Topic 1; Needs, wants and aspirations

Question 1

What are the main types of financial products people use to satisfy their medium and long-term needs, wants and aspirations?

Answer 1

Investments
Pensions
Long-term borrowing (Secure borrowing)
Insurance

Question 2

What is a need?

Answer 2

An essential, must have items that everyone must have to survive

Question 3

What is a want?

Answer 3

Optional, nice to have items that are desirable but not essential. Items and experiences people wish they could have

Question 4

What is an aspiration?

Answer 4

Hopes for the future. Items and experiences that people wish to have in the medium-term or long-term future. Can be realistic or unrealistic

Question 5

What might a persons need or want change according to?

Answer 5

1. Their lifestyle
2. The culture of the society they live in
3. The size of their family
4. Their ability to afford products

Question 6

How can medium-term and longer-term savings satisfy needs, wants and aspiration?

Answer 6

People need financial products that allow the, to save over a longer period.

Banks and certain other providers offer longer-term savings account where customers can build up the lump sum they need

Question 7

How can investments satisfy needs, wants and aspiration?

Answer 7

People invest to save for a longer-term want or aspiration

It is more risky but it can bring a higher return

Question 8

How can pension satisfy needs, wants and aspiration?

Answer 8

Many people save money in a pension scheme throughout their working lives to finance their retirement

Question 9

How can longer-term borrowing satisfy needs, wants and aspiration?

Answer 9

When people borrow money to finance a large purchase, they need to pay it back over a long period, otherwise they cannot afford

Hire purchase is a type of secured consumer credit to finance items such as cars and furniture, which also involves the borrower repaying over a number of years

Question 10

How can insurance savings satisfy needs, wants and aspiration?

Answer 10

Insurance companies and banks provide insurance policies that cover long term risks

Life assurance allows people to protect their loved ones in case they die, and some products also enables people to save money for a later stage of their lives.

Question 11

What is the feedback effect?

Answer 11

The notion that thoughts and feelings have a direct influence on
behaviour