1.2 Household Finance

• Household finance involves managing a household's income and expenses to achieve financial goals
• Steps involved in creating a household budget

  1️⃣ Calculate income

  2️⃣ Identify expenses

  3️⃣ Allocate funds to categories

  4️⃣ Track spending

  5️⃣ Adjust budget as needed
• What is debt management in household finance?

  Paying off loans
• What is the primary purpose of budgeting in household finance?

  Managing income and expenses
• What are the potential returns from investing mentioned in the study material?

  Capital gains, dividends
• What are the two main components managed in household finance?

  Income and expenses
• What is the primary purpose of debt management in household finance?

  Paying off loans
• What are the benefits of saving money rather than investing it?

  Safe, readily accessible
• Banks use fraud monitoring to detect and block suspicious activity
• What does household finance involve to meet financial goals?

  Planning, budgeting, saving, spending
• What are examples of household expenses?

  Housing, food, entertainment
• Household finance ensures financial stability and security.


  True
• Match the budget categories with their planned and actual spending amounts:

  Housing ↔️ £800 planned, £800 actual

  Food ↔️ £300 planned, £350 actual

  Savings ↔️ £100 planned, £50 actual

  Entertainment ↔️ £50 planned, £30 actual
• Investing involves putting money into assets like stocks or real estate to potentially earn higher returns
• Borrowing allows individuals to access funds but incurs interest costs
• Income includes money received from wages, investments, and benefits
• Saving involves setting aside money for future use, while investing aims for higher returns
• What are the two common types of bank accounts mentioned in the study material?

  Checking and savings
• Debt management focuses on paying off loans and managing credit cards effectively.


  True
• What is the definition of household income?

  Money received from wages
• Budgeting involves creating a detailed plan for managing income and expenses within a household
• In the example budget, actual savings exceeded planned savings.

  False
• Mortgages have lower interest rates compared to personal loans.


  True
• Budgeting involves creating a plan to allocate income for expenses and savings.


  True
• Types of budgets based on income and expenses

  1️⃣ Balanced budget (income equals expenses)

  2️⃣ Surplus budget (income exceeds expenses)

  3️⃣ Deficit budget (expenses exceed income)
• Student loans often have government backing and income-tied repayment.


  True