How can I understand financial risks and rewards?...How can I understand financial risks and rewards? Fraud scene investigators| | 4 Investing When you use money to buy things that

Fraud scene investigators| 1How can I understand financial risks and rewards? | 1

How can I understand financial risks and rewards? Presentation


Define

Gambling

Return Risk Saving

Investing BorrowingInterest

%


Return

The profit or loss you

have on your investments.

%Risk

Considering what could

happen, not what will happen,

as there is the element of

uncertainty. When deciding

what risks people are prepared

to take, various factors such as

emotions and personal

circumstance will be important.

Saving

When you put money aside,

often on a regular basis, to

make a lump sum. You might

save towards a certain goal,

such as a holiday or a deposit

to buy a property, but you can

also set aside money to cover

emergency costs. Saving often

involves putting money into

cash products, like bank

savings accounts.

Interest

Money paid regularly

at a particular rate for

delaying the repayment

of a debt.


Investing

When you use money to buy

things that might grow in

value – for example stocks,

property, or shares in a fund

or business venture. The aim

is to make the money

increase more quickly or get

a better return than you

would from the interest from

a savings account.

Borrowing

When you ask for and receive

money that you must pay

back, usually with an additional

amount – interest – and within

a certain time. Borrowing can

include loans, overdrafts or

credit cards.

Gambling

When you put money towards

an activity or game of chance

with the hope of winning more

money back. Examples include

the lottery, sports bets, slot

machines, casino games and

scratch cards.


Why might people save, invest, borrow or gamble?


What are the chances of matching all six numbers in the National Lottery?

Gambling odds


• What are the chances of matching all six numbers in the National Lottery?

• 1 in 45 million

• You can also think about it in terms of how long it would take before you can expect to win. If you enter one ticket in both draws each week, you could wait up to 432,000 years!

• How would you describe the risks and rewards in this situation?

Gambling odds


• Views about risks and rewards are personal

Risk and reward


• What options can you think of for borrowing?

• What are the risks when borrowing?

• What are the benefits when borrowing?

Borrowing options


• When you save or invest money, two of the most important factors are risk and return

• The risk associated with an investment is a way of describing how likely it is to lose money, i.e. a deposit in a bank savings account is considered very low risk, but buying shares in a new business can be considered high risk

Saving and investing


• Investments can increase and decrease, and some types of investment carry more risk than others

• Generally, the more risk, the greater the potential return – but also the greater the potential loss

• People invest for growth and income



Generally, banks and agencies recommend:

• To save until you have an emergency cash reserve, then you could consider investing

• If you’re likely to use the money in the next five years, save

• If it’s likely to be ten years or more before you use the money, invest

• If you’re likely to use the money in five to ten years’ time, you could consider saving or investing and should consider whether you’ll need a certain amount at a particular time



Risks and rewards

Interactive activity


Understanding financial risks and rewards

Activity sheet


Don’t put all your eggs in one basket

Documents

How can I understand financial risks and rewards?...How can I understand financial risks and rewards? Fraud scene investigators| | 4 Investing When you use money to buy things that