Personal Finance Flashcards
Role of Money
Life Stages, Personal Attitudes, External Influences, Life Events, Culture, Interest Rates.
Childhood
Financial needs: Limited, reliant on parents, may want pocket money for sweets and toys
Implications:
Money maybe received as gifts or presents to support child
Child may rely on pocket money
Parents may set up savings account for them
Adolescence
Financial needs: Want to be more independent, slightly less reliant on parents as want to socialise away from family
Implications:
May look for part time job, partially reliant on pocket money, more likely to receive cash as gifts
Young Adult
Financial needs: University, starting a career, looking for more independence, buying a car and buying or renting a house, maybe getting married and having children
Implications: may take a student loan, borrowing money to pay for car or purchase one on finance deal, need to earn money to support themselves and others, eligible for credit and debit card
Middle Age
Financial needs: Support family, start saving for children’s future, looking to improve own lifestyle (new car, moving house), enjoy having access to additional money for holidays etc
Implications:
Savings accounts for specific purposes, paying a mortgage, planning for own future through pensions and retirement plans
Old Age
Financial needs: Fewer dependants, may downsize, few financial needs for assets but may be higher for things such as healthcare.
Implications: mortgage payments stop, less income as reliant on pension rather than a salary
Personal Attitudes
Individuals vary in their attitude towards risk and reward
You may 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 reward!
This can, in part, be influenced by your families attitudes towards money
Culture
Different cultures, affected by religion, tradition and ethical beliefs, will have different attitudes towards money
The older generation of the Chinese population, 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.
Life Events
Events throughout your life will impact on your attitude to money
Events within your control
for example; going to university, travelling abroad, getting married or starting a family, divorce
OR may be outside of your control
for example; illness, financial gains or losses
Interest rates
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
External Influences
Factors outside of your control
State of the economy, will impact wages, availability of jobs and the prices of goods and services
Decisions made by Government will impact the amount of tax you pay or the amount you receive in benefits
These affect your ability to spend or save
