Unit 3: Aim A Personal and Business

Question 1

What are the Functions of Money

Answer 1

• Unit Of Account
• Means of Exchange
• Store Of Value
• Legal Tender

Question 2

What is Unit Of Account?
Give me an Example…

Answer 2

Money can be used to place a value on goods and services. You exchange money for an equivalent value in goods and services - this is the price.

For Example: A chocolate bar is 60p and a new car is £30,000

Question 3

What is Means of Exchange?
Give me an Example…

Answer 3

Money is used to sell, buy or trade goods and services. Money makes it simple to do this; otherwise you would have to swap products or services in order to trade.
For Example: when you paid to get tickets for the cinema

Question 4

What is Store of Value?
Give me an Example…

Answer 4

Money keeps its value over time, so you can save it and use it in future. AS long as inflation is stable.
For Example: If you save £100 today, you can spend it later and get something in similar value

Question 5

What is a Legal Tender?
Give me an Example:

Answer 5

Legal Tender means money that is officially recognized by the government and must be accepted for payments of debts so bank notes and coins are legal tender.
For Example: a £20 note

Question 6

Which Function of money is the most crucial one?

Answer 6

The most important function of money is Store of value meaning this will allow business to save their wealth and use it for future purposes. For Example a business might save its budget to spend on external and internal marketing factors such as expertise of staff and technological factors.

Question 7

What are the 6 roles of Money?

Answer 7

1. Culture
2. Life events
3. External Influences
4. Personal Attributes
5. Life Stages
6. Interest Rates

Question 8

What is Culture?
Give me an Example:

Answer 8

Culture backgrounds influenced by traditions religions or ethics can shape how people view money, for instance in some cultures there is strong emphasises on savings.
For Example: Asian Countries- like china are required to save money
where as Muslims don’t believe in interests

Question 9

What are Life Events?
Give me an Example:

Answer 9

Life events are personal events, whether planned or unplanned, significantly affects your financial choices, they could be unplanned events such as sudden loss of income or illness.
For Example: sudden loss of income or illness or someone who looses their money may have to start saving or borrowing.

Question 10

What are External Influences?
Give me an Example:

Answer 10

External influences that is happening outside of your control, so if the economy is doing well, than you can find a job easier.
For Example: During recession you might cut on spending and save more for uncertain times.

Question 11

What are Personal Attributes?
Give an Example:

Answer 11

Personal Attributes is when different people have different views on money, depending on how they feel about risk, saving and borrowing. Some may save money for future but others may take a risk and invest in stocks,.

For Example: If you are raised in a family that prioritizes savings, you are more likely to be financially stable

Question 12

What are Life Stages?
Give me an Example:

Answer 12

You Financial needs change as you go through different stages of life from childhood and adulthood.
In childhood-> might depend on pocket money
In Adulthood-> you need money for a new car
In Middle Age-> rely on savings and pensions
Examples: a teenage might spend all their money on entertainment while a ideal age person might focus on saving money.

Question 13

What are Interest Rates?
Give me an Example:

Answer 13

When interest rates are low, it becomes cheaper to borrow money which might encourage people to take loans therefore when interest rates are high than borrowing will be more expensive.
For Example: Low Interest will make borrowing money easy where as high interest will makes borrowing money expensive

Question 14

What are the 5 Life Stages…

Answer 14

1. Childhood
2. Adolescence
3. Young people
4. Middle Age
5. Old Age

Question 15

What are the financial needs and implications of someone in their Childhood

Answer 15

Financial Needs:
- Financial needs are minimal and mostly centred around small purchases like toys, and sweets
- Limited Needs so they reply on parents

Implications:
- Money received from parents may be sent 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
- May rely on pocket money

Question 16

What are the financial needs and implications of someone in their Adolescence

Answer 16

Financial Needs:
* Want to be more independent
* Spend it on social activities and
* Somewhat dependant on parents

Implications:
* May look for a part-time job
* Still partially reliant on pocket money
* More likely to receive cash as gifts and may be willing to
save up smaller amounts in order to make bigger purchases

Question 17

What are the financial needs and implications of someone in their Young Adults

Answer 17

Financial Needs:
* University or starting a career
* Looking to be more independent
* Buying a car and buying or renting a flat or
house
* Looking to settle down and maybe get
married or start a family

Implications:
* 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
* Eligible for credit and debit cards

Question 18

What are the financial needs and implications of someone in their Middle Age?

Answer 18

Financial Needs:
* 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

Implications:
* Saving Accounts
* Paying a mortgage
* Planning own future and purposes

Question 19

What are the financial needs and implications of someone in their Old Age?

Answer 19

Financial Needs:
- Move from family home to retirement home
- Higher service on health

Implications:
- Mortgage payments stop or become lower
- Less income as reliant on a pension rather than a salary

Question 20

What are the key terms for Planning an Expenditure?

Answer 20

• Debt – money owed.
• Credit rating – a score given
  to individuals on how likely
  they are to repay debts based
  upon their previous actions.
• Bankrupt – when an
  individual or organisation
  legally states its inability to
  repay debts.
• Solvent – the ability to meet
  day-to-day expenditure and
  repay debts.

Question 21

What are the 6 ways to Planning Expenditure?

Answer 21

1. Avoid Getting in Debt
2. Control Costs
3. Avoid Legal Action
4. Remain Solvent
5. Good Credit Rating
6. Avoid Brankrupency