Financial Lifecycle - Chapter 2 Flashcards
What are needs and wants?
Needs: items that we cannot do without in order to survive (e.g. Food).
Wants: Items we would like to have but are not essential to survive (e.g. Computer games).
What is Financial Lifecycle?
A series of stages which most people pass through during their life. Each stage has different financial goals, income and spending.
Name the 6 stages of the Financial Lifecycle Wheel.
Childhood 0-12 yrs > Teen/Young Adult (13-20 yrs) > Starting Career (20-30 yrs) > Setting Up a Home (25-35 yrs) > Growing Career & Family (30-65 yrs) > Retirement (65+ yrs)
These are the 6 stages of the financial lifecycle wheel.
How do we live during Childhood (0-12 yrs)? and what income do we have?
During childhood we live at home and our parent(s) / guardians provide food, clothing and pay household bills.
How do we live during Teen/Young Adult (13-20yrs)? what is our income? And what do people do after finishing school?
During teenage years we still live at home and our parents still provide most of our food, clothing and pay household bills.
We may have pocket money or part-time job for income.
After finishing school most people do further study (college/ apprenticeship). This can be expensive for books, fees, travel.
This is financed by a part-time job, grant or parent(s) / guardians
Explain stage 3 (Starting Career 20-30 yrs).
Most people have their first full time job by early 20’s. You earn your own income so you can pay for your own clothes.
Many people move out of the family home and must pay rent, food and household bills themselves.
Explain stage 4 (Setting up a home 25-35yrs)?
Buying your own home is often the next stage. This is the largest purchase most people will ever make. A new home also needs to be decorated and fitted with furniture.
It should be insured against fire and theft.
Explain stage 5 (Growing a Career & Family)
People usually earn the most income at this stage in their career. E.g. promotions.
However, having children brings new expenses (food, school, entertainment). Child benefit helps to cover some of these costs.
Explain stage 6 (Retirement 65+ yrs)
People do not work their entire lives. They usually retire between 60-70.
This is the end of income but not spending. A pension and savings are therefore important.
People make regular contributions to a pension when they are working which they receive when they retire.
What is a Financial Goal?
Financial Goal is a target that you have for your money to deal with future financial needs.
Example: Saving for a comfortable retirement, saving to go on a family holiday, saving to buy a home.
Name the 1st Financial goal.
Childhood (0-12yrs) Understanding money
Name the 2nd Financial Goal.
Teen/Young Adult (13-20yrs) Start saving plan, Keep basic financial records.
Name the 3rd Financial Goal.
Starting a Career (20-30yrs) Learn about taxes, Keep personal financial records, Save for a big purchase (car or holiday).
Name the 4th Financial Goal.
Setting Up a Home (25-35yrs) Purchase a home, Take out home insurance.
Name the 5th Financial Goal.
Growing Career & Family (35-65yrs) Grow your pension, Financial Security for Family.
