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Business- personal and business finance > Functions And Role Of Money > Flashcards

Functions And Role Of Money Flashcards

1
Q

What are the 4 functions of money?

A

Unit of account, Means of exchange, Store of value, Legal tender

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2
Q

Explain how money is a unit of account

A

Allows us to place monetary value on goods and services. The price of the good or service will show the unit of account

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3
Q

Explain how money is a means of exchange

A

Money is a means of exchange because it allows us to trade and buy and sell goods or services

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4
Q

Explain how money is a store of value

A

Money can be stored in a savings account or a piggy bank for later use, as it never loses its value

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5
Q

Explain how money is a legal tender

A

Money is a legally recognised form of payment and therefore is used for many types of transactions

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6
Q

What are the 6 things which impact the role of money?

A

Personal attitudes, Life stages, Culture, Life events, External influences, and Interest rates

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7
Q

Explain how personal attitudes impact the role of money

A

Individuals vary their attitudes towards risk and reward and saving and borrowing. Some people may be willing to take risks whilst others may avoid risk. Some people are less likely to spend than save and vice versa. Some people have different attitudes to borrowing (some will only buy what they can afford, but some will borrow money to get what they want sooner)

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8
Q

What are the different life stages that impact the role of money?

A

Childhood, Adolescence, Young adult, Middle age, Old age

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9
Q

What are children’s financial needs and implications?

A

Reliant on parents but have limited needs. Implications include may be reliant on pocket money, money received from gifts may be spent on toys or saved by parents

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10
Q

What are adolescence financial needs and implications?

A

Want to be more independent. Implications include part time jobs, reliant on pocket money, willing to save up small amounts for bigger purchases

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11
Q

What are young adults financial needs and implications?

A

University or starting a career, buying a car, renting a flat or house, start to settle down (marriage and family). Implications include taking out a student loan for uni, paying for a car, taking out a mortgage, support self and others

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12
Q

What are middle aged financial needs and implications?

A

Support family, improve own lifestyle, access to additional money to spend on luxuries (holidays). Implications include paying a mortgage, saving for specific purposes, and planning for pensions

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13
Q

What are old aged financial needs and implications?

A

Fewer dependents, may downsize houses. Implications may include reliant on pensions, and mortgage may become lower or stop

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14
Q

Explain how culture impacts the role of money?

A

Different cultures will have different attitudes to money

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15
Q

Explain how life events impacts the role of money?

A

Life events within your control (uni, travelling) and life events outside of your control (illness, financial gains or losses) will impact your attitude to money

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16
Q

Explain how external influences impact the role of money

A

Factors outside of your control(economy) may impact wages, prices of goods and services, availability of jobs, amount of tax paid, interest earnt will affect ability to save and spend

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17
Q

Explain how interest rates impact the role of money?

A

Low interest rates means people are more willing to borrow or spend. High interest rates means people are incentive to save

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18
Q

What are the common principles to planning expenditure

A

Control costs - Avoid debt - Maintain a good credit rating - Avoid bankruptcy - Remain solvent - Set financial targets - Manage money to fund purchases

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19
Q

Describe cash as a method of payment

A

Payments in notes and coins

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20
Q

Advantages of cash as a method of payment

A

Confidence, easy to control expenditure, widely accepted

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21
Q

Disadvantages of cash as a method of payment

A

Risk of loss and theft, physical transactions only, inappropriate for large items of expenditure

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22
Q

Describe debit card as a method of payment

A

Allows you to make purchases by card with money taken from a current account

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23
Q

Advantages of debit card as a method of payment

A

Secure, widely accepted, can withdraw cash

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24
Q

Disadvantages of debit card as a method of payment

A

Monitors spending and bank balance, overspending can be costly

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25
Q

Describe credit card as a method of payment

A

Can make purchases on credit (buy now but pay later), repayment are made following the issue of the statement with a minimum amount

26
Q

Advantages of credit card as a method of payment

A

Allows you to defer and spread payment, widely accepted, used online and in store

27
Q

Disadvantages of credit card as a method of payment

A

Interest is charged on the outstanding balance, can encourage overspending

28
Q

Describe cheque as a method of payment

A

A paper transaction giving a bank permission to transfer payment from your account to another account

29
Q

Advantages of cheque as a form of payment

A

Secure method of payment, widely accepted, appropriate for postal transactions

30
Q

Disadvantages of cheque as a method of payment

A

May be charged for each cheque processed, costly if the cheque is not honoured due to insufficient funds

31
Q

Describe electronic transfer as a method of payment

A

Online transfer of money

32
Q

Advantages of electronic transfer as a method of payment

A

Quick method, transfer is almost instant

33
Q

Disadvantages of electronic transfer as a method of payment

A

Risk of loss if incorrectly set up, not appropriate for face-to-face transactions

34
Q

Describe standing order as a method of payment

A

Permission given to the bank to make regular payments, of a set amount, to a third party upon request

35
Q

Advantages of standing order as a method of payment

A

Same amount is paid each time, don’t need to remember to make regular payments

36
Q

Disadvantages of standing order as a method of payment

A

Payments are continuously made unless cancelled, payments are taken regardless of balance so may lead to overdraft

37
Q

Describe direct debit as a method of payment

A

Agreement made with a bank allowing a third party to withdraw money from an account on a set day to pay for goods and services

38
Q

Advantages of direct debit as a method of payment

A

Easy way to make regular payments, amount paid may vary, quick and easy to set up

39
Q

Disadvantages of direct debit as a method of payment

A

The payer determines the amount paid making it difficult for payee to plan and budget, if the payer makes a mistake the responsibility to claim back the money is with the payee

40
Q

Describe pre-paid card as a method of payment

A

Money is uploaded onto a card with transactions then being withdrawn to reduce the balance

41
Q

Advantages of pre-paid card as a form of payment

A

Can set a budget in advance to avoid overspending, effective to control children’s spending and where it is spent, if stolen or lost the loss is limited to the remaining balance

42
Q

Disadvantages of pre-paid card as a form of payment

A

No protection if lost, sometimes requires initial fee to purchase or set up the card

43
Q

Describe contactless card as a method of payment

A

Cards containing antennae allow money to be transferred when the card touches a contactless terminal

44
Q

Advantages of contactless card as a method of payment

A

Gaining in population, quick and easy, secure method

45
Q

Disadvantages of contactless card as a method of payment

A

Often only accepted for small transactions, still not widely accepted as it is new technology

46
Q

Describe a change card as a method of payment

A

Issued by financial institutions allowing customers to delay payments for goods and services for a short period

47
Q

Advantages of change card as a method of payment

A

Reduces risk of running up debt, allows a short period of credit, avoids need to carry cash

48
Q

Disadvantages of a change card as a method of payment

A

Must be paid in full each month, often a fee applied

49
Q

Describe store card as a form of payment

A

Issued by a retail outlet so that customers can delay payments for goods and services

50
Q

Advantages of a store card as a method of payment

A

Allows a period of credit, often offer loyalty schemes, discounts, and special promotions or priviledges

51
Q

Disadvantages of a store card as a method of payment

A

Only accepted in issuing store associations, interest is paid on outstanding balances, encourages overspending

52
Q

Describe mobile banking as a method of payment

A

Ability to carry out financial transactions using mobile devices

53
Q

Advantages of mobile banking as a method of payment

A

Convenient as can be used at anytime and place, secure method of payment

54
Q

Disadvantages of mobile banking as a method of payment

A

Features are limited, does not offer all functionality that internet banking does

55
Q

Describe Banker’s Automated Clearing Service (BACS) as a method of payment

A

System that allows the transfer of payments directly between accounts

56
Q

Advantages of BACS as a method of payment

A

Faster payment allows almost instant transfers, no additional costs (interest)

57
Q

Disadvantages of BACS as a method of payment

A

Faster payment is not offered by all banks and branches, a limit is set on the amount that can be transferred in a single transaction

58
Q

Describe Clearing House Automated Payment Systems (CHAPS) as a method of payment

A

A system that allows the transfer of payments directly from one account to another

59
Q

Advantages of CHAPS as a method of payment

A

Transfers made same day, no limit on the amount that can be transferred in a single transaction

60
Q

Disadvantages of CHAPS as a method of payment

A

Fixed charge per transaction regardless of the amount transferred#

Business- personal and business finance (10 decks)

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