children are young so they can help them with their education later
• Pensions


  Many people save money in a pension scheme throughout their working lives to finance their retirement
• Longer-term borrowing


  When people borrow money to finance a large purchase, they need to pay it back over a long period, otherwise they cannot afford it
• Examples of longer-term borrowing

  • Mortgage - a loan secured on the value of the property being purchased
  • Hire purchase - a type of secured consumer credit to finance items such as cars and furniture, which also involves the borrower repaying over a number of years
• Insurance


  Insurance companies and banks provide insurance policies that cover long-term risks
• Examples of insurance


  • Property and contents insurance for homeowners
  • Life assurance to protect loved ones in case of death, and some products also enable people to save money for a later stage of their lives
• Financial products are not like, say, a car - people do not get pleasure simply from having them. They buy financial products because such products enable them to satisfy their needs, wants and aspirations
• A decision to satisfy a need or want and therefore to buy a financial product is based on both internal and external factors
• People need to be sure they understand the financial products they are buying and that the products are suitable for their needs