What is this called?

Ally

When my friend was young (she is now 28), her parents gave a small amount of money (about £1) to a guy (company rep) that used to collect from their house every week. She got a lump sum at 18 - she didn't give the exact figures, but did say it was around 8k!

Now with my limited mathamatic abilities :-/ I worked out that 18 (years) x 52 (weeks) = £936 How do you get 8k out of that after 18 years?? Isn't that like way over 800% interest ??? ???

I am confused ??? But would loooove to know if any thing like this still exists : ;D ;D

Many thanks

lisyloo

It's difficult to know what this was invested in, but you haven't added in any interest at all.

All savings accounts or investments give you some kind of return. With ordinary bank savings accounts it called interest.

You wouldn't invest money in something which returned 0% (which is what your calculations are doing).
In this case your money would actually devalue in real terms because of inflation.

She would be getting some sort of return on her money.
The companies who take this money probably lend it out to others at a higher rate, thus making themselves a profit.

dunstonh

Its called an endowment.

Companies like pru, pearl, co-op refuge used to do these. 18 years would have had some good periods in there plus back then, the products were put together by marketing teams, usually without the accountants checking whether they were profitable to the company. Some products were too good to the customer and left the company with a hole. I recall the one company offering an insurance ISA that cost them about £1.18 for every £1 of income. That company is no longer open for new business and has a very weak financial strength rating.

Ally

Thanks for the reply guys ....

Are there any such saving schemes still around for kids? Small weekly savings for a big big huge return possibly ;D ;D ;D

Pal

Hi Allyzerozerozero

I doubt very much you are going to find anything like this again, with a renewed emphasis on financial strength and risk reduction by insurance companies.

Leia_Stephens

Hi Allyzerozerozero

I wish I had a 7 figure sum (before the decimal point)
to my name .

Leia

Ally

Hi Allyzerozerozero

Soon I'll be Ally Ever So Regular ;D ;D ;D ;D

ooooo  :-[

ps thanks for the info guys