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

Unit 3 A and B Personal Finance Flashcards

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
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
Q

Explain the chaps method of payment

A

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

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26
Q

What is an overdraft

A

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

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27
Q

What is a personal loan

A

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

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28
Q

Hire purchase

A

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

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29
Q

Mortgage

A

a loan 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
Q

Credit card

A

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
Q

What are payday loans

A

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
Q

What’s a deposit account

A

A savings account where customers can grow money with interests rates

33
Q

What is an isa

A

A saving method that offers tax free payments which will get you more money

The allowance is £20,000 and for under 18s it’s £9000

There can only be one isa per year

34
Q

What are bonds and gilts

A

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
Q

Premium bonds

A

An investment product where the money is secured by the government

Tax free

Not very profitable as you won’t earn a regular income on your bonds

36
Q

What is a pension

A

An investment plan that you save money into for retirement

9% of your income is put into your pension by law

37
Q

What type of institution is the Bank of England

A

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
Q

What type of institution is a regular bank

A

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
Q

What type of financial institution is a building society

A

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
Q

What kind of financial institution is a credit union

A

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
Q

What kind of financial institution is the national savings and investment

A

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
Q

What kind of financial institution is a pension company

A

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
Q

What kind of financial institution are Pawnbrokers

A

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
Q

What kind of financial institution are payday loans

A

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
Q

Methods of communication

A

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
Q

Advantages and disadvantages of a branch

A

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
Q

Online advantages and disadvantages

A

Advantages
Available at any time
High degree of privacy

Disadvantages
Cyber crime
Takes time to se up
Not suitable for cash withdrawals

48
Q

Telephone advantages and disadvantages

A

Advantages
No additional charges

Disadvantages
Higher risk of getting scammed
Call centres can be annoying

49
Q

Mobile advantages and disadvantages

A

Advantages
Can be done at any time
Convenient
No charges

Disadvantages
Hackers
Could lose mobile device

50
Q

Postal advantages and disadvantages

A

Advantages
Traditional so people feel comfortable

Disadvantages
Slow
Can get lost

51
Q

What service does the fca provide

A

the fca is an independent organisation that regulates financial markets and service firms

if you are getting ripped off then they protect you

they check financial institutions to make sure you wont get ripped off

they will go into bank supervise them and remind them to make their information clear

52
Q

What service does the FOS provide

A

appointed by the government to protect and represent consumer who are in disputes with financial service providers

the idea is that this service is used as a last resort

53
Q

what service does the FSCS

A

an organisation that pays compensation to customers when there financial service provider is unable to

54
Q

What is legalisation

A

the need for the fca to allow your institution to give credit

55
Q

What is a key advantage of saving?

A

No risk of losing money

Saving typically involves putting money in a secure account or method, ensuring that the principal amount is preserved.

56
Q

List three advantages of saving.

A
  • Can be spent later
  • Solvent finances
  • Low risk of debt/repossession

These advantages highlight financial stability and flexibility associated with saving.

57
Q

What is a disadvantage of saving?

A

Can’t increase money saved

Savings typically do not offer high returns, which can limit growth compared to investments.

58
Q

Fill in the blank: Some saving methods like a savings account don’t let you take the money out __________.

A

[when certain conditions are met]

Some savings accounts have withdrawal limits or penalties for early withdrawal.

59
Q

What is a key advantage of investment?

A

Higher reward as you’re getting more money

Investments typically yield higher returns over time compared to traditional savings.

60
Q

What is a potential disadvantage of investment?

A

Some methods like gilts or regular bonds could result in your investment failing

Investments carry risk, and certain types may not perform as expected.

61
Q

Fill in the blank: Investments are vulnerable to __________.

A

[inflation]

Inflation can erode the value of returns on investments, particularly fixed-income securities.

62
Q

List two benefits of certain investments.

A
  • Some investments give you income over long periods of time
  • Potential for capital appreciation

Income-generating investments can provide cash flow, while appreciation can increase wealth.

63
Q

What is a legal requirement for owning a motor vehicle in the UK?

A

Car insurance

This insurance is needed in case of accident, fire, or theft.

64
Q

What does third party insurance cover?

A

Injuries or financial loss to others due to bad driving

This ensures you won’t have to pay out of pocket for damages to others.

65
Q

What additional coverage does third party fire and theft offer?

A

Coverage for fire and theft in addition to third party

This type of insurance protects against both damage to others and loss of your vehicle.

66
Q

What does building insurance cover?

A

Structural damage to the physical building

This insurance protects the property itself from various types of damage.

67
Q

What items are covered under contents insurance?

A

Items within the house such as electricals, carpets, and furniture

This insurance covers personal belongings in the home.

68
Q

What is the purpose of life insurance?

A

To pay a sum after someone dies

This is often used to ensure financial security for dependents.

69
Q

What does travel insurance typically cover?

A

Illness, holidays, flight delays, etc.

This insurance protects travelers while abroad.

70
Q

What does pet insurance protect against?

A

Expenses related to looking after pets

This insurance helps cover veterinary costs and other pet-related expenses.

71
Q

Who does health insurance cover?

A

Individuals, families, and employees for medical bills

This insurance helps manage healthcare costs.

Business Btech (6 decks)

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