A1 Flashcards
What is money?
Money is a medium of exchange in the form of coins and banknotes that is generally recognised in payment for goods and services.
What are the 4 functions of money?
Unit of account
Means of exchange
Store of value
Legal tender
What does unit of account mean?
It allows us to place a monetary value on goods and services.
What is an example of unit of account?
Chocolate bar = 75p
New car = £16,000
What does means of exchange mean?
- It allows us to trade
- Business and people can buy and sell goods and services using money
What is an example of means of exchange?
Purchasing your lunch
Paying to go to the cinema
What does store of value mean?
It allows us to use it in the future as it keeps its value.
What is an example of store of value?
Can be money in a bank or a piggy bank which you can use to buy goods and services in the future.
What does legal tender mean?
- It is a legally recognised form of payment.
- Money is widely recognised and used for all sorts of transactions.
What is a use of legal tender?
To buy a house, paying for a haircut or receiving your wages.
What factors affect peoples opinion towards risk?
- How they were brought up
- Life stages
What does life stages mean?
As you grow up from childhood to adulthood your financial needs change.
Your attitude changes as well.
What are the 5 different life stages?
- Childhood
- Adolescence
- Young adult
- Middle age
- Old age
What are the financial needs in childhood?
- Limited needs
- Mainly reliant on parents
- Many want to buy sweets or toys
What are the financial needs in adolescence?
There is a need to be more independent and therefore you are likely to be slightly less reliant on parents.
What are the financial needs in young adult?
- University or starting a career
- Become more financially independent
- looking to settle down and start a family
What are the financial needs in middle age?
- Support family
- Starting saving for children’s futures
What are the financial needs in old age?
- Fewer dependents
- More downsize house
- Fewer financial needs
How does culture change the attitudes towards money?
Different cultures, affected by tradition, religion and ethical belief will have different attitudes.
What is an example of culture affected attitudes?
The older generation of Chinese people have a culture of saving. However the younger generation are willing to spend more and even use credit.
How does life events influence peoples attitudes on money?
If you start to go it to debt as soon as you are able to save money for your future.
How do external influences influence peoples attitudes on money?
These are factors outside your control.
What is an example of external influence?
The state of the economy. In times of recession people will be reluctant to spend and save their money for rainy days.
How do interest rates influence peoples attitudes on money?
High Interest rates = Savers will benefit
High interest rates = loaners will lose out
Low interest rates = Savers lose out
Low interest rates = Loaners will benefit
Why is it important to plan expenditures?
Avoid bankruptcy Maintain a good credit rating Remain solvent (Keep money) Avoid getting into debt Control costs
What does debt mean?
Debt is money owed to someone.
What does credit rating mean?
Score given to individuals on how likely they are to repay debts based upon their previous actions.
What is an example of credit rating?
Experian and Clearscore
What does bankrupt mean?
When an individual or organisation legally states it’s inability to pay its debt.
What does solvent mean?
The ability to meet day to day expenditure and repay debts.
