Finance, Savings, And Credit

Question 1

Factors that affect a household’s income

Answer 1

Age, Gender, Socio-economic status, Culture, Family members in employment - dual income.

Question 2

How does age affect income?

Answer 2

Over 18s can work more & get more money. They are entitled to the minimum wage of €9.04 (2023). With qualifications & more experience, you get more money. Over 66s retire & get a pension which is less than wages.

Question 3

How does gender affect income?

Answer 3

The Equal Status Act states that both genders should get the same amount of money for the same job. Most managers are men, leading to higher wages.

Question 4

How does socio-economic status affect income?

Answer 4

Upper-class individuals often have better-paid jobs due to better education and contacts. Lower-class individuals prioritize needs like rent over education.

Question 5

How does culture affect income?

Answer 5

Salaries for the same job can vary from country to country. For example, nurses in Australia are paid better than Irish nurses.

Question 6

How does family involvement affect the Irish economy?

Answer 6

Working adults provide to the national economy by paying taxes, which maintain state services. Family income is spent on goods & services that create jobs.

Question 7

What are the sources of income?

Answer 7

Social welfare payments, Pension, Wage/salary.

Question 8

What is gross income?

Answer 8

Income before deductions and taxes.

Question 9

What is net income?

Answer 9

Income after deductions.

Question 10

What are compulsory deductions?

Answer 10

PRSI, PAYE, & USC.

Question 11

What does PAYE stand for?

Answer 11

Pay As You Earn. It is a compulsory tax deducted from gross income.

Question 12

What is tax liability?

Answer 12

The amount of tax a person owes to revenue commissioners. In Ireland, there are 2 PAYE rates: 20% and 40%.

Question 13

What are tax credits?

Answer 13

They reduce the amount of income tax a person has to pay. For example, the tax credit for a single person is €1,700 for 2022.

Question 14

What does PRSI stand for?

Answer 14

Pay Related Social Insurance. It is a compulsory deduction made from gross income.

Question 15

What is USC?

Answer 15

Universal Social Charge, a compulsory deduction from gross income.

Question 16

What is a P60?

Answer 16

It shows your total income & total PAYE, PRSI, & USC for the last tax year.

Question 17

What is a P45?

Answer 17

Given when you leave your job, showing total income since January 1st and amounts of USC, PRSI & PAYE paid.

Question 18

What are voluntary deductions?

Answer 18

Private health insurance, Trade union payments, Loan repayments, Savings, Pension scheme payments.

Question 19

What is a private pension?

Answer 19

You pay into a private pension throughout your working life and receive a lump sum upon retirement.

Question 20

What is an occupational pension?

Answer 20

A pension set up by employers of large companies, with both employee and employer contributions.

Question 21

What is a contributory old age pension?

Answer 21

Paid to individuals aged 66 with at least 502 PRSI contributions, not means tested.

Question 22

What is a non-contributory old age pension?

Answer 22

Paid to individuals aged 66 who have not qualified for the contributory pension, means tested.

Question 23

What is a widow’s pension?

Answer 23

Means tested payment for widows & surviving civil partners without dependent children, max payment is €208.

Question 24

What are the three categories of social welfare payments?

Answer 24

Social insurance, Social assurance, Universal payments.

Question 25

What are social insurance payments?

Answer 25

Payments for those who have paid at least 39 weeks of PRSI, not means tested.

Question 26

What are social assurance payments?

Answer 26

Payments for those who have paid less than 39 weeks of PRSI, means tested.

Question 27

What are universal payments?

Answer 27

Payments given to everyone regardless of PRSI contributions, not means tested.

Question 28

What is a working family payment?

Answer 28

A weekly tax-free payment for low-income working families with children.

Question 29

What is supplementary welfare allowance?

Answer 29

A social assurance payment for those with no income or insufficient income to meet needs.

Question 30

What is a budget?

Answer 30

A plan for spending & saving money, identifying total income and dividing it for expenses.

Question 31

What are the advantages of budgeting?

Answer 31

Creates good money management skills, ensures financial security, facilitates savings for unforeseen events.

Question 32

What are guidelines for preparing a budget?

Answer 32

Identify household income, list expenditure, set a percentage for each expense, allocate savings, review budget.

Question 33

What is essential expenditure?

Answer 33

Money spent on needs, such as bills that must be paid.

Question 34

What is discretionary expenditure?

Answer 34

Money spent on non-essential items and luxuries.

Question 35

What factors contribute to patterns in household expenditure?

Answer 35

Family size, Socio-economic status, Location, Beliefs/values.

Question 36

How does family size affect expenditure?

Answer 36

Larger families spend more due to more people to provide for.

Question 37

How does socio-economic status affect expenditure?

Answer 37

Upper-class individuals have more discretionary income compared to working-class individuals.

Question 38

How does location affect household expenditure?

Answer 38

Urban families face higher living costs, while rural families incur greater travel expenses.

Question 39

How do beliefs/values affect expenditure?

Answer 39

Some families prioritize private education, increasing their spending.

Question 40

What are ways to reduce household expenditure?

Answer 40

Make shopping lists, use coupons, upcycle clothes, and use public transport.

Question 41

What is the Money Advice and Budgeting Service (MABS)?

Answer 41

Provides a free, confidential & independent service to people in debt.

Question 42

What are the functions of MABS?

Answer 42

Advises on immediate debt problems and helps develop money management skills.

Question 43

What is credit?

Answer 43

Allows consumers to borrow money to buy goods & services and repay with interest.

Question 44

What are the advantages of credit?

Answer 44

Allows use of products before payment, facilitates large purchases, encourages spending.

Question 45

What are the disadvantages of credit?

Answer 45

Can lead to debt, goods may be repossessed, and costs more due to interest.

Question 46

What are forms of credit?

Answer 46

Credit Card, Overdraft, Hire Purchase, Term loans.

Question 47

What does the Hire Purchase Act set out?

Answer 47

Conditions for HP agreements to protect consumers, including a cooling-off period.

Question 48

What are the advantages of Hire Purchase?

Answer 48

10-day cooling-off period and goods cannot be repossessed without a court order.

Question 49

How are borrowers protected by the Consumer Credit Act (1995)?

Answer 49

Includes a cooling-off period, written agreements, and clear advertisements.

Question 50

What is the Annual Percentage Rate (APR)?

Answer 50

Used to compare costs of different types of credit over a one-year period.

Question 51

What is saving?

Answer 51

Setting aside income for future use, can be long-term or short-term.

Question 52

Where can you save?

Answer 52

Post office, Banks, Building society, Credit union, Insurance companies.

Question 53

What are reasons to save?

Answer 53

Security for future, creates good credit rating, provides money for large spending.

Question 54

What factors to consider when choosing a savings scheme?

Answer 54

Term, Risk, Access, Interest, Tax.

Question 55

What is a demand deposit account?

Answer 55

Suitable for short-term savings, easy access, and earns variable interest.

Question 56

What is a notice deposit account?

Answer 56

Suitable for short-term deposits, earns high variable interest, requires notice to access.

Question 57

What are An Post savings schemes?

Answer 57

Deposit account and Savings bond.

Question 58

What is a deposit account?

Answer 58

Minimum of €1 to open, earns interest, subject to DIRT.

Question 59

What is a savings bond?

Answer 59

Fixed lump sum invested for 3 years, earns 1% interest, no DIRT.

Question 60

What is a fixed rate?

Answer 60

Interest rate set for a specific number of years, providing stability.

Question 61

What is a variable rate?

Answer 61

Interest rate changes with the ECB rate, offering lower initial payments.