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Business Btech > Unit 3 A and B Personal Finance > Flashcards

Unit 3 A and B Personal Finance Flashcards

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1
Q

Unit of account

A

when a products price can be easily identified by its use and can be compared with other products e.g a bottle of water thats 3 litres is worth less then a bottle of water thats 5 litres

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2
Q

Means of exchange

A

money is a universal currency that can be traded for anything making it valuable compared to a more mediaeval bartering system

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3
Q

Store of value

A

money can be saved to be used later meaning you can use it whenever you want

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4
Q

Legal tender

A

money is an official currency recognised by the government giving it lots of social and legal credibility

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5
Q

Personal attitudes

A

The different attitudes people have between saving or spending money on risky things like gambling

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6
Q

Life stages

A

A person values money for different reasons/gains money in different ways throughout their life’s

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7
Q

Culture

A

Different cultures will have different attitudes e.g china has an attitude of saving

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8
Q

Life events

A

Certain events throughout your life will affect your finances events like university,marriage,etc may be in your control or events like illness,destruction of property,etc may not

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9
Q

Interest rates

A

When interest rates are low people are more likely to borrow money on credit

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10
Q

Explain the financial needs and implications of the childhood stage

A

NEEDS
not many financial needs
dependent on parents

IMPLICATIONS
Money received from presents/pocket money are main source of income

May have to do chores

May be encouraged to save up

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11
Q

Explain the financial needs and implications of someone in the Adolescence stage

A

NEEDS
Independence from parents
Socialisation with other teens
Buying trendy things

IMPLICATIONS
mostly reliant on parents
May get a job

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12
Q

Explain the financial implications/needs of someone in the young adult stage

A

NEEDS
to save up for uni
To buy a house or car
To start a family
To get married

IMPLICATIONS
student loans
mortgage
car finance and borrowing
work clothes
own bank account

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13
Q

Explain the financial needs/implications of someone in the middle age stage

A

NEEDS
support family
improve lifestyle
save for future

IMPLICATIONS

paying a mortgage
paying into a pension
high income and expenses

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14
Q

Explain the financial needs/implications of someone in the old age stage

A

NEEDS
fewer dependants
fewer financial needs
may downsize

IMPLICATIONS

no mortgage payments
income from pension not a salary

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15
Q

Why plan expenditure

A

-avoid getting into debt
-avoid legal repossession
-control costs
-remain solvent(you can pay back your debts at any time)
-good credit rating(people trust you with money)

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16
Q

Explain the contactless form of payment

A

A card that allows money to be transferred when it touches a contactless terminal

Advantages
becoming popular
secure way to make payments
instantaneous

Disadvantages
still not officially recognised
it sometimes wont work due to technical errors
also someone can steal it

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17
Q

Explain the mobile banking form of payment

A

Mobile banking

The ability to do financial transactions on a mobile device

Advantages
can be done anywhere at any time

Disadvantages
features are limited

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18
Q

Explain the direct debit form of payment

A

Direct debit
an agreement from the bank to allow a third party to access an account to pay for things like gas bills,etc

Advantages
easy way to make regular payments

Disadvantages
if the payer takes to much then the owner has to deal with it
variable/fixed amount to be paid

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19
Q

Explain the standing order form of payment

A

When the bank sends a sum of money on a certain date to pay for things

Advantages
an easy way to make regular payments
easy and quick to set up

Disadvantages
payments are taken independent of the customers finances which could lead to overdraft
cant be cancelled

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20
Q

Explain the EFT method of payment

A

EFT=electronic funds transfer

when money is transferred electronically

Advantages
Instantaneous

Disadvantages
Can be set up incorrectly
And be prevented by government

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21
Q

Explain the pre paid card form of payment

A

money is put onto a card with transactions then withdrawn to reduce balance

Advantages
can set a budget to avoid overspending
easy way to control kids finances
know the amount of money on there

Disadvantages
no protection if lost
requires money to purchase sometimes

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22
Q

Explain the charge card form of payment

A

same as a credit card but the balance must be paid every month

Advantages
reduces risk of debt
no need to carry cash

Disadvantages
must be paid in full each month
there’s often an annual fixed fee
risky because of interest rates

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23
Q

Explain the store card method of payment

A

a credit card but only for retail stores

Advantages
loyalty schemes(what are those?)discounts and special privileges

Disadvantages
only accepted in the chosen retail store
can encourage overspending

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24
Q

Explain the back method of payment

A

a system that transfers money form one bank to another there mainly used for direct debits

Advantages
instant payments within 2 hours
no additional costs

Disadvantages
some banks are not offered faster payments and take about three days to transfer payments
there is a limit to how much transferred

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25
Explain the chaps method of payment
a system that transfers money from one bank to another Advantages transfers can be made the same day assuming instructions are already received there no limit to how much transferred Disadvantages there is usually a fixed charge per transaction
26
What is an overdraft
taking money out of your account that you don’t have Advantages interest is only charged on the amount paid Can only be used if needed Disadvantages interest rates are usually high Not cheap Encourages overspending as it’s easy
27
What is a personal loan
convincing the bank to pay you a certain amount of money for something specific and then paying it back Advantages planning is easy as payments are regular Useful for purchasing a specific item Disadvantages if payments are missed the asset could be taken away
28
Hire purchase
allows you to use an item immediately but must be payed for in regular instalments credit for the item is secured Advantages Can afford things that you couldn’t otherwise interest rates are charged higher Disadvantages Not yours until fully paid
29
Mortgage
a loan for a piece of property/land that can be spent over a long period of time Advantages can pay it off over time Disadvantages interest payments can vary(although it’s sometimes fixed)
30
Credit card
a card that allows you to withhold payments Advantages can pay above the minimum rate which will speed up repayment and reduce interest Disadvantages can encourage overpsending
31
What are payday loans
a loan taken before you get your wages or in an emergency Advantages easy to secure interest rates are very high Disadvantages Amount to be repaid can spiral out of control
32
What’s a deposit account
savings account where customers can grow money with interests rates Advantages Interest is earned on positive balances Saver is required to have a savings plan due to regular deposits Disadvantages Interest earned is taxed
33
What is an isa
A saving method that offers tax free payments which will get you more money Advantages Tax is not charged on interest earned Interest rates are slightly higher than in alternative savings account Disadvantages A notice is usually required to make withdrawal’s There’s a limit that can be set in how much you place
34
What are bonds and gilts
A bond loan is made by a lender to a borrower and isn’t tax free The idea is that the lender is investing money into the borrowers plan so they get more money later A gilt is a government bond that has low risk but low reward
35
Premium bonds
An investment product where the money is secured by the government Advantages Tax free Disadvantages Not very profitable as you won’t earn a regular income on your bonds
36
What is a pension
investment plan that you save money into for retirement Advantages Encourages people to save for working retirement Depending upon the policy the savings might be boosted Disadvantages Movement between jobs may mean one policy stops and another one starts Final outcome is difficult to predict
37
What type of institution is the Bank of England
it's the banks for the other banks as in:it prints banknotes,sets interests rates for the country,and stores 400,000 gold bars Advantages -Protect the financial stability of the UK economy -Lend to banks -Set interest rates Disadvantages -Do not lend to the general public -Can raise interest rates making borrowing such as mortgages more expensive
38
What type of institution is a regular bank
a bank handles the financial transactions and stores the money of their clients this is what allows them to use credit cards,an overdraft,etc Advantages Secure place to store money Pay interest on savings Variety of services Disadvantages Savings only protected to £85,000 if the bank goes bankrupt Owned by shareholders therefore are designed to make a profit
39
What type of financial institution is a building society
A regular bank that is run by people who are partial owners(not shareholders) they are more likely to lend low amounts of money for non risky things Advantages Owned by members Variety of services Pay interest on savings Safe place to store money Disadvantages May lack the business drive of commercial banks as banks are profit driven Savings only protected to £75,000
40
What kind of financial institution is a credit union
not for profit banks that are responsible for supporting there community which is there members who all owners and have voting rights Advantages Variety of services Owned by members Offer additional benefits to the community and charities Disadvantages May lack the business drive of commercial banks as banks are profit driven Savings only protected to £85,000
41
What kind of financial institution is the national savings and investment
A government backed bank that offer secure savings(isas,bonds,etc) Advantages Savings are 100% secure as it is Government backed Various ways to save such as premium bonds Disadvantages Variable rates Lack a high street presence Usually need to give notice on withdrawals
42
What kind of financial institution is a pension company
business that sell policies that enable themselves or their employees to save for retirement this is usually in the form of investing the money deposited by the individual Advantages Structured way to plan for retirement Matched contributions by employer Tax benefits Disadvantages Poor investment decisions may mean a poor return on investment Cannot access money until the agreed term
43
What kind of financial institution are Pawnbrokers
business or individuals who loan money against the security of an individual Advantages Quick way of acquiring short term cash Interest not charged Buy back pawned asset Disadvantages Amount given for the asset is much lower than its worth Asset will be sold on if loan is not repaid
44
What kind of financial institution are payday loans
organisations that give out short term loans that bridge the gap until your next payment Advantages Quick way of acquiring cash in a short period of time Disadvantages The interest rates mean you will have to pay back significantly higher then what you got
45
Methods of communication
Online banking:using e-commerce for financial transactions Branch:a physical place where transactions could be made in person Telephone:transactions over the telephone Postal banking:using the postal service for banking Mobile banking:the use of mobile devices such as mobile phones and tablets for transactions
46
Advantages and disadvantages of a branch
Advantages Easy way to build rapport Transactions can be offered right then Disadvantages You need to travel to the branch There could be long queues
47
Online advantages and disadvantages
Advantages Available at any time High degree of privacy Disadvantages Cyber crime Takes time to se up Not suitable for cash withdrawals
48
Telephone advantages and disadvantages
Advantages No additional charges Disadvantages Higher risk of getting scammed Call centres can be annoying
49
Mobile advantages and disadvantages
Advantages Can be done at any time Convenient No charges Disadvantages Hackers Could lose mobile device
50
Postal advantages and disadvantages
Advantages Traditional so people feel comfortable Disadvantages Slow Can get lost
51
What is a key advantage of saving?
No risk of losing money ## Footnote Saving typically involves putting money in a secure account or method, ensuring that the principal amount is preserved.
52
List three advantages of saving.
* Can be spent later * Solvent finances * Low risk of debt/repossession ## Footnote These advantages highlight financial stability and flexibility associated with saving.
53
What is a disadvantage of saving?
Can’t increase money saved ## Footnote Savings typically do not offer high returns, which can limit growth compared to investments.
54
Fill in the blank: Some saving methods like a savings account don’t let you take the money out __________.
[when certain conditions are met] ## Footnote Some savings accounts have withdrawal limits or penalties for early withdrawal.
55
What is a key advantage of investment?
Higher reward as you’re getting more money ## Footnote Investments typically yield higher returns over time compared to traditional savings.
56
What is a potential disadvantage of investment?
Some methods like gilts or regular bonds could result in your investment failing ## Footnote Investments carry risk, and certain types may not perform as expected.
57
Fill in the blank: Investments are vulnerable to __________.
[inflation] ## Footnote Inflation can erode the value of returns on investments, particularly fixed-income securities.
58
List two benefits of certain investments.
* Some investments give you income over long periods of time * Potential for capital appreciation ## Footnote Income-generating investments can provide cash flow, while appreciation can increase wealth.
59
What is a legal requirement for owning a motor vehicle in the UK?
Car insurance ## Footnote This insurance is needed in case of accident, fire, or theft.
60
What does third party insurance cover?
Injuries or financial loss to others due to bad driving ## Footnote This ensures you won't have to pay out of pocket for damages to others.
61
What additional coverage does third party fire and theft offer?
Coverage for fire and theft in addition to third party ## Footnote This type of insurance protects against both damage to others and loss of your vehicle.
62
What does building insurance cover?
Structural damage to the physical building ## Footnote This insurance protects the property itself from various types of damage.
63
What items are covered under contents insurance?
Items within the house such as electricals, carpets, and furniture ## Footnote This insurance covers personal belongings in the home.
64
What is the purpose of life insurance?
To pay a sum after someone dies ## Footnote This is often used to ensure financial security for dependents.
65
What does travel insurance typically cover?
Illness, holidays, flight delays, etc. ## Footnote This insurance protects travelers while abroad.
66
What does pet insurance protect against?
Expenses related to looking after pets ## Footnote This insurance helps cover veterinary costs and other pet-related expenses.
67
Who does health insurance cover?
Individuals, families, and employees for medical bills ## Footnote This insurance helps manage healthcare costs.
68
What is expenditure?
The amount of money you need to cover all your expenses/outgoings, e.g., your mortgage and bills.
69
What is the purpose of consumer protection in personal finance?
To help ensure that the consumer is not treated unfairly or exploited.
70
What is the Financial Conduct Authority (FCA)?
An independent organisation that regulates the actions of providers of financial services.
71
How is the FCA funded?
By membership fees charged to financial service providers.
72
What are the three key areas of the FCA's work?
Authorisation, supervision, and enforcement.
73
What is the role of the Financial Ombudsmen Service (FOS)?
To represent the interests of the consumer in disputes with financial service providers.
74
How is the FOS funded?
By compulsory fees charged to all regulated financial institutions plus additional fees when actions are taken against an institution.
75
When does the FOS become involved in disputes?
Only if disputes cannot be satisfactorily resolved between the consumer and the financial institution prior to involving the FOS.
76
What is the Financial Services Compensation Scheme (FSCS)?
An organisation that pays compensation to consumers of financial services if the service provider is unable to.
77
What does the FSCS protect?
All savers in banks and building societies up to £5,000.
78
What is the Office of Fair Trading (OFT)?
A government organisation established to regulate all markets, including financial markets.
79
What was the aim of the OFT?
To encourage fair practices and healthy competition between financial institutions.
80
What happened to the responsibility for financial institutions in 2014?
It was passed to the FCA.
81
What is consumer credit legislation?
Laws passed by the UK government to regulate any firm offering credit to consumers.
82
What must any firm offering credit do?
Be registered with the FCA.

Business Btech (8 decks)

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