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Business > Unit 3 - personal finance > Flashcards

Unit 3 - personal finance Flashcards

1
Q

the 5 life stages

A

child, adolescents, young adult, middle aged, old age

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2
Q

4 functions of money

A

unit of account
means of exchange
store of value
legal tender

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3
Q

unit of account

A

Allows us to place monetary value on goods/services

E.g chocolate bar is 60p and car is £30,000

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4
Q

means of exchange

A

It allows us to trade

People can buy/sell goods using money e.g buying lunch or going to the cinema

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5
Q

store of value

A

Allows us to use money in the future as it keeps its value

E.g you can save money in a piggy bank to use later

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6
Q

legal tender

A

It is a legally recognised form of payment

Money is widely recognised and used for all sorts of transactions

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7
Q

6 factors influencing views on money

A 
personal attitudes
life stages
life events
culture
interest rates
external influences
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8
Q

personal attitudes

A

individuals vary in attitude towards risk and reward. Can be influenced by the people around you

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9
Q

life stages

A

As you grow up, your financial needs change

Childhood, adolescence, young adult, middle aged, old age

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10
Q

culture

A

Different cultures have different attitudes towards spending e.g older Chinese like to save

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11
Q

life events

A

Events throughout your life will impact your attitude e.g uni/marriage (in control) or illness (out of control)

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12
Q

interest rates

A

Low interest rates mean more likely to borrow
High interest rates mean more likely to save

Cost of borrowing and reward of spending

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13
Q

external influences

A

Factors out of your control

E.g state of economy/government decisions

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14
Q

childhood financial needs

A

toys, sweets

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15
Q

adolescence financial needs

A

More independence, treats for yourself, cinema etc, social events

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16
Q

young adult financial needs

A

18-30, mortgage/rent, uni, car, new family/marriage, supporting someone else

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17
Q

middle aged financial needs

A

Supporting family, saving for future, uni debt, upgrade car/home, holidays, mortgage

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18
Q

old aged financial needs

A

May downsize/retirement home, fewer financial needs but need more services, lower mortgage

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19
Q

childhood implications

A

pocket money, gifts, b day

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20
Q

adolescences implications

A

gifts/holidays, part time job, more likely to save for bigger purchases

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21
Q

young adult implications

A

Full time job, savings, managing income, take loans, credit, set up pension

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22
Q

middle aged implications

A

Full time job, planning retirement, highest income but highest expenditure

23
Q

old aged implications

A

Reliant on pension rather than salary

24
Q

5 reasons to plan for expenditure

A 
counter inflation effects
remain solvent
maintain good credit rating
avoid too much debt
avoid bankruptcy
control costs
provide insurance against loss or illness
manage money to fund purchases 
avoid legal action/repossession 
set financial targets/goals
generate income/savings
25
Q

3 benefits of planning for expenditure

A

safety net
interest
savings can fund future purchases

26
Q

3 risks of not planning for expenditure

A

debt risk = poor credit score
use it or lose it
bankruptcy risk

27
Q

cash

A

Notes and coins in a wide range of denominations

28
Q

debit cards

A

Issued by banks with payments for goods and services being deducted directly from a current account

29
Q

credit card

A

Issued by financial institutions allowing customers to delay payments for goods and services

30
Q

cheque

A

A written order to a bank to make a payment for a specific amount of money from one person’s account to another account

31
Q

electronic transfer

A

Payment is transferred directly from one bank account to another

32
Q

direct debit

A

An agreement made with a bank allowing a third party to withdraw money from an account on a set day to pay for goods/services e.g. pay a gas bill

33
Q

standing order

A

An agreement made with a bank to transfer a fixed sum of money to a third party account on a set date on a regular basis e.g. pay £30 for a phone contract each month

34
Q

prepaid card

A

Money is uploaded onto a card with transactions then being withdrawn to reduce the balance

35
Q

contactless card

A

Cards containing antennae allow money to be transferred when the card touches a contactless terminal

36
Q

charge card

A

allows customer to delay payments for a short period of time; the balance must be paid off in full when a statement is issued

37
Q

store card

A

issued by a retail outlet so that customers can delay payments for goods/services (similar to credit cards but only accepted in specified stores)

38
Q

mobile banking

A

The ability to carry out financial transactions using mobile devices such as phones or tablets

39
Q

BACs

A

A system that allows the transfer of payments directly from one bank account to another

40
Q

CHAPS

A

A system that allows the transfer of payments directly from one bank account to another (faster than bacs, usually on same day)

41
Q

4 main types of current account

A

standard current account
student current account
package premium current account
basic current account

42
Q

types of borrowing

A 
overdraft
personal loans
hire purchase
mortgages 
payday loan
credit card
43
Q

2 credit card pros

A

.everyday use
.lots of different types
.can come with perks e.g travel cards

44
Q

credit card con

A

can negatively affect credit rating

45
Q

2 overdraft pros

A

.Short term e.g a purchase day before pay day

.not always interest

46
Q

2 overdraft cons

A

Short term
High interest
Lowers credit score

47
Q

2 personal loan pros

A

.Good for expensive things e.g buying car/home improvements
.easy to manage - fixed each month
.lower interest than credit cards

48
Q

personal loan con

A

Poor credit users will have high interest

49
Q

2 hire purchase pros

A

.Good for one off items e.g TV/fridge-freezer

.can have use of an item immediately

50
Q

2 hire purchase cons

A

.Missing payments negatively affect credit score

.items repossessed if not paid

51
Q

2 mortgage pros

A

.Good for assets that will maintain value
.Good for assets that cant be paid for outright
.cost effective

52
Q

mortgage con

A

.interest makes payments even more expensive

53
Q

2 payday loan pros

A

.Short term

.Don’t check your credit score

54
Q

2 payday loan cons

A

Very high interest

.does not help build credit score

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