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Personal and Business Finance > Learning Outcome A: Understand the importance of managing personal finance > Flashcards

Learning Outcome A: Understand the importance of managing personal finance Flashcards

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1
Q

What are the four functions of money?

A

Unit of account, means of exchange, store of value, legal tender

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2
Q

Unit of account allows us to…

A

place a monetary value on goods and services

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3
Q

What does the price of goods and services show?

A

The unit of account

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4
Q

A chocolate bar is 60p or a new car is £30,000. This is an example of which function of money?

A

Unit of account

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5
Q

Means of exchange allows us to…

A

trade

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6
Q

Means of exchange allows businesses and customers to do what?

A

Buy and sell goods and services using money

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7
Q

Store of value allows us to…

A

use it in the future as it keeps value

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8
Q

You might have money saved in a bank account or ‘piggy bank’ which you can then use to buy goods and services in the future. Which function of money is this an example of?

A

Store of value

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9
Q

Legal tender

A

A legally recognised form of payment

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10
Q

Money is widely recognised and used for all sorts of transactions from buying an ice cream or getting a haircut to paying a deposit on a house and receiving your wages. Which function of money is this an example of?

A

Legal tender

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11
Q

Give 5 examples of factors that affect the role of money

A

Any 5 from personal attitudes, life stages, culture, life events, external influences and interest rates

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12
Q

How can personal attitudes impact the role of money?

A

Individuals will vary in their attitude to risk and reward as well as saving and borrowing. You may be risk averse so you will try to avoid risk, or you may be willing to take more risks and may even enjoy risk taking as you are incentivised by the potential rewards. Equally, you may be more or less likely than others to save your money rather than spend it. This can, in part, depend on your family’s attitude to money, for example whether you were brought up being told savings were good and encouraged to save for a rainy day. You will also be influenced by your attitude to borrowing. You might like to live within your own means and only buy what you can afford. Alternatively, you might be happy to buy goods and services on credit or to borrow money in order to get what you want sooner rather than later

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13
Q

How can life stages impact the role of money?

A

As you grow up from childhood to adulthood, your financial needs change. Each stage of your life has different implications that will affect not just your needs but also your attitude to money

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14
Q

How can culture impact the role of money?

A

Different cultures, affected by tradition, religion, ethical beliefs, will have different attitudes to money. The older generation of Chinese people, for example, have a culture of saving. However, as the country becomes wealthier, young people are more willing to spend and even buy on credit

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15
Q

How can life events impact the role of money?

A

Events throughout your life will impact on your attitude to money. These events may be within your control, for example going to university, travelling abroad, getting married or starting a family, or may be outside your control for example illness, financial gains or losses

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16
Q

How can external influences impact the role of money?

A

Factors outside your control, including the state of the economy, will have an impact. For example, the state of the economy will impact on wages, availability of jobs and the prices of goods and services. Decisions by the government will affect the amount of tax you pay or the amount you receive in benefits. These all directly affect your ability to spend and save

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17
Q

How can interest rates impact the role of money?

A

When interest rates are low you may be more willing to borrow money or spend on credit. When interest rates are high there is more of an incentive to save.

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18
Q

What are the financial needs of someone in the childhood stage of their life?

A

Limited needs - they are mainly reliant on parents. May want to buy sweets or toys

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19
Q

What are the financial needs of someone in the adolescence stage of their life?

A

Want to be more independent - slightly less reliant on parents as want to socialise away from family

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20
Q

Which life stage is a big stage which can encompass a wide range of different scenarios depending upon life choices?

A

Young adult

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21
Q

What are the financial needs of someone in the young adult stage of their life?

A

University or starting a career and looking to be more independent. Buying a car / buying or renting a flat or house. Looking to settle down and maybe get married or start a family

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22
Q

What are the financial needs of someone in the middle age stage of their life?

A

Support family, start saving for children’s futures e.g. university, weddings, etc. Look to improve own lifestyle, e.g. new car or move house. Enjoy having access to additional money to spend on luxuries such as foreign holidays

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23
Q

What are the financial needs of someone in the old age stage of their life?

A

Fewer dependents, may downsize, e.g. move from family home to a smaller retirement home. Fewer financial needs for assets but may be higher for assets but may be higher for services such as healthcare

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24
Q

Give 2 examples of financial implications during the childhood stage of life

A

Any 2 from money received from presents may be spent as attitude will be that this is to buy things you want, may be encouraged to save or parents or grandparents may set up a savings account for you into which they make regular payments, and may rely on pocket money.

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25
Q

Money received from presents may be spent as attitude will be that this is to buy things you want. Which stage of life is this a financial implication of?

A

Childhood

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26
Q

May be encouraged to save or parents or grandparents may set up a savings account for you into which they make regular payments. Which stage of life is this a financial implication of?

A

Childhood

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27
Q

May rely on pocket money. Which stage of life is this a financial implication of?

A

Childhood

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28
Q

Give 2 examples of financial implications during the adolescence stage of life.

A

Any 2 from may look for a part-time job, still partially reliant on pocket money and more likely to receive cash as gifts and may be willing to save up smaller amounts in order to make bigger purchases.

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29
Q

May look for a part-time job. Which stage of life is this a financial implication of?

A

Adolescence

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30
Q

Still partially reliant on pocket money. Which stage of life is this a financial implication of?

A

Adolescence

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31
Q

More likely to receive cash as gifts and may be willing to save up smaller amounts in order to make bigger purchases. Which stage of life is this a financial implication of?

A

Adolescence

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32
Q

Give 3 examples of financial implications during the adolescence stage of life

A

Any 3 from may take a student loan if going to university, borrow money to pay for a car or purchase one on a finance deal, may be looking at taking out a mortgage, need to earn money to support self and others, eligible for credit and debit cards

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33
Q

May take a student loan if going to university. Which stage of life is this a financial implication of?

A

Young adult

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34
Q

Borrow money to pay for a car or purchase one on a finance deal. Which stage of life is this a financial implication of?

A

Young adult

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35
Q

May be looking at taking out a mortgage. Which stage of life is this a financial implication of?

A

Young adult

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36
Q

Need to earn money to support self and others. Which stage of life is this a financial implication of?

A

Young adult

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37
Q

Eligible for credit and debit cards. Which stage of life is this a financial implication of?

A

Young adult

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38
Q

Give 3 examples of financial implications during the middle age stage of life

A

Any 3 from savings accounts for specific purposes, paying a mortgage, planning for own future through pensions and retirement plans and likely to be the stage of life when income peaks but matched with high expenditure.

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39
Q

Savings accounts for specific purposes. Which stage of life is this a financial implication of?

A

Middle age

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40
Q

Paying a mortgage. Which stage of life is this a financial implication of?

A

Middle age

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41
Q

Planning for own future through pensions and retirement plans. Which stage of life is this a financial implication of?

A

Middle age

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42
Q

Likely to be the stage of life when income peaks but matched with high expenditure. Which stage of life is this a financial implication of?

A

Middle age

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43
Q

Give an example of financial implication during the old age stage of life

A

Any from mortgage payments stop or become lower and less income as reliant on pension rather than a salary

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44
Q

Mortgage payments stop or become lower. Which stage of life is this a financial implication of?

A

Old age

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45
Q

Less income as reliant on a pension rather than a salary. Which stage of life is this a financial implication of?

A

Old age

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46
Q

Having limited needs is a financial implication of which stage of life?

A

Childhood

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47
Q

Mainly reliant on parents is a financial implication of which stage of life?

A

Childhood

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48
Q

May want to buy sweets or toys is a financial implication of which stage of life?

A

Childhood

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49
Q

Want to be more independent is a financial implication of which stage of life?

A

Adolescence

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50
Q

Slightly less reliant on parents as want to socialise away from family is a financial implication of which stage of life?

A

Adolescence

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51
Q

University or starting a career is a financial implication of which stage of life?

A

Young adult

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52
Q

Looking to be more independent is a financial implication of which stage of life?

A

Young adult

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53
Q

Buying a car and buying or renting a flat or house is a financial implication of which stage of life?

A

Young adult

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54
Q

Looking to settle down and maybe get married or start a family is a financial implication of which stage of life?

A

Young adult

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55
Q

Supporting family is a financial implication of which stage of life?

A

Middle age

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56
Q

Starting saving for children’s futures e.g. university, weddings, etc is a financial implication of which stage of life?

A

Middle age

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57
Q

Looking to improve own lifestyle e.g. new car or move house is a financial implication of which stage of life?

A

Middle age

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58
Q

Enjoying having access to additional money to spend on luxuries such as foreign holidays is a financial implication of which stage of life?

A

Middle age

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59
Q

Having fewer dependents is a financial implication of which stage of life?

A

Old age

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60
Q

May downsize, e.g. move from family home to a smaller retirement home is a financial implication of which stage of life?

A

Old age

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61
Q

Having fewer financial needs for assets but may be higher for services such as health care is a financial implication of which stage of life?

A

Old age

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62
Q

Interest rate

A

The proportion of an amount that is charged as interest to the borrower

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63
Q

Debt

A

Money owed

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64
Q

Credit rating

A

A score given to individuals on how likely they are to repay debts based upon their previous actions

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65
Q

Bankrupt

A

When an organisation or individual legally states its inability to repay debts

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66
Q

Solvent

A

The ability to meet day-to-day expenditure and repay debts

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67
Q

You should look to control costs in order to avoid getting into ____ in the future

A

debt

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68
Q

If your spending is too high this may mean more money is going out than coming in which will lead to what?

A

The build-up of debt

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69
Q

True/False: Interest is charged on debt

A

True

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70
Q

If debts are not paid or not paid on time, this will affect your ______ rating

A

credit

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71
Q

What will a poor credit rating affect?

A

Your ability to borrow in the future

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72
Q

In extreme cases, an individual may be declared ________ if their debts have spiralled out of control

A

bankrupt

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73
Q

To remain _______, you should set financial targets and goals

A

solvent

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74
Q

What should financial targets and goals consider?

A

How much money you want to earn and place limits on how much you will spend

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75
Q

What do savings help to provide?

A

A safety net for the future, for example to provide insurance against loss or injury

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76
Q

Inflation in general rises/falls

A

rises

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77
Q

Give 6 examples of common principles of planning personal finances

A

Any 6 from avoid getting into debt, control costs, avoid legal action and/or repossession, remain solvent, maintain a good credit rating, avoid bankruptcy, manage money to fund purchases, generate income and savings, set financial targets and goals, provide insurance against loss or illness and counter the effects of inflation

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78
Q

One common principle to be considered in planning personal finance is avoid getting into ____

A

debt

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79
Q

One common principle to be considered in planning personal finance is control _____

A

costs

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80
Q

One common principle to be considered in planning personal finance is avoid legal action and/or ____________

A

repossession

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81
Q

One common principle to be considered in planning personal finance is remain _______

A

solvent

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82
Q

One common principle to be considered in planning personal finance is maintain a good ______ rating

A

credit

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83
Q

One common principle to be considered in planning personal finance is avoid __________

A

bankruptcy

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84
Q

One common principle to be considered in planning personal finance is manage money to ____ purchases

A

fund

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85
Q

One common principle to be considered in planning personal finance is generate ______ and _______

A

income and savings

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86
Q

One common principle to be considered in planning personal finance is set financial _______ and _____

A

targets and goals

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87
Q

One common principle to be considered in planning personal finance is provide insurance against ____ or _______

A

loss or illness

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88
Q

One common principle to be considered in planning personal finance is counter the effects of _________

A

inflation

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89
Q

Give 7 examples of different methods of payment

A

Any 7 from cash, debit card, credit card, cheque, electronic transfer, direct debit, standing order, pre-paid card, contactless card, charge card, store card, mobile banking, BACS, CHAPS

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90
Q

Explain the payment method of cash

A

Notes and coins in a wide range of denominations

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91
Q

Explain the payment method of debit cards

A

Issued by banks with payments for goods and services being deducted directly from a current accoutn

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92
Q

Explain the payment method of credit cards

A

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

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93
Q

Explain the payment method of cheques

A

A written order to a bank to make a payment for a specific amount of money from one person’s account to another account

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94
Q

Explain the payment method of electronic transfer

A

Payment is transferred directly from one bank account to another

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95
Q

Explain the payment method of direct debit

A

An agreement made with a bank allowing a third party to withdraw money from an account on a set day to pay for goods or services received, e.g. pay a gas bill

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96
Q

Explain the payment method of standing order

A

An agreement made with a bank to transfer a fixed sum of money to a third party account on a set date on a regular basis, e.g. pay £30 for a phone contract each month

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97
Q

Explain the payment method of pre-paid card

A

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

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98
Q

Explain the payment method of contactless card

A

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

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99
Q

Explain the payment method of charge card

A

Issued by financial institutions allowing customers to delay payments for goods and services for a short period of time. The balance must be paid off in full when a statement is issued

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100
Q

Explain the payment method of store card

A

Issued by a retail outlet so that customers can delay payments for goods and services (similar to a credit card but only accepted by stores specified)

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101
Q

Explain the payment method of mobile banking

A

The ability to carry out financial transactions using mobile devices such as phones or tablets

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102
Q

Explain the payment method of BACS

A

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

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103
Q

Explain the payment method of CHAPS

A

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

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104
Q

Give 3 advantages of the payment method: cash

A

Any 3 from most widely accepted form of exchange, physical not virtual, consumers feel confident when using and makes budgeting easier

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105
Q

Give 3 advantages of the payment method: debit card

A

Any 3 from no need to carry cash, secure method of payment with low risk of theft, widely accepted, offers a degree of protection on purchases and suitable for online transactions

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106
Q

Give 3 advantages of the payment method: credit card

A

Any 3 from allows a period of credit that is interest free, e.g. one month, most cards are widely accepted, loyalty schemes are often offered, e.g. collection points or cash back, offers a degree of protection on purchases and suitable for online transactions

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5
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107
Q

Give 2 advantages of the payment method: cheque

A

Any 2 from low risk form of payment as the cheque can only be cashed by the named payee, widely accepted for face-to-face and postal transactions and no need to provide change as it can be written for an exact amount

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108
Q

Give 2 advantages of the payment method: electronic transfer

A

Any 2 from almost instantaneous, provides a record of payment, no additional costs incurred and easy to use for one-off and more frequent transactions

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109
Q

Give 2 advantages of the payment method: direct debit

A

Any 2 from an easy way to make regular payments, e.g. utility bills, amount paid can vary to ensure the payment matches the amount required by the vendor and quick and easy to set up

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110
Q

Give 2 advantages of the payment method: standing order

A

Any 2 from the same amount is paid each time making it easier for the payee to plan and budget, easy both to set up and to cancel and no need to remember to make regular, standard payments

111
Q

Give 2 advantages of the payment method: pre-paid card

A

Any 2 from can set a budget in advance to avoid overspending, if lost or stolen the loss is limited to the remaining balance and an effective way of controlling the amount spent by children and where money is spent, e.g. upload money for school lunches or transport

112
Q

Give 2 advantages of the payment method: contactless card

A

Any 2 from gaining in popularity, secure method of making payments and quick and easy

113
Q

Give 2 advantages of the payment method: charge card

A

Any 2 from reduces risk of running up debts, allows a short period of credit, avoids the need to carry cash and often offers additional perks

114
Q

Give 2 advantages of the payment method: store card

A

Any 2 from allows a short period of credit that is interest free, e.g. one month and often offer loyalty schemes, discounts and special promotions or privileges

115
Q

Give 2 advantages of the payment method: mobile banking

A

Any 2 from convenient as can be used at any time and place and secure

116
Q

Give 2 advantages of the payment method: BACS

A

Any 2 from faster payment allows almost instant transfers that are guaranteed within 2 hours, can be accessed in a number of ways including in a branch, over the telephone and online and no additional costs

117
Q

Give 2 advantages of the payment method: CHAPS

A

Any 2 from Transfers can be made the same day assuming instructions are received prior to a set time, e.g. 2pm at Barclays and there is no limit on the amount that can be transferred in a single transaction

118
Q

Give 2 disadvantages of the payment method: cash

A

Any 2 from can be lost or stolen, threat of counterfeit, only really appropriate on purchase up to a certain amount and cannot be used online

119
Q

Give 2 disadvantages of the payment method: debit card

A

Any 2 from short time lapse between making the transaction and the money being withdrawn from the customer’s account may result in overspending and not accepted or appropriate for small transactions

120
Q

Give 2 disadvantages of the payment method: credit card

A

Any 2 from interest is charged on balances not paid off within a month, can encourage a customer to overspend and get into debt, interest is charged on cash withdrawals and a limit will be set on the amount of credit allowed

121
Q

Give 2 disadvantages of the payment method: cheque

A

Any 2 from expensive for the consumer if the bank refuses to clear the cheque, i.e. it ‘bounces’, the time delay between writing the cheque and it being cashed could cause a consumer to go overdrawn, viewed as old fashioned and easy for the consumer to make errors when writing the cheque which will create problems for both the consumer and the recipient

122
Q

Give 2 disadvantages of the payment method: electronic transfer

A

Any 2 from risk of loss if the transfer is incorrectly set up and not appropriate for face-to-face transactions

123
Q

Give 2 disadvantages of the payment method: direct debit

A

Any 2 from if the payer makes a mistake and takes too much it is the payee’s responsibility to claim back the money and the payer determines the amount paid each time making it difficult for the payee to plan and budget

124
Q

Give 2 disadvantages of the payment method: standing order

A

Any 2 from payments are taken regardless of the customer’s balance which could lead to the unplanned use of an overdraft facility and payments will continue to be made unless cancelled

125
Q

Give 2 disadvantages of the payment method: pre-paid card

A

Any 2 from no protection if lost and sometimes requires an initial fee to purchase or set up the card, e.g. Oyster travelcards

126
Q

Give 2 disadvantages of the payment method: contactless card

A

Any 2 from often only accepted for relatively small transactions and still not widely accepted as seen as new technology

127
Q

Give 2 disadvantages of the payment method: charge card

A

Any2 from must be paid in full each month and often an annual fixed fee is applied

128
Q

Give 2 disadvantages of the payment method: store card

A

Any 2 from only accepted in issuing store or linked associations, interest is paid on outstanding balances and can encourage overspending and result in a consumer getting into debt - particularly if they hold multiple cards

129
Q

Features of mobile banking are still limited and hence mobile banking does not offer all of the functionality of…

A

internet banking

130
Q

Give 2 disadvantages of the payment method: BACS

A

Any 2 from faster payment is not offered by all banks or branches and the customer may therefore have to default to BACs which can take three days to transfer payments and a limit is set on the amount that can be transferred in any single transaction

131
Q

Give a disadvantage of the payment method: CHAPS

A

Normally, there is a fixed charge per transaction regardless of the amount transferred

132
Q

Current account

A

An account with a bank or building society that is designed for frequent use

133
Q

With a current account, money can be paid in and withdrawn how often?

A

On a daily basis

134
Q

True/False: You need to give notice to pay in and withdraw from a current account

A

False, there is no need to give notice

135
Q

Give 2 examples of things that people may use a current account for?

A

Any 2 from to get wages paid into, to pay cheques into and out of, pay bills and other frequent expenses and to withdraw cash

136
Q

Give 3 examples of features of current accounts

A

Any 3 from rate of interest paid on any positive balance, rate of interest charged on a negative balance, an overdraft limit, charges on unauthorised overdrafts and additional incentives

137
Q

This is the normal current account offered to customers with a reasonable credit rating. It includes standard features such as the ability to pay and withdraw money, cheque book, debit card, interest payments on positive balances and a pre-agreed overdraft limit. Which type of current account does this describe?

A

Standard

138
Q

This account offers additional features to a standard account, for example car and house insurance, credit card protection, breakdown cover and cash back on certain transactions. The bank may have additional charges for these accounts so it is important that you check whether you are being offered a good deal or not. Which type of current account does this describe?

A

Packaged/premium

139
Q

This account offers only limited features designed for those customers who may otherwise find it difficult to open a bank account due to poor credit ratings. It will not offer an overdraft and will not pay interest on positive balances. Which type of current account does this describe?

A

Basic

140
Q

This account is designed specifically to meet the needs of learners. Common features include an agreed overdraft limit and incentives to join the bank, for example free rail cards or cash. Banks are keep to attract learners because once a young person has joined a bank they tend to stay with that bank for life. However, this is less often the case now due to the availability of information on the Internet and the ease with which banks can be changed. Which type of current account does this describe?

A

Student

141
Q

Give 2 advantages of a standard current account

A

Any 2 from no charges on credit balances, offers the holder a wide range of facilities including a cheque book, debit/cash card and possibly an overdraft facility, convenient for receiving regular payments e.g. wages and making regular withdrawals

142
Q

Give 2 disadvantages of a standard current account

A

Any 2 from potentially high charges on the use of an overdraft facility and standard features only, i.e. no additional perks

143
Q

Give 2 advantages of a packaged, premium current account

A

Any 2 from no charges on credit balances, offers the holder a wide range of facilities including a cheque book, debit/cash card and possibly an overdraft facility, convenient for receiving regular payments, e.g. wages and making regular withdrawals, offers the holder additional perks at a packaged price cheaper than acquiring them individually (standard additional features include things such as holiday/travel insurance, break down cover and phone protection)

144
Q

Give 2 disadvantages of a packaged, premium current account

A

Any 2 from additional monthly charge is frequently applied and the package offered may not offer value for money or meet the needs of the individual account holder

145
Q

Give 2 advantages of a basic current account

A

Any 2 from available to customers with a low credit rating and offers an easy first step for individuals to gain access to basic banking facilities, i.e. the ability to pay in and withdraw cash

146
Q

Give a disadvantage of a basic current account

A

Limited facilities e.g. no debit card or overdraft facility

147
Q

Give 2 advantages of a student current account

A

Any 2 from course fees and student loans can be easily handled and bonuses offered are designed to meet the needs of learners, e.g. discounts on travel or small lump sum cash payment

148
Q

Give 2 disadvantages of a student current account

A

Any 2 from overdraft facilities could encourage overspending, charges for overspending are high and limited facilities

149
Q

An overdraft allows you to…

A

withdraw money that you do not have from a current account

150
Q

What kind of needs may an overdraft be suitable for?

A

Short term needs such as shortage of cash just before payday

151
Q

What do personal loans give you the ability to do?

A

Borrow a set amount of money, normally for a specific purpose, to be repaid in regular instalments with interest

152
Q

True/False: Personal loans have no interest

A

False, they do

153
Q

Why do most people take out personal loans?

A

For a specific purpose

154
Q

How are personal loans paid off?

A

In regular instalments with interest

155
Q

What may a personal loan be suitable to fund the purchase of?

A

A high price item such as a car or to make home improvements

156
Q

What does hire purchase allow you to do?

A

Have use of an item immediately it pay for it in regular instalments

157
Q

How do you pay off higher purchase?

A

In regular instalments

158
Q

What is hire purchase suitable for?

A

One-off or infrequent purchases, for example a TV or fridge freezer

159
Q

Is a mortgage a short or long-term loan?

A

Long-term

160
Q

What are mortgages usually to fund?

A

The purchase of assets

161
Q

What are mortgages usually secured against?

A

A house

162
Q

What are mortgages suitable for?

A

Assets that will maintain value for a long time and cannot normally be paid for outright

163
Q

Describe how a credit card works

A

Goods are paid for by card and can be paid for either at the end of a set period, normally a month, when a statement is issued or over time with the card provider stating a minimum payment each month. The minimum payment will be a percentage of the balance on the credit card

164
Q

When are credit cards paid for?

A

At the end of a set period, normally a month

165
Q

When may credit cards be suitable?

A

When buying high price goods or services, for example a holiday, or at times when expenses are higher than usual, for example Christmas, to spread the costs of spending

166
Q

Credit cards may be used for convenience and safety as an alternative to using what?

A

Cash

167
Q

Are payday loans a short or long-term loan?

A

Short-term

168
Q

What are payday loans used for?

A

To bridge the gap between now and receiving a wage

169
Q

Payday loans are normally only available for relatively small/large amounts at very low/high rates

A

small, high

170
Q

When may payday loans be suitable?

A

In an emergency to meet cash shortages

171
Q

Give 2 advantages of an overdraft

A

Any 2 from interest is charged only on the amount outstanding, can be paid off without penalties, an overdraft facility can be prearranged and only used if needed and provides a short term solution to cash flow problems

172
Q

Give 2 advantages of personal loans

A

Any 2 from regular, pre-agreed payments make planning and budgeting easy, as a general rule these would only be issued to individuals who can prove their ability to make the repayments and useful when looking to purchase a specific item of medium to high value, e.g. a car or home improvement

173
Q

Give 2 advantages of hire purchase

A

Any 2 from spreads the cost of an expensive item over a period of time, credit is secured against a specific item and often allows a customer to afford something now that they could not otherwise afford, e.g. four years interest free on furniture

174
Q

Give an advantage of a mortgage

A

Any from allows the customer to spread the cost of expensive items over a long period of time, e.g. the purchase of a house is often spread over 25 years and interest rates, depending upon the mortgage deal, can sometimes be fixed or tracked against a standard rate of interest reducing the risk of fluctuations

175
Q

Give 2 advantages of a credit card

A

Any 2 from the credit card holder can pay above the minimum rate if they wish and hence speed up the rate of repayment and reduce interest incurred, can be used for items of multiple sizes and add value, to a limit, without the need to secure against an asset and provides some protection on purchases

176
Q

Give an example of a payday loan

A

Any from help solve immediate short term cash flow problems and relatively easy to secure

177
Q

Give 2 disadvantages of an overdraft

A

Any 2 from when used, interest charges are often high, additional penalty charges for going over a pre-arranged limit are often very high, not the cheapest form of borrowing and the ease with which these can be obtained could encourage overspending

178
Q

Give a disadvantage of personal loans

A

Any from may have to be secure3d against an asset which means if payments are missed the asset may be taken to cover the outstanding debt and not really suitable for short-term loans

179
Q

Give 2 disadvantages of hire purchase

A

Any 2 from interest charges may be higher than other traditional loans, ownership of the asset may legally be kept by the seller until the final payment is made and agreements can be manipulated to make a purchase seem deceptively appealing

180
Q

Give 2 disadvantages of mortgages

A

Any 2 from interest payments, although sometimes fixed for a short period of time, can vary - this seriously affects the borrower’s ability to repay or meet other expensive, failure to meet repayments may lead to a loss of a home and seriously affect an individual’s future credit rating and penalties may be applied to early repayment

181
Q

Give a disadvantage of credit cards

A

Any from can encourage overspending, sometimes on unnecessary purchases, and can lead to debt problems and interest rates are often higher than on a personal loans

182
Q

Give a disadvantage of a payday loan

A

Interest rates are very high and the cumulative amount to be repaid can quickly spiral out of control

183
Q

What does ISA stand for?

A

Individual savings accounts

184
Q

Individual savings accounts (ISA)

A

This is a type of saving account where the holder is not charged income tax on the interest received

185
Q

Deposit and savings accounts

A

These are accounts where interest is paid on the balance and normally the holder needs to give notice before withdrawing funds

186
Q

Premium bonds

A

A government scheme that that allows individuals to save up to a set amount by buying bonds. The bond holder does not receive interest on their savings but each bond is placed into a regular draw for cash prizes

187
Q

Bonds and gilts

A

These are fixed term securities where the lender (the individual) lends money to companies and governments in return for interest payments. The money is invested for a specified period of time

188
Q

Shares

A

Shares involve investment in a business in return for equity, i.e. the shareholder becomes a part owner of the business. The shareholder will receive dividends from the company’s profits and will also want the value of the shares to increase

189
Q

Pensions

A

These are long-term savings plans where individuals make regular contributions, called premium payments, throughout their working life. This is then repaid as either a lump sum, regular payments or a combination of the two upon retirement. Pensions can be state, company or private.

190
Q

Expenditure

A

The amount of money you need to cover all your expenses/outgoings, e.g. your mortgage and bills.

191
Q

Shareholder

A

Someone who has invested in a company in return for equity, i.e. a share of the business

192
Q

True/False: ISA account holders are charged income tax on the interest received

A

False: they are not charged income tax on the interest received

193
Q

True/False: Deposit and savings account holders usually need to give notice before withdrawing funds

A

True

194
Q

Premium bonds are a __________ scheme

A

government

195
Q

Premium bonds allow individuals to save up to a set amount by…

A

buying bonds

196
Q

With premium bonds, does the bond holder receive interest on their savings?

A

No

197
Q

With premium bonds, each bond is placed into a regular…

A

draw for cash prizes

198
Q

Bonds and gilts are fixed term securities where the lender lends money to who?

A

Companies and governments

199
Q

Bonds and gilts are fixed term securities where the lender lends money to who companies and governments in return for what?

A

Interest payments

200
Q

How long are bonds and gilts invested for?

A

A specified period of time

201
Q

Shares involve investment in a business in return for what?

A

Equity

202
Q

Equity

A

The shareholder becomes a part owner of the business

203
Q

What does a shareholder receive from a company’s profits?

A

Dividends

204
Q

Why will a shareholder want the value of shares to increase?

A

It will receive dividends

205
Q

Pensions are short/long-term savings plans

A

long

206
Q

Pensions are long-term savings plans where individuals make regular contributions called what through their working life?

A

Premium payments

207
Q

How can pensions be repaid?

A

As a lump sum, regular payments or a combination of the two upon retirement

208
Q

Pensions can be s____, c______ or p______

A

state, company or private

209
Q

Give an advantage of an ISA as a type of saving and investment

A

Any from tax is not charged on interest earned allowing the saver to keep all of the rewards for saving and interest rates are sometimes slightly higher than in alternative savings accounts

210
Q

Give 2 disadvantages of an ISA as a type of saving and investment

A

Any 2 from notice is often required to make withdrawals and according to the agreement there may be a limit set on the number of withdrawals made, if the saver makes more withdrawals than set out in the agreement then the penalty may cancel out the tax savings and there is a limit set on the annual amount that can be placed in an ISA

211
Q

Give an advantage of deposit and savings accounts as a type of saving and investment

A

Any from interest is earned on positive balances and accounts sometimes require regular deposits of a set amount forcing the saver to follow a savings plan

212
Q

Give a disadvantage of a deposit and savings account as a type of saving and investment

A

Any from interest earned is taxed and the percentage rate of interest paid on savings is likely to be lower than interest to be paid on borrowing, therefore the benefits of savings are lost if the customer is borrowing at the same time

213
Q

Give an advantage of premium bonds as a type of saving and investment

A

Any from chance of winning substantially more than could be earned in interest and can be easily withdrawn with no loss or penalty

214
Q

Give 2 disadvantages of premium bonds as a type of saving and investment

A

Any 2 from no guaranteed return on investment, maximum amount reviewed annually by the government and the amount invested, assuming zero or low returns, loses value due to inflation

215
Q

Give an advantage of bonds and gilts as a type of saving and investment

A

Any from regular fixed returns and spreads risk across a range of markets

216
Q

Give a disadvantage of bonds and gilts as a type of saving and investment

A

Any from risk of losing some or all of the value of the investment if the bond or guilt value falls and interest payments may not be received if the issuer is unable to make payments

217
Q

Give 2 advantages of shares as a type of saving and investment

A

Any 2 from share prices fluctuate offering a potential high reward, shareholders’ returns can include dividend payments and an increase in share value, as part owners in a business there may be additional benefits including discounts and special offers and for some investors share ownership is more than just a way of saving - it is a pastime and creates interest

218
Q

Give 2 disadvantages of shares as a type of saving and investment

A

Any 2 from share prices fluctuate offering a potential high risk and there is no guarantee of any reward or return as all of an investment can be lost

219
Q

Give 2 advantages of pensions as a type of saving and investment

A

Any 2 from encourages individuals to save throughout their working life for retirement, depending upon the policy, an individual’s savings may be boosted by an employer’s contributions increasing the final value of the saving and regular payments are deducted, sometimes at source, meaning the individual is tied into making regular contributions

220
Q

Give 2 disadvantages of pensions as a type of saving and investment

A

Any 2 from movement between jobs may mean that one policy stops and another starts, thus reducing the overall cumulative value of the savings, final outcome is difficult to predict and if compulsory payments are deducted this may affect short-term living standards

221
Q

Saving and investment both involve forfeiting current spending in the hope of gaining what?

A

Greater wealth in the future

222
Q

Saving

A

Placing money in a secure place so that it grows in value and can be used in the future

223
Q

Investment

A

Speculative commitment to a business venture in the hope that it generates a financial reward in the future

224
Q

Saving involves placing any extra money in a secure place where what happens?

A

It will hopefully grow as it gains interest

225
Q

Why do most people save their money?

A

Often with a view to buying a specific good in the future or to support a planned future lifestyle

226
Q

Why do many parents start to save when a child is born?

A

To pay future college fees or to support the child as he or she grows up

227
Q

Investment involves making a commitment to a project in the hope that what?

A

It is successful and a healthy return is made on the investment

228
Q

Which is the most risky: saving or investing?

A

Investing

229
Q

Which can be the most rewarding: saving or investing?

A

Investing

230
Q

Which is the least risky: saving or investing?

A

Saving

231
Q

Outline the risks involved when saving

A

Low/zero risk as money saved is guaranteed to be available in the future, however inflation can reduce the spending power of money saved

232
Q

Outline the rewards involved when saving

A

Interest payments and financial security/peace of mind

233
Q

Outline the risks involved when investing

A

Investments can go wrong and all or some of the value may be lost. There is also no guarantee of a return

234
Q

Outline the rewards involved when saving

A

if successful, there is potential for a high financial return (significantly higher than could be earned in interest) and investing can be exciting. Some people will invest in shares, antiques, art or foreign currencies, for example, in the hope of high returns

235
Q

Insurance

A

An agreement with a third party to provide compensation against financial loss in line with the conditions laid down in the policy agreement

236
Q

Premiums

A

Regular payments made by an individual or company to an insurance provider in return for protection

237
Q

Insurance policies cover the costs of loss, damage or illness up to prearranged levels in return for regular payments called what?

A

Premiums

238
Q

Give 5 examples of types of insurance that are available

A

Any 5 from car, home and contents, life assurance and insurance, travel, pet. mobile and health

239
Q

When can insurance be taken out?

A

Against anything deemed to have a worth or where there is a risk of financial loss

240
Q

True/False: A common type of insurance now is against mobile devices such as your mobile phone

A

True

241
Q

The premium paid on insurance will vary depending upon what?

A

The amount of cover provided and the amount of risk as assessed by the insurance provider

242
Q

True/False: It is a legal requirement to insure any car that is on the road

A

True

243
Q

True/False: Car insurance doesn’t cover theft

A

False, it covers theft and accidents

244
Q

What does the degree of cover with car insurance depend on?

A

Whether the policy is third party or fully comprehensive

245
Q

Who does car insurance protect?

A

The drier, passengers and other road users

246
Q

What does home insurance cover?

A

The physical building, for example against fire

247
Q

What does contents insurance cover?

A

Physical items in a house including electrical equipment, furniture and personal items

248
Q

If there are individual items of high value in a house, when it comes to contents insurance these may need to be _________ on the ______

A

specified, policy

249
Q

True/False: With home and contents insurance, items can be insured when a person is using them away from home as well as when inside the house

A

True

250
Q

Life assurance is an ongoing policy to pay…

A

a lump sum upon death

251
Q

True/False: Life insurance is a policy for a set period of time

A

True

252
Q

Life insurance is a policy for a set period of time to pay a lump sum if what happens?

A

You die within that time period

253
Q

True/False: Mortgage lenders prefer for people to not have life insurance

A

False, they often insist upon life insurance

254
Q

Why do mortgage lenders often insist upon life insurance for the same period as the mortgage?

A

To secure repayment of the mortgage if the holder dies while monies are still owed

255
Q

What does travel insurance do?

A

Protects individuals or groups while abroad

256
Q

Give 2 examples of different ways travel insurance policies can be purchased

A

Any 2 from to cover a specific trip, multiple trips or for all trips within a year

257
Q

What does travel insurance cover generally include?

A

Loss or theft of property, illness, cancellation and emergencies up to predetermined limits

258
Q

Why do specific types of holiday or activities such as skiing or extreme sports require additional travel insurance cover?

A

Due to the high level of risk associated

259
Q

What does pet insurance protect pet owners against?

A

Some or all of the expenses associated with treating ill or injured pets, i.e. vets’ fees

260
Q

What does health insurance cover individuals, families or employees against?

A

Medical expenses including assessments, treatments and loss of earnings

261
Q

Why may people in the UK wish to take out health insurance?

A

To receive payments if, for example, time is spent in hospital, or to receive private treatment

262
Q

True/False: Health insurance can include payment plans to cover routine visits such as to the dentist or optician with a percentage of expenses paid

A

True

263
Q

Give 2 advantages of car insurance

A

Any 2 from meets legal requirements, protects self against theft or damage and protects against damage caused to a third party

264
Q

Give a disadvantage of car insurance

A

Any from premiums can be high depending upon assessed level of risk, e.g. expensive for young drivers and normally there is an excess that must be paid, e.g. first £500 of all damages is still the responsibility of the car owner

265
Q

Give an advantage of home and contents insurance

A

Any from protects against damage which may otherwise be too expensive to repair resulting in the loss of a home and contents are protected both when inside the house and outside

266
Q

Give a disadvantage of home and contents insurance

A

Premiums are an additional expense to home ownership and some items cannot be replaced due to a value beyond the financial worth, e.g. a painting or inherited piece of jewellery

267
Q

Give an advantage of life assurance and insurance

A

Provides peace of mind to family following the bereavement of a homeowner

268
Q

Give a disadvantage of life assurance and insurance

A

If the policy holder does not die within the period of life insurance no payment is made (could be seen as an advantage)

269
Q

Give 2 advantages of travel insurance

A

Any 2 from provides protection for personal belongings when away from home, covers medical costs when on holiday and protects against cancellation and sometimes delays

270
Q

Give a disadvantage of travel insurance

A

Any from the person suffering the loss is likely to have to pay upfront to replace items or cover medical costs and then reclaim later and an there is an additional cost when travelling abroad

271
Q

Give an advantage of pet insurance

A

Any from avoids expensive vet fees and if vet fees are too high, there may be no alternative to having the pet put down - insurance can avoid this

272
Q

Give a disadvantage of pet insurance

A

An additional monthly expense to protect against the unexpected

273
Q

Give an advantage of health insurance

A

Any from some compensation is provided when ill which can reduce the financial burden and stress allowing the patient to concentrate on recovery rather than financial worries and if used to fund private care, this often results in quicker treatment and better facilities

274
Q

Give 2 disadvantages of health insurance

A

Any 2 from you are paying for something that you hope you will not use, premiums can be expensive depending upon the degree of cover required and will not cover pre-known conditions

Personal and Business Finance (6 decks)

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