Personal Finance Flashcards
What are the four functions of money ?
Unit of account
Store of value
Legal tender
Means of exchange
What is expenditure
Expenditure is the spending of money, an outward flow
Why is it important to plan personal finance
To control costs To avoid legal action Remain solvent Maintain a good credit rating Avoid bankruptcy Avoid getting into debt
What are the benefits of planning expenditure?
Careful planning will help you to ensure you have money to meet financial needs.
A good credit rating means you will be able to borrow money to fund a large purchase such as a car or buying a house
Savings can be used to fund purchases or be available to pay for unexpected expenses.
What are the risks of not planning expenditure ?
Failure to control expenditure means you are at risk of :
Getting into debt
Legal action taken against you
Poor credit rating affects ability to borrow money
Can not open up a bank account and cannot ask for a loan
What is your credit score based one ?
Payment of bills
History of spending
Income
What are the different methods where you can pay for products and services
Cash Debit card Credit card Cheque Electronic transfer Direct debit
What are the features of cash ?
Accepted in most places
Cannot be used for online purchases
What are the advantages and disadvantages of using cash ?
Advantages:
It is accepted anywhere
Some stores only accept cash
Quick and efficient
Disadvantages:
Risk of loss/theft
Physical transactions only
Define debit card
It is issued by the bank
Payment is taken directly from the cardholders account
Contactless cards can be used for small amounts
What are the advantages and disadvantages of using a debit card
Advantages: The specific amount is withdrawn Contactless / quick Disadvantages: Only 4 contactless payments allowed a day If overspend can be costly
What is a credit card ?
A credit card is issued by bank and financial companies. Buy now pay later. Card issuer charges interest on balance outstanding after the interest free period
What are the advantages and disadvantages of a credit card
Advantages:
Can pay in monthly instalments
Used online and instore
Disadvantages:
Delay fo payments can affect credit score
Interest increases if you don’t pay the full amount
What are some features of a cheque ?
A written order or pay a sum of money from one account to another. Fairly secured method. Old fashioned, some retailers no longer accept cheques.
What are the advantages and disadvantages of using a cheque ?
Advantages:
Secure method of payment
Widely accepted
Appropriate postal transactions
Disadvantages:
Maybe charged for each cheque processed, costly of cheque is not honoured due to sufficient funds.
Needs to be carefully set up to ensure transfer goes to the right place
