Attittudes To Risk And Financial Choices Flashcards
attitudes to risk
vary from person to person and can change over the stages of the life cycle
risk adverse definition
some people avoid taking risks in aspects of their life
risk tolerant definition
people who are willing to take more risk
what are the four categories of risk?
- physical risks
- emotional risks
- risk to reputation
- financial risk
physical risks examples
includes hazardous sports and activities such as
- bungee jumping
-parascending
- drinking alcohol
- sunbathing
why are some people more willing to take risks with their personal safety than others?
may be linked to life stage as younger people are often more willing to take physical risks than older people
why are younger people more willing to take physical risks than older people?
their physical fitness is better and they have no dependants
why do people tend to reduce the risks they take when they become responsible for others?
they have to protect their dependants from the financial consequences
emotional risks definition
trusting people such as friends, partners and spouses, and so risking being hurt by that person
how to people overcome emotional risks?
by trying to minimise the financial consequences e.g a prenup
risk to reputation example
borrowing money and not repaying it on time: the borrower’s behaviour affects the way they’re regarded by other people
impact of risk to reputation
impacts the amount of money that the person can borrow in the future and at what cost
financial risk examples
-putting money in an investment that might fall in value
-gambling
how attitudes to financial risk relate to the life cycle
people’s attitude to risk can be influenced by the stage they’ve reached in the life cycle.
- the consequences of risks can also be more damaging at different stages of the life cycle
