Personal Finance and Economic Concepts

Understanding Pension Plans

A private pension plan is a savings plan with flexible contributions designed for future retirement, disability, or death, or to complement a public pension. A company pension plan is a retirement plan where an employer makes contributions into a fund for a worker's future benefit.

Benefits of a good pension plan often include favorable taxation, versatility, and flexibility in payments.

• Private Pension Calculation Example: % of previous salary - public pension
• Public Pension Calculation Example: Regulating base x % (depending on years)

Money: Functions and Types

Money is generally accepted as a medium of exchange for payments and collections.

Functions of Money

1. Medium of exchange
2. Store of value
3. Unit of account

Types of Money

1. Legal tender
2. Bank deposits
3. Cryptocurrencies

Bank Accounts and Online Banking

Bank deposits or accounts include:

1. Current account: Offers high liquidity, typically with lower interest.
2. Savings account: Requires funds to be held for a certain period, often offering higher interest.

Online Banking

Offered by most banks, online banking provides convenient self-service but carries risks such as phishing and hacking. Practicing good online security is essential.

Key Economic Indicators

Economic growth: Measured by GDP/PIB.

Prices: Measured by CPI (Consumer Price Index).

Price of money: Represented by the interest rate.

Percentage change: Calculated as (X2 - X1) / X1 * 100.

Gross Domestic Product (GDP/PIB)

The monetary value of all final goods and services produced by a country in a year. Calculated as: GDP = Consumption + Investments + Government spending + (Exports - Imports).

Investment Management

Investment is the management of money to generate additional profits or returns in the future. Returns are not always guaranteed.

Classifying Investments

1. Liquidity
2. Risk
3. Profitability

Investment Securities

• Fixed income security
• Variable income security

Maturity: The time until the invested capital is returned.

Mutual funds: Investments in different combinations of fixed and variable income securities.

Diversification: Investing in different securities to reduce risk.

Insurance Policy

A contract where an insurer, in return for a premium payment, pledges to compensate the policyholder or beneficiaries in the event of a contingency or loss.

Budgeting

A spending and income plan used by individuals and companies to better manage their finances and plan for the future.

Monetary Policy

Central banks use monetary policy to fix the price of money (basic interest rate) and control the amount of money in circulation. This includes lending money to banks. Central bank monetary policy has a real impact on the economy.