A1 function and roles of money

Question 1

what are the 4 functions of money?

Answer 1

Unit of account, means of exchange, store of value, legal tender

Question 2

unit of account

Answer 2

anything that allows the value of something to be expressed in an understandable way, and in a way that allows the value of items to be compared.

Question 3

means of exchange

Answer 3

money allows good and services to be traded without the need for a barter system.

Question 4

Store of value

Answer 4

Allows us to use money in the future.
People can save now and fund spending later.

Question 5

legal tender

Answer 5

legally recognized form of payment.
Money issued by monetary authority or government which cannot be refused by any person in payment for transactions.

Question 6

What is the role of money influenced by?

Answer 6

-personal attitudes
-external influences & trends
-life stages
-culture
-life events
-interest rates

Question 7

personal attitudes

Answer 7

-individuals have their own attitudes towards money
-risk, reward, borrowing, saving
-could depend on your family’s attitude towards money

Question 8

Culture

Answer 8

-your religious beliefs/ethical views may shape how you view and use money
-older generation of chinese people have a culture of saving

Question 9

life events

Answer 9

-importance of money may change depending on life events
-events may be within your control e.g university, weddding
-or out of your control e.g. illness, financial loss

Question 10

interest rates

Answer 10

-Impact what you decide to do with your money

Question 11

external influences and trends

Answer 11

-state of the economy, job availability and the price of goods and services
-out of your control

Question 12

life stages

Answer 12

-as you grow up financial needs and perception of money changes
- 5 pinnacle life stages

Question 13

what are the 5 life stages

Answer 13

childhood, adolesence, young adult, middle age, old age

Question 14

what are the financial needs of someone in the childhood life stage

Answer 14

• limited needs
• reliant on parents
• purchases sweets and toys

Question 15

what are the financial implications of someone in the childhood life stage

Answer 15

-money from parents in the form of pocket money
-spent on non-essentials
-may be encouraged to save

Question 16

what are the financial needs of someone in the adolescent life stage

Answer 16

-Want independance
-less reliant on family
-start socialising away from home

Question 17

what are the financial implications of someone in the adolescent life stage

Answer 17

-Still reliant mainly on money from parents
-may look for a job
-get cash as gifts and save for larger purchases

Question 18

what are the financial needs of someone in the young adult life stage

Answer 18

-University/ early career
-more inpedendant
-buying cars, renting homes
-starting a family/getting married

Question 19

what are the financial implications of someone in the young adult life stage

Answer 19

-student loan
-car finance and borrowing
-job and mortgage
-eligible for credit cards

Question 20

what are the financial needs of someone in the middle age life stage

Answer 20

-support family
-improve lifestyle
-save for the future

Question 21

what are the financial implications of someone in the young adult life stage

Answer 21

-paying a mortgage
-paying into a pension
-high income and high expenses

Question 22

what are the financial needs of someone in the elderly life stage

Answer 22

-fewer dependants
-fewer financial needs
-may downsize

Question 23

what are the financial needs of someone in the elderly life stage

Answer 23

-no mortgage payments
-income from pension not salary

Question 24

what are the consequences of not planning expenditure and personal finance?

Answer 24

-may end up in debt
-may end up bankrupt
-can get assets taken away
-lower quality of life
-poor credit rating which affects ability to borrow in the future

Question 25

why plan expenditure- Good credit rating

Answer 25

- How trustworthy you are at paying off debts, which makes borrowing easier.

Question 26

why plan expenditure- Provide insurance against loss or illness

Answer 26

-Having money set aside for unseen circumstances to cover your expenses over a period of time

Question 27

why plan expenditure- Control costs

Answer 27

-allows you to control costs making adjustments to your finances

Question 28

why plan expenditure- Generate income and savings

Answer 28

-money saved from planning finances can generate further income

Question 29

why plan expenditure- manage money to fund purchases

Answer 29

-avoids borrowing as you have ot save to fund purchases

Question 30

why plan expenditure- avoid bankruptcy

Answer 30

-Unable to pay off debts

Question 31

why plan expenditure- avoid legal action and repossesion

Answer 31

-not planning expenditure makes it harder to pay bills -this could lead to legal action to reclaim the cost of unpaid items or repossession of that item

Question 32

why plan expenditure- remain solvent

Answer 32

-you have the ability to meet financial obligations -you can cover costs -avoid borrowing and have a good credit rating

Question 33

what are the benefits of managing personal finance?

Answer 33

-surplus money to save -savings can provide security -good credit rating -avoid debt

Question 34

what are the risks of not managing personal finance?

Answer 34

-get in debt -poor credit rating so cannot borrow -no savings/security -unable to pay bills