Financial Products and Services – Level 2 Business BTEC Revision

Financial Products and Services: An Overview

Financial products and services are tools that help you manage and grow your money. They are offered by financial institutions such as banks and insurance companies.
The three main categories of financial products include banking products (like savings accounts and loans), investment products (like bonds and mutual funds), and insurance products (like car insurance and health insurance).

Current accounts are used for managing daily finances, depositing income, paying bills, and making cash withdrawals.
Savings accounts allow you to earn interest over time on your deposited money and are designed to help with long-term financial goals and security.
Loans are a type of debt where the bank lends you a specific sum, which you have to repay along with interest over a decided period.
Credit cards give you the ability to buy now and pay later up to a certain limit set by your bank.

Bonds are a type of investment where you lend money to an entity (like the government or a corporation) who promises to pay you back with interest after a set period.
Shares or stocks represent part ownership in a company. Buying shares provides the potential for profit if the company does well, but also a risk of loss if the company does poorly.
Mutual funds are a pool of funds from many investors that are managed by a professional who invests in stocks, bonds and other securities.

Car insurance covers you against any financial loss due to accidents, theft, or damage to your car.
Home insurance protects against damage to your home from hazards like fire, flood, or theft.
Health insurance helps cover medical costs, such as doctor visits, hospital stays, medications, and surgeries.
Life insurance provides a pay-out after death to support your family or dependents financially.

Selecting the right financial products and services can help you grow your wealth, manage risks and emergencies, and achieve your financial goals.
However, each financial product or service carries a certain amount of risk. It’s important to understand these risks before making a decision.
Sound financial management includes diversifying investments to minimise risk, sourcing insurance to protect against unforeseen circumstances, and using banking products responsibly to maintain good credit health.