A1 - Functions & Role Of Money Flashcards
Functions and role of money
What are the functions of money?
Unit of account
Legal tender
Store of value
Means of exchange
Definition of unit of account
A value for goods and services
Definition of legal tender
A recognised form of payment
Definition of store of value
Can be saved and spent in the future
Definition of means of exchange
Allows to see and buy goods (trade)
What is money affected by?
Personal attitudes
Life stages
Culture
Life events
External influences
Interest rates
Definition of personal attitudes (money affects)
Risk and reward, saving or spending, borrowing and debt
Definition of life stages (money affects)
childhood to adulthood, changing financial needs and attitudes
Definition of culture (money affects)
Ethnic background affects saving and borrowing
Definition of life events (money affects)
University costs, marriage, property, financial losses
Definition of external influences (money affects)
Economic change, job wages, taxes, affects spending and saving
Definition of interest rates (money affects)
Low rates encourage borrowing and spending, high rates encourage saving
Things to consider when planning expenditure?
Avoid getting into debt
Avoid legal action
Remain solvent (day to day costs)
Keep a good credit rating
Generate income and savings
Provide insurance
Definition of debt
Money owed
Definition of credit rating
A score given to individuals on how likely they are to repay debts based upon previous actions
