Business Booklet A
Unit Of Account
Money can be used to place a value on goods & services.
Means Of Exchange
Money is used to sell, buy, Trade goods and services.
Store of Value
Money has value. Can be stored in a bank & used in future
Legal Tender
A legally recognised from a payment that is backed by government.
What does Debt mean?
Money owed to someone else.
What is a Credit Rating
A score given to individuals on how likely they are to repay debts based on previous actions.
What is Bankruptcy?
Individual or organisations legally states its inability to repay debts.
What does Solvent mean?
The ability to meet day to day expenditure & repay debts
Personal Attitudes
How you borror, spend & save money
Life Stages
Childhood
Adolescence
Young Adult
Middle Age
Old Age
financial needs change
Culture
Religious beliefs & ethical princeaples may shape your view on money.
Life Events
Moving home, Redudencies effect importance of money.
Benefits of planning expenditure
1. Good Credit Rating
2. Avoid Debt
3. Savings can be used
4. Avoid Bankruptcy
Risks of planning expenditure
Debt, can't pay bills
Bad credit rating meaning you can't borrow
No savings/security
Cash
Notes + coins
Advantages of Cash
Accepted in most places
Easy to use
Disadvantages of Cash
Stolen
Cannot be used online
Debit Card
Payment card take money from bank account
Advantages of Debit Card
Secure
Contactless
Easy
Disadvantages of Debit Card
Hacked
Overdraft means risk of overspending
Credit Card
Credit provided from the bank in a form of borrowing, paid monthly
Advantages of credit cards
Pay for large transactions
Dont have to pay in full
Disadvantages of Credit Cards
Charges Interest
Risk of overspending
Hacked
Pre-paid cards
Cash loaded onto card
Advantages of Pre-paid cards
Widely accepted
Control Spending
Disadvantages of Pre-Paid cards
Lost
Stolen
Transaction fees
Charge cards
Short term. interest free loan where you buy now & pay later
Advantages of Charge Cards
Buy things you can't afford
Disadvantages of Charge Cards
Have to pay back in full
Hard to get
What does BACS stand for?
Bankers Automated Clearing Service
What does BACS do?
Makes payment directly from one account to another
Advantages of BACS
Fast Payment (within 2 hours)
Usually no fee
Disadvantages of BACS
Takes 3 working days to clear
What does CHAPS stand for?
Clearing House Automated Payment System
What is CHAPS?
Payments to UK accounts.
Advantages of CHAPS
Same day transfer within certain time
Disadvantages of CHAPS
Bank charge £20-£30 for service.
Cheque
Written order to a bank to pay a stated amount from one persons account to another.
Advantages of Cheque
Secure
Disadvantages of Cheque
Have to go to the bank
3 days to clear
What is an Electronic Transfer
Payment from one account to another, no cash
Advantages of Electronic Transfer
Easy
Transfers are instant
Disadvantages of Electronic Transfer
Risk of scam
Bank details must be correct
What is Direct Debit?
Payments taken out account automatically
Advantages of Direct Debit
Convient
Simple way to pay bills
Disadvantages of Direct Debit
Must have sufficient funds
Needs monitering
Define standing order
Instruction to make regular set payments to person/organisations
Advantages of Standing Order
Payment doesn't change
Plan expenditure
Automatic
Disadvantages of Standing Order
Sufficient funds
Lack of flexibility
Define Mobile Banking
Manage account through phone
Advantages of mobile banking
Check Balance
Make Payments
Transfer
Secure
Disadvantages of Mobile Banking
Must have internet
Impulse spending
Define contactless
Payment made when card touches terminal
Advantages of Contactless
Simple
Fast
Hygienic
Disadvantages of contactless
Loose track of spending
Only up to a certain amount
Define store cards
Like credit cards accepted by the store that made it
Advantages of store cards
Discounts
Loyalty schemes
Disadvantages of Store Cards
Interest Payable
Can overspend
What is a current account?
A type of bank account that keeps your money secure & helps manage your finances
What are common features of a current account
Money in (wages)
Money out (Debt)
Overdraft
Standered current account
Must have a fair credit rating.
Overdraft available
Premium/packaged current account
Monthly fee for benefits
breakdown cover, cashback, interest on credit balances
Student Account
Aimed for higher education
Interest free overdraft
Rail cards, discounts on food
Basic account
Aimed at customers with bad credit score
No overdraft, no banking fees
What is a overdraft?
Short term loan, used to pay bills if your short of cash.
Advantages of Overdraft
Flexiable
Quick to arrange
Disadvantages of overdraft
Interest is high
Charged a fee to use your overdraft
What is a personal loan?
Borrow a fixed amount & pay it back monthly.
Long term & high priced items
Advantages of Personal Loans
Plan Expenditure with monthly installments
Disadvantages of personal lones
Arrangment fees
Fail to pay on secure loan
Asset could get seized
What is Hire Purchase?
Put down deposit then pay monthly, once payments done you own the asset.
Advantages of Hire Purchase
Allows you to buy item & spread cost
Disadvantages of Hire Purchase
Cost more then buying it outright
Repossession
What is a mortgage?
Long term loan to buy property.
Monthly installments for 25+ years.
Advantages of Mortgage
Buy home & spread the cost
Fixed rate is more affordable
Disadvantages of a mortgage
Increased interest may effect payment repossession.
What is a credit card?
Loan, money spent is borrowed by card provider.
Advantages of credit card
Build positive credit history
Pay the full amount no interest
Disadvantages of credit card
Pay minimum amount your charged interest
Interest higher then that of a personal loan
What is a payday loan?
Short term loan for small amounts
Advantages of a payday loan
Good for emergencies
Disadvantages of payday loan
High interest rates
Very expensive
Advantages of savings
Low risk
Secure
Interest payments
Disadvantage of savings
Low interest payments
Inflation can impact spending power
Advantages of Investment
Higher rate of return compared to interest on savings
Variety
Disadvantage of Investment
Higher risk
Investment can be lost
No guarentee on return
What does ISA stand for?
Individual Savings Account
What is a ISA?
Allows you to save without paying tax on profits you earn but limit on amount
What is cash ISA?
Savings account where interest is paid tax free
What is stock & share ISA?
Funds invested in shares or bonds, profits earned at tax free.
What is deposit/saving account?
Put your money in to grow in value called interest
What are premium bonds?
Savers are given a chance to win tax-free cash price each month
What are shares?
Gives part ownership of business in return of investment if the business has a success then investors get paid by dividends value of shares can go up & down.
What is a pension?
Long term saving.
Pay into a scheme to get more when you retire.
What is a bond?
loan from investor to borrower such as company or government.
What is a GILTS
Government bonds in commonwealth countries.
What is insurance?
Financial service that protects an individual or organisation against financial loss.
What is motor (car) insurance?
Covers you in case of accident, fire, theft
Advantages of Car Insurance
Protection against liability claims
Satisfies the legal requirement
Disadvantages of car insurance
Expensive for young/new drivers
What is home insurance?
Covers the cost of rebuilding or repairs
Advantages of Home Insurance
Contents insurance covers loss/damage of personal possessions.
Disadvantage of Home insurance
Only covers the cost of rebuilding the property
Insurance is expensive
What is life insurance?
Pays out a sum of money in the event of death
Advantages of life insurance
Provides financial security
Helps pay off debts
Pay final expenses
Disadvantages of life insurance
Pre-exsisting medical conditons may not be covered
What is travel insurance?
Protects you whilst abroad
Advantages of Travel Insurance
Covers delay, cancellation
Covers loss of personal possessions
Disadvantages of Travel Insurance
Pre exsisting medial conditons not covered
Wont cover everything
What is Health Insurance?
Covers some/all private medical costs with treatment times.
Advantages of Health Insurance
Allows you to have access to private hospital and healthcare in the uk
Disadvantages of health insurance
Pre-exsisting medical conditions are not covered
Expensive
What is Pet Insurane?
Protects owner from expenses associated with looking after a pet
Advantages of pet insurance
Lifetime cover for serious illness for additional premium
Covers illness & injury
Disadvantages of pet insurance
Vaccines not covered
Pre-exsisting medical conditons not covered