Unit 3: Personal and Business Finance Flashcards
What are the functions of money?
1) Unit of account
2) Means of exchange
3) Store of value
4) Legal Tender
What is unit of account?
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.
What is the unit of account in the UK?
Unit of account is shown in pounds and pence.
What is means of exchange?
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 .
What is store of value?
Money has a value. It can be stored, for example in a bank, and than used in the future to buy goods and services.
What is legal tender?
Money is the legal means you use to pay for goods and services. Legal tender is the national currency of a country. It is the official method of payment.
What are the factors influencing the view of money?
1) Personal Attitudes
2) Life Stages
3) Culture
4) Life Events
5) External Influences
6) Interest Rates
How does life stages effect your view on money?
As you go through each of the five main life stages - childhood, adolescence, young adult, middle age, old age - your financial priorities and needs will change.
Why should you plan expenditure?
1) Control costs
2) Avoid legal action and/or repossession of goods or your home.
3) Remain solvent
4) Maintain a good credit rating
5) Avoid Bankruptcy
6) Manage money to fund purchases
7) Generate income and savings
8) Set financial targets and goals
9) Provide insurance against loss or illness
10) Counter the effects of inflation
11) Avoid getting into debt
What are the benefits of planning expenditure?
1) A good credit ratings means you will be able to borrow money to fund a large purchase such as a car or your home.
2) Money not spent on essentials can be saved and earn interest to generate an income.
3) Savings can be used to fun purchases or be available to pay for unexpected expenses.
Failure to control expenditure may mean you are at risk of:
1) Getting into debt because you cannot pay bills
2) Having insufficient funds to pay loan repayments
3) Having legal action taken against you for non-payment of loans or losing goods that you are unable to pay for.
4) A poor credit rating, which affects your ability to borrow money
5) Not being able to save for the future
What are the different ways to pay?
1) Cash
2) Debit Card
3) Credit Card
4) Cheque
5) Electronic Transfer
6) Direct Debit
7) Standing Order
8) Prepaid Cards
9) Contactless cards
10) Charge Cards
11) Store cards
12) Mobile Banking
13) BACS and faster payments
14) CHAPS
