A Undestand The Importance Of Managing Personal Finance Flashcards
Functions of money
Unit of account
Means of exchange
Store value
Legal tender
Unit of account
Value on goods and services
Means of exchange
Allows us to trade money to buy goods
Store of value
Use it in the future as it keeps its value
Legal tender
Legal form of payment
Role of money factors
Personal attitudes Life stages Culture Life events External influences Interest rates
Planning expenditure
Money paid out
Debt
Money that you owe
Credit rating
Score given to individuals on how likely they are to repay debts
Solvent
Ability to meet day to day expenditure
Cash explanation
Plus advantages and disadvantages
Notes and coins
Adv - widely accepted
Dis - lost or stolen easily
Debit card explanation
Plus advantages and disadvantages
Take away money directly from a current account
Adv - no need to carry cash
Dis - short lapse between the spending and it being taken out meaning overspending
Credit card explanation
Plus advantages and disadvantages
Delayed payment for goods and services
Adv - loyalty schemes
Dis - overspending
What is a current account
An account with a bank that is designed for frequent money spending. Money can be paid in or withdrawn regularly
Overdraft
Ability to withdraw money that you don’t have in your current account
Hire purchase
Have use of an item immediately but pay for it in regular instalments
Mortgage
Long term loan
What is Individual savings account (ISA)
Saving account where the holder is not charged
what is Deposit and savings account
Account were interest is paid
What are Premium bonds
Scheme that allows individuals to receive cash prizes
What’s a Pension
Long term savings plan
ISA
A/ tax not charged
D/ limit set on annual amount that can be placed
Deposit and savings account
A/ interest is earned
D/ low interest rates
Premium bonds
A/ no loss
D/ no guaranteed return
Saving
Placing money in a secure place so that it grows in value and can be used in future
Investment
Commitment to a business venture in the hope that it generates financial reward
Car insurance
It is a legal requirement
Home insurance
Home covers the physical building and contents covers items in the house
