Learning Outcome A Flashcards
1
Q
What are the 4 functions of money?
A
Unit of account, Means of exchange, Store of value & Legal tender.
2
Q
What is Unit of account?
A
Refers 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.
3
Q
What is Means of exchange?
A
Money allows goods and services to be traded without the need for a barter system (trading with different things).
4
Q
What is Store of value?
A
This refers to 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 something at a later date.
5
Q
What is legal tender?
A
A legally recognised form of payment that is backed by the government.
6
Q
How is the role of money influenced?
List 5 ways.
A
Culture, Life events, Interest rates, Life stages, Personal attitudes, External influences & trends.
7
Q
How does Culture influence the role of money?
A
Religious beliefs or ethical principles.
Some religions do not allow people to take out a loan for their own financial gain.
Some don’t allow any form of borrowing.
8
Q
How do Life Events influence the role of money?
A
Marriage.
Buying a house.
9
Q
How does Interest Rates influence the role of money?
A
Decrease interest rates = good opportunity to borrow, not to save as receive less interest.
10
Q
How does Life Stages influence the role of money?
A
Childhood, Adolescence, Young Adult, Middle Age, Old Age.
11
Q
How do Personal Attitudes influence the role of money?
A
Individuals have their own attitude to money such as :
Risk, Reward, Borrowing, Saving.
12
Q
How do External Influences & Trends influence the role of money?
A
State of the economy.
Jobs.
Market.
13
Q
What are the financial needs of people in the life stage : Childhood?
A
= Limited needs.
= Reliant on parents.
= Purchases sweets & toys.
14
Q
What are the implications of people in the life stage : Childhood?
A
= Money from parents in the form of pocket money.
= Spent on non-essentials.
= May be encouraged to save.
15
Q
What are the financial needs of people in the life stage : Adolescence?
A
= Want independence.
= Less reliant on family.
= Start socialising away from home.
16
Q
What are the implications of people in the life stage : Adolescence?
A
= Still reliant mainly on money from parents.
= May look for a job.
= Get cash as gifts & save for larger purchases.
17
Q
What are the financial needs of people in the life stage : Young Adult?
A
= University / Early career.
= More independent.
= Buying cars, renting, buying homes.
= Starting a family / getting married.
18
Q
What are the implications of people in the life stage : Young Adult?
A
= Student loan.
= Car finance and borrowing.
= Job & mortgage.
= Eligible for credit cards.
19
Q
What are the financial needs of people in the life stage : Middle Age?
A
= Support family.
= Improve lifestyle.
= Save for future.
20
Q
What are the implications of people in the life stage : Middle Age?
A
= Paying a mortgage.
= Paying into a pension.
= High income & high expenses.
21
Q
What are the financial needs of people in the life stage : Old Age?
A
= Fewer dependant.
= Fewer financial needs.
= May downsize.
22
Q
What are the implications of people in the life stage : Old Age?
A
= No mortgage payments.
= Income from pension not a salary.
23
Q
Why is it important to plan expenditure?
List 11 reasons.
A
- To avoid getting into debt.
- To control costs.
- Avoid legal action and/or repossession.
- Remain solvent.
- Maintain a good credit rating.
- Avoid bankruptcy.
- To manage money to fund purchases.
- Generate income and savings.
- Set financial targets and goals.
- Provide insurance against loss or illness.
11.Counter the effects of inflation.
24
Q
What are benefits of managing money?
A
- Surplus money to save.
- Savings can provide security.
- Good credit rating.
- Avoid debt.
25
What are risks of not managing money?
- Get in debt.
- Poor credit rating so cannot borrow.
- No savings / security.
- Unable to pay bills.
26
How many methods of payment is there?
16.
27
What are the 16 methods of payment?
1. Cash.
2. Credit.
3. Debit.
4. Cheque.
5. Contactless.
6. Mobile banking.
7. Direct debit.
8. Standing order.
9. Electronic transfer.
10. Pre-paid card.
11. Charge card.
12. Store card.
13. BACS.
14. CHAPS.
15. SPS.
16. Mobile payment apps.
28
CASH - Explanation
Coins/notes used to purchase goods or services.
29
CASH - Advantages
No interest charges.
Makes it easier to budget.
More widely accepted.
More confident.
30
CASH - Disadvantages
Less secure.
Less convenient.
Cannot be used online - some companies only online.
Not good for large amounts.
31
CREDIT CARD - Explanation
Not linked to your current account, you use credit to buy things and pay for them later.
32
CREDIT CARD - Disadvantages
Interest charges - if not paid in full.
Credit card debt - could encourage overspending.
Set amount of credit.
Charges on cash withdrawals.
33
CREDIT CARD - Advantages
Fraud protection.
Build good credit history.
Help cover unexpected costs (bills, illnesses).
Used online.
Loyalty scheme/cash back.
34
DEBIT CARD - Explanation
A debit card lets you spend and withdraw money straight from your current account.
35
DEBIT CARD - Advantages
Widely accepted.
Convenient - don't need to carry cash.
Relatively secure.
Can be used online.
36
DEBIT CARD - Disadvantages
Potential fraud.
No grace period.
May overspend on card - difficult to budget.
May have minimum spend limits.
Potential to go into an overdraft.
37
CHEQUE - Explanation
A document that orders a bank to pay a specific amount of money from a person's account to the person, in whose name the cheque has been issued to.
38
CHEQUE - Advantages
Safer way to send money.
No limit - good for large transactions, good for postal transactions.
Change date to clear out of account.
Don't need to carry large amounts of cash.
39
CHEQUE - Disadvantages
Takes longer to process.
Error easily made when writing.
Time delay between writing cheque and it being cleared.
40
CONTACTLESS - Explanation
A wireless financial transaction in which the customer makes a purchase by tapping a card or phone on a card reader or contactless terminal.
41
CONTACTLESS - Advantages
Safe.
Convenient.
Quick transaction.
Widely accepted.
42
CONTACTLESS - Disadvantages
Potential security concerns.
Can only be used for small amounts.
Not available everywhere.
May be limited amounts.
43
MOBILE BANKING/ MOBILE PAYMENT APPS - Explanation
The act of making financial transactions on a mobile device e.g. mobile phone of tablet.
44
MOBILE BANKING/ MOBILE PAYMENT APPS - Advantages
Access your money anywhere.
Convenience.
Secure - password or Face ID to access.
45
MOBILE BANKING/ MOBILE PAYMENT APPS - Disadvantages
Potential fraud risks.
Limited features.
46
DIRECT DEBIT - Explanation
An arrangement made with a bank that allows a company to transfer money from a person's account on agreed dates.
Can only be set up by the organisation to which your making the payment to.
Amount can change e.g. gas & electricity.
Can be changed by company e.g. gym membership - they have to tell you.
47
DIRECT DEBIT - Advantages
Convenient - don't forget to pay bills.
Cost-effective as company is guaranteed to get paid.
Quick & easy.
48
DIRECT DEBIT - Disadvantages
If you don't have an overdraft and you do not have enough money in your account, the company may charge you with a late fee as unable to pay on date.
Don't know how much comes out each month.
Amount can vary - difficult to budget.
49
STANDING ORDER - Explanation
A regular fixed payment of the same amount that's paid on a specific date. It allows the bank to take money regularly from your account to pay another account.
Set up by you.
Amount can change it if you manually change it.
50
STANDING ORDER - Advantages
Choose the amount.
Payer gets to set how long the standing order is in place for.
Good for budgeting.
Provides peace of mind.
51
STANDING ORDER - Disadvantages
Payments are taken regardless of customers bank balance - may result in being overdrawn.
Payments continue until cancelled.
52
ELECTRONIC TRANSFER - Explanation
Electronic transfer of money from one bank account to another.
53
ELECTRONIC TRANSFER - Advantages
Convenient.
Fast method of payment.
Payment is recorded.
Free.
54
ELECTRONIC TRANSFER - Disadvantages
You must have the money immediately.
Could transfer to wrong person.
55
PRE-PAID CARD - Explanation
A pay-as-you-go debit card. You add money to the card price when you buy the card.
56
PRE-PAID CARD - Advantages
Easily track your spending.
Avoids overspending.
If lost cannot be overdrawn.
57
PRE-PAID CARD - Disadvantages
Cannot increase your credit score.
May cost to set up.
No protection if lost.
58
CHARGE CARD - Explanation
Like credit-cards - they allow you to pay for goods and services on credit.
Have to pay off full amount every month.
59
CHARGE CARD - Advantages
Help avoid a credit card debt spiral.
No need to carry cash.
Additional perks.
60
CHARGE CARD - Disadvantages
Don't allow you to carry a balance over from one month to the following month.
Annual fixed fee.
61
STORE CARD - Explanation
A type of credit card that is issued by a retailer and can only be used to make purchases in that particular store.
62
STORE CARD - Advantages
May get retailer discounts.
Membership perks.
Short period of interest free credit.
63
STORE CARD - Disadvantages
Not widely accepted.
Interest is charged on balances.
Can encourage debt on consumer goods.
64
BACS - Explanation
(Bankers' Automated Clearing System)
An electronic money transfer between one bank account to another. Normally takes 3 working days.
65
BACS - AdvantageS
No additional costs.
Used in branch, phone, or online.
66
BACS - Disadvantges
Limited out in a single transaction.
67
CHAPS - Explanation
(Clearing House Automated Payment System)
Allows you to make same day, high value electronic payments. Uk accounts.
Usually for very large amounts of cash.
68
CHAPS - Advantages
No limit on the amount in a single transaction.
Same day transfer.
69
CHAPS - Disadvantages
May be charged a fixed fee.
70
FPS - Explanation
(Faster Payment Services)
A way of sending money electronically in the UK. Quickly within 2 hours.
71
FPS - Advantages
Fast.
Convenient.
Secure.
72
FPS - Disadvantages
Payment Limit.
73
What is a current account?
A bank account designed to manage your income and day-to-day spending.
Current accounts facilitate the making of payments (direct debits, standing order).
74
What are common features of a current account?
(9)
- Easy access.
- Higher withdrawal limits.
- Bulk payout facilities.
- Overdraft (some may have).
- Additional extras.
- Paying money in (wages).
- Paying money out (bills).
- Interest paid on the balances.
- Interest charged on negative(-) balances.
75
What are the 4 types of current account?
Standard
Basic
Premium/Packaged
Student
76
What are advantages of STANDARD current accounts?
- No charges on credit balances.
- Range of facilities (debit card, overdraft, cheque book).
- Interest paid on positive balances.
- Convenient for receiving wages and withdrawing money.
77
What are disadvantages of STANDARD current accounts?
- Potentially high charges on overdraft.
- Standard features (no additional perks).
78
What are advantages of BASIC current accounts?
- Available to customers with a low credit rating.
- Easy first step for banking.
- Ability to pay in and withdraw cash.
79
What are disadvantages of BASIC current accounts?
- Limited facilities.
- Some have no debit card.
- No overdraft.
- No interest on the positive balances.
80
What are advantages of PREMIUM/PACKAGED current accounts?
- No charges on credit balances.
- Range of facilities (debit card, overdraft, cheque book).
- Convenient for receiving wages and withdrawing money.
- Additional perks (travel insurance, breakdown cover, phone insurance).
81
What are disadvantages of PREMIUM/PACKAGED current accounts?
- Additional monthly charge.
- May not provide value for money.
- Have to have at least 2-3 direct debits.
- Have to have certain amount going in.
82
What are advantages of STUDENT current accounts?
- Course fees and loans can be easily handled.
- Added extras are designed to meet the needs of students (rail & food card).
- Usually a high interest free overdraft.
83
What are disadvantages of STUDENT current accounts?
- Overdraft can encourage overspending.
- Charges for overspending are high.
84
What are the 6 types of borrowing available?
1. Mortgage
2. Loans (personal)
3. Overdraft.
4. Hire purchase e.g. cars.
5. Credit cards.
6. Payday loans.
85
What are 2 savings?
- ISA.
- Deposit Account.
86
What are 4 investments?
- Premium Bonds.
- Shares.
- Pensions.
- Bonds & Gilts.
87
ISA defintion:
A type of long-term, tax-free savings account.
88
ISA advantages :
- Wide investment choices.
- Transferrable.
- No age limits.
- Tax free interest payments.
- Can put up to £20,000.
89
ISA disadvantages :
- They have a limit, you can only put £20,000 in.
- No joint accounts.
- May be penalties if take out cash.
90
Deposit Account definition :
An account which allows you to deposit your money, safe with the bank.
91
Deposit Account advantages :
- High interest earnings will grow your money over time.
- Withdraw anytime during banks business hours.
- No limit.
92
Deposit Account disadvantages :
- May require a minimum balance to avoid paying fees.
- Relatively low interest rates.
93
Premium Bonds definition :
An annual prize fund rate that funds a monthly prize draw for tax free prizes.
94
Premium Bonds advantages :
- No risk of losing money.
- Instant access.
- Secure.
95
Premium Bonds disadvantages :
- No interest.
96
Shares definition :
A share represents a unit of equity ownership in a company. You can buy shares in Private Limited Companies (PLCs) and Public Limited Companies (LTDs). People may want to invest in shares to earn dividends. People may also want to buy shares as you can buy them for a low price and sell them for a high price.
97
Shares advantages :
- Can help to build wealth overtime.
98
Shares disadvantages :
- There is a risk of losing money if you sell them for a lower price than when you bought them.
99
Pensions defintion :
A pension pays you a regular income to live on when you retire. The account is paid into by you and your employer.
100
Pensions advantages :
- Value of your investment rises.
101
Pensions disadvantages :
- Cannot access until you retire (age 68 - STATE PENSION).
- TAKE EARLY = PENALTY.
102
Bonds & Gilts definition :
Bonds and gilts are a product you buy from a company or the government and in return you gain interest. When you buy a bond you lend money to the issuer in exchange for regular payments and the promise of getting you principal (amount of money you loaned) back at a set time in the future. Gilts are a type of bond issued by the government.
SET AMOUNT OF INTEREST EACH MONTH AND AT THE END OF BOND YOU GET IT BACK
103
Bonds & Gilts advantages :
- Interest (bonds & gilts)
- Low risk as lender is trusted (gilts)
- Provide a source of income (bonds & gilts)
104
Bonds & Gilts disadvantages :
- Offer low rate of interest (gilts)
105
Saving Advantages -
+ Low risk.
+ Interest payments.
+ Security & peace of mind.
106
Saving Disadvantages -
- Inflation can impact spending power.
- Low interest payments.
107
Investment Advantages -
+ Potential for a high return.
+ Could achieve a much higher rate of return compared to interest on savings.
+ Variety of investment opportunities (shares, bonds, property, art).
108
Investment Disadvantages -
- Medium risk.
- No guarantee of return.
- Can go wrong, and some or all of investment can be lost.
109
What are the 6 types of insurance?
1. Car insurance.
2. Home insurance.
3. Life insurance.
4. Travel insurance.
5. Pet insurance.
6. Health insurance.
110
What is Car insurance?
A legal requirement (protected).
111
What are the 3 types of Car insurance?
1. Fully comprehensive.
2. Third party.
3. Third party fire and theft.
112
What does it mean if you have Fully Comprehensive Car insurance?
It pays out if you damage your car, someone else's car or injure someone in an accident, regardless of who is at fault.
113
What does it mean if you have Third Party Car insurance?
Minimum level of car insurance the law allows.
It covers the damage to another person's car, along with the compensation costs for injuries to other people.
114
What does it mean if you have Third Party Fire And Theft Car insurance?
It covers you for any damage made to a third party, their vehicle, or property due to an accident.
It also covers you for damage caused by fire or by your vehicle being stolen.
115
What are advantages of Car insurance?
+ Range of options at different prices.
116
What are disadvantages of Car insurance?
- Have to pay car insurance or you cannot drive.
117
What are the 2 types of Home insurance?
1. Building insurance.
2. Contents insurance.
118
What does it mean if you have Building insurance?
Have to have if have a mortgage.
Covers the physical building itself and incase of fire or structural damage.
119
What does it mean if you have Contents insurance?
Covers items inside the house such as electrical, carpets and furniture.
120
What are advantages of Home insurance?
+ You are financially protected if anything happens.
+ Gives you a peace of mind.
121
What are disadvantages of Home insurance?
- Can be expensive.
- Have to have if you have a mortgage.
122
What is Life insurance?
A policy that pays a lump sum upon death. It is usually required when purchasing a home to ensure the mortgage is covered if the home owner dies.
123
What are advantages of Life insurance?
+ Peace of mind.
+ Financial stability.
+ Cover funeral expenses.
124
What are disadvantages of Life insurance?
- It can be expensive if you are older and have health conditions.
125
What is Travel insurance?
Protects you while abroad. Typically covers illness, holiday and flight cancellations, theft and emergencies.
126
What are advantages of Travel insurance?
+ Compensates for most things.
+ Compensates for lost, stolen, damaged luggage.
+ Covers most medical.
127
What are disadvantages of Travel insurance?
- Can be expensive.
- May not cover certain activities e.g. skiing.
- Some claims may be rejected.
128
What is Pet insurance?
Protects the owners of pets from expenses associated with looking after a pet such as illness or injury of the animal.
129
What are advantages of Pet insurance?
+ Many types.
+ Significantly reduce out-of-pocket veterinary expenses.
130
What are disadvantages of Pet insurance?
- Does not cover pre-existing conditions.
131
What is Health insurance?
Covers individuals, families and employees via a payment plan that may include going to the dentist or opticians.
132
What are advantages of Health insurance?
+ Access high-quality healthcare.
+ Financial security.
133
What are disadvantages of Health insurance?
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