Learning Aim A: Understanding the importance of personal finance Flashcards
What are the functions of money?
Means of Exchange
Store of Value
Legal Tender
Unit of Account
What is meant by interest rates?
The proportion of an amount that is charged as interest to the borrower
What is meant by debt?
Money owed to others
What is meant by going bankrupt?
When an individual/organisation legally states its inability to pay debts
What is meant by staying solvent?
The ability to meet day-to-day expenditure and repay debts
What are the different financial needs at the different stages of life?
Childhood - limited needs, reliant on parents
Adolescence - aiming to be more independent, less reliant on parents
Young Adult - university/career, buying a car/house/rent, starting a family
Middle Age - support family, saving for children, holidays, home improvements
Old Age - fewer dependents, downsizing
What are the different methods of payment?
Cash
Debit/Credit card
Cheque
Electronic Transfer
Direct Debit
Standing Order
Prepaid card
Contactless
Charge card
Store card
Mobile banking
Bankers automated clearing service
Clearing houdr automated payment system
What are the different types of savings?
Individual savings account (ISAs)
Deposit and savings account
Premium bonds
Bonds and gilts
Shares
Pensions
What is meant by insurance?
an agreement with a third party to provide compensation against financial loss in line with the conditions laid down in the policy agreement
What is the role of money?
Personal Attitude
Life Stage
Culture
Life Events
External Influences
Interest Rates
What is a credit rating?
A score given to individuals on how likely they are to repay debts based upon previous actions
What is a shareholder?
Someone who has invested in a company for a return for equity
What is meant by investment?
Speculative commitment to a business venture in the hope that it generates a financial reward
What are the common principles to consider when planning expenditure?
Avoid getting into debt
Control costs
Avoid legal action or repossession
Remain solvent
Maintain a good credit rating
Avoid bankruptcy
Manage money to fund purchases
Generate income and savings
Set financial goals
Provide insurance against loss or illness
Counter the effects of inflation
What are the different types of bank accounts?
Standard account - normal account comes with interest on positive balances
Packaged, premium - offers additional features, cashback, discounts on insurance
Basic - accounts for those with poor credit ratings (no overdraft/interest)
Student - designed for students, student incentives and an interest free overdraft
What are the different types of borrowing?
Overdraft
Personal Loan
Hire Purchase
Mortgage
Credit Card
Payday Loan
