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Personal Finances
Jargon Buster
We've made it easy to
understand the terms used in this site. Look below for simple explanations.
Introduction
Savings
These accounts are a safe and secure place to keep your cash. The Royal Bank
pays you interest at various rates depending on the type of account and the
amount of money you keep in it. So by keeping your money in a savings account,
you can watch it grow. Some savings accounts allow you to take your money out
immediately at any branch. Other types of account mean you have to let us know
in advance if you want to withdraw money. The accounts that ask you for notice
usually pay a higher rate of interest. You can open a savings account at any
branch. We ask for some identification and there’s often a minimum amount you
are allowed to deposit.
Investments
These can be made in many ways, for example:
ISAs
Bonds
Unit Trusts
Endowments
Interest
This is money that we pay into your account as a reward for keeping your
savings with us. Simple Interest is the percentage applied each day on the
amount of money in your account. Because interest is added to your account
(either monthly, quarterly or annually) your total savings are always
increasing, so you're earning interest on the original amount invested plus
interest on the interest. This feature is known as Compound Interest.
Tiered Interest
This means each time your total savings reach the next band or tier, you get a
higher interest rate. An example is listed in the table below:
|
Amount in
account |
Compound
gross annual rate of interest |
Amount
payable in interest per year |
|
£100-£499 |
2.5% |
Say £200
balance
2.5% x £200 = £5 |
|
£500-£999 |
3.0% |
Say £800
balance
3% x £800 = £24 |
|
£1000-£4999 |
3.5% |
Say £2000
balance
3.5% x £2000 = £70 |
|
£5000-£9999 |
4.0% |
Say £8000
balance
4% x £8000 = £320 |
Gross and Net Interest
Gross interest means interest paid without tax being taken off. The bank can pay
interest gross if you are a non tax payer - all you need to do is fill out a
simple R85 form (these forms are available from any branch). Net interest is
interest paid after tax has been taken off.
Types of accounts
There are two main types of savings account. Instant access and Notice
accounts:
Instant Access
These accounts allow you to take money out at any time. And because these
accounts usually come with a Cashline card, you can withdraw your money from
cash machines across the country. An example of this type of account is the
Royal Bank's Instant Access Savings Account.
Notice accounts
These accounts ask you to give us warning in writing if you’re going to take any
money from the account. Different notice accounts ask for different periods of
notice and it’s easy to select the period that suits you best. Generally
speaking, the longer the period of notice, the higher the rate of interest we
pay. It is still possible to take money out of notice accounts without giving
notice, but there is a penalty to pay depending on which type of account.
Examples of this type of account include the Royal Bank's
30 Day Savings Account and
60 Day Savings Account.
Typical working example of a savings account
This is where we let you see how a savings account might work in a real
life situation. The rates of interest are simply examples and don't relate to
the actual rates of interest available on these products. The example figures
below give you a rough idea of what you might expect to get back and of some
other savings details, but they don't relate to any of our accounts in
particular.
|
Name Mr
Jones: Savings £10,000 |
|
Account type |
Amount of
money invested |
Annual gross
interest rate |
Immediate
withdrawal penalty |
Total
savings after one year |
Notice
required |
|
Instant Access |
£10,000 |
3.15% |
none |
£10,315 |
no notice |
|
30 Day Notice |
£10,000 |
4.15% |
30 days'
interest |
£10,415 |
30 days |
|
60 Day Notice |
£10,000 |
4.90% |
60 days'
interest |
£10,490 |
60 days |
Glossary
The following is a glossary of the Savings and Investment Terms:
|
Glossary |
|
Bonds |
Life assurance
lump sum savings plans. |
|
Bonus
payment |
Some savings
accounts reward you with an extra payment if you meet certain conditions.
For example an annual bonus may be paid if no withdrawals are made in the
year and the balance doesn’t fall below an agreed amount. |
|
Cirrus |
Cirrus is an
international network of cash machines which allow you to withdraw money in
local currency in a number of different countries. |
|
Annual
Equivalent Rate |
AER stands for
Annual Equivalent Rate and illustrates what the gross interest rate would be
if interest was paid and compounded each year. As every advert for a
savings product which quotes a rate of interest will contain an AER, you
will be able to compare more easily what return you can expect from your
savings over time. |
|
Endowment |
A savings plan
that involves making monthly payments for a set period. At the end of the
period the policy "matures" and pays out a tax-free lump sum. The savings
plan comes in the form of a life assurance policy and includes cover in the
event of death. |
|
Interest |
This is the
bonus that banks promise to pay if you keep your money with them. Rates are
usually a percentage of the amount in the account and are calculated on a
daily basis. |
|
Maestro |
Maestro is an
international debit card system which allow you to pay for goods and
services overseas at retailers who display the sign. It works in a similar
way to Switch in the UK. |
|
Penalty |
Penalties are
occasionally incurred if you break the conditions of the account. For
example if the account required 60 days notice and you make an instant
withdrawal, you would be penalised the equivalent of 60 days' interest. |
|
ISAs |
ISAs are the
new tax-efficient way to save and can be made up of three components: cash,
stocks and shares and life insurance. There are two types of ISA – mini and
maxi. With a mini ISA, you can opt for just one of these components, though
you can take out up to three mini ISAs in any tax year – one for each
component. All of these could be held with different ISA providers. A maxi
ISA lets you combine the stocks and shares component with cash and/or
insurance. You can only take out one maxi ISA in any tax year and this must
be with a single provider. The Royal Bank of Scotland offer two
mini cash ISAs. |
|
Unit Trusts |
When you invest
in a Unit Trusts, your money is grouped together with that of many other
investors so that costs are kept to a minimum. Your investment is spread
over many different types of stocks and shares by an investment management
team and so the risks are also lower. ** |
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