Functions and role of money Flashcards
define unit of account
to anything that allows the value of something to be expressed in an
understandable way, and in a way that allows the value of items to be compared.
define means of exchange
Money allows goods and services to be traded without the need for a barter system.
Barter systems rely on there being a double coincidence of wants between the two people involved
in an exchange.
define store of value
any asset whose “value” can be used now or used in the future i.e. its value can be retrieved at a later date.
This means that people can save now to fund spending at a
later date.
define legal tender
Money that has a legal sanction by the government behind it is called legal tender means
money under the law of land.
It is the money issued by monetary authority or government
which cannot be refused by any person in payment for transactions.
The tender or payment
of it constitutes by law the sufficient discharge of debt.
how can culture affect the role of money
Your religious beliefs or ethical principals may shape the role that money plays in your life and how you view and use it.
For example there are
certain banks that follow religious rules in terms of lending and borrowing
money.
how can life events affect the role of money
The importance of money may change depending on certain life events.
For instance when you first buy a home, the role money plays in your life may now be more important. If you are made redundant then this also will
impact your view of money.
how can external influences affect the role of money
The state of the economy and the jobs market may mean that money plays and bigger or less valuable part of your life. These external influences are out of your control but still impact the role money plays.
how can interest rates affect the role of money
Interest rates may impact what you decide to do with your money.
When interest rates are low this is a good opportunity for borrowing but not for saving as you receive less interest.
However when interest rates are high it may be a good time to increase your savings but would not be a good time
to borrow.
how can persona attitudes affect the role of money
The role of money is impacted by your own personal attitude. Individuals will have their
own attitude to money such as:
Risk
Reward
Borrowing
Savings
what are the financial needs during childhood
Limited needs
Reliant on parents
Purchases sweets & toys
what are the implications of money during childhood
Money from parents in the form of pocket money.
Spent on non essentials
May be encouraged to save
what are the financial needs during adolescence
Want independence
Less reliant on family
Start socialising away from home
what are the implications of money during adolescence
Still reliant mainly on money from parents
May look for a job
Get cash as gifts & save for larger purchases
what are the financial needs of a young adult
University / Early career
More independent
Buying cars, renting, buying homes
Starting a family / getting married
what are the implications of money of an young adult
Student loan
Car finance and borrowing
Job & mortgage
Eligible for credit cards
