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Lecture notes Unit 3 - Personal and Business Finance
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Unit 3 – business and personal finance 16/09/22Unit of account- money serves as the common base of comparison that people use to present prices
and record debt eg. The new iPhone 14 is out the price of the iPhone 13 will drop
-money also provides a measure by which we can value different goods and services eg. You can go
to a store and look at different products and see if you are getting value for money
Means of exchange
-in today’s economy we use notes and coins as money, rather than exchanging goods and services
for other goods and services (barter)
-money enables goods and services to be exchanged, transactions to be settled and debts to be paid
store of value- money acts as a store of value over time eg. You buy a house you invested your
money into that property and if you look after the house then it will keep it value or increase in value
-it enables individuals to transfer spending to future time periods secure in the knowledge that it will
have a future value eg. Able to put money in the bank where it will gain interest over time slowly
Legal tender
-accepted to buy goods and services
-money allows individuals to pay for goods and services later, it enables credit to be offered so
payment can take place at a future date.
Risk averse and risk taker
- Some people are willing to take risks why others are more cautious want to save money to
ensure security in the future
- Rewards can be immediate earning interest on savings for a big commitment such as buying
a house or car
- Borrowing can allow for immediate reward but will incur cost as money borrowed will be
paid back with interest
Life stage features Financial needs implications
childhood Zero to low income Most needs are meet Likely to spend money
e.g pocket by parents e.g food, received planned
money,gifts,savings cloths, toys savings by parents
and savings maybe set
up by relatives could
be a piggy bank
adolescents Greater independence Higher expenditure Conflict between
could have a part time patterns eg. Buying wanting to spend now
job so they have a more expensive items and save for the
higher source of or going out with future. Still heavy
income. There looking friends reliant on perants
to the future eg saving
for a car or uni
Young adults Spending more on University or starting a May take student
needs than wants career loans if going to
Saving for the future Looking for more university
Could have children or independent Borrow money to pay
paying taxes Buying a car and for a car or purchase
Completely buying or renting a flat on a finance deal
independent or house May be looking at
, Started to forge their Looking to settle down taking out a mortgage
own life and maybe get Need to earn money
married or start a to support self and
family others eligible for
credit and debit card
Middle age Now you have been in Support family Saving accounts for
your career for years Started saving for specific purposes
so your salary is much children’s future eg Paying a mortgage
better helping children with Planning for own
You could now university costs and future through
purchase your flat or wedding etc pensions and
house Look at improve own retirement plans
Higher household lifestyle e.g new car or Likely to be the stage
income move house of life when income is
Enjoy having access to at the peak but
additional money to matches with highest
spend on luxuries such expenditure
as foreign holidays
Old age Comfortable lifestyle Fewer dependents Mortgage payment
Lots of extra time May downsize eg stop or become lower
Spend more time with move form family Less income as reliant
grandchildren / home to smaller on a pension rather
children retirement home or than salary
No longer have bungalow
dependents fewer financial needs
for assets but may be
higher for services
such as health care
Cost of living crisis
- The cost of living is rising why the average wages are not
- Shops are not helping because they are putting up prices to combat the increase in gas and
electric
Key driver to rising cost are whole sale gas prices
Cost of living crisis | The Institute for Government
https://www.instituteforgovernment.org.uk › explainers
- Some people blame covid for the increase in prices as items where unable to travel across
the global as easy and it would cost more money for the. Business to get the products in so
they raised the prices to recuperate the losses same with fule and Ukraine war
- Situation in which the cost of everyday objects are more than you income
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