Topic 1

• Needs


  Essential, 'must-have' items that everyone must have to survive, such as water, food and shelter
• Wants


  Optional, 'nice-to-have' items that are desirable but not essential, for example jewellery or going to the cinema
• Aspirations


  Hopes for the future. Items or experiences that people wish to have in the medium-term or long-term future
• Needs do not change much over the life cycle but a person's values might change as they grow older and have different experiences
• Needs, wants and aspirations over the personal life cycle

  • Birth and infanthood (0–2 yrs old)
  • Childhood – preschool (2–5 yrs old)
  • Childhood – school (5–12 yrs old)
  • Teenager (13–19 yrs old)
  • Young adult (18–25 yrs old)
  • Mature adult (26–40 yrs old)
  • Middle age to late middle age (41–60 yrs old/55–65 yrs old)
  • Old age/ retirement (66 onwards)
• As people move from childhood into adulthood and then grow older, their needs and wants change according to their lifestyle, the prevailing culture, the size of their family, and their ability to afford products
• People's aspirations probably become more realistic as they learn more about life
• Financial products used to satisfy needs, wants and aspirations

  • Medium-term and longer-term savings
  • Investments
  • Pensions
  • Longer-term borrowing
  • Insurance
• Financial products are bought because they enable people to satisfy their needs, wants and aspirations
• Internal factors


  Factors that come from within people themselves, such as their personal set of values, beliefs and attitudes
• Values, beliefs and attitudes affect the way people manage their money
• People's perception of a situation is influenced by their own experiences, which are affected by their values and attitudes
• Needs, wants and aspirations


  People's motivations to satisfy their needs, wants and aspirations
• A decision to satisfy a need or want and therefore to buy a financial product is based on both internal and external factors
• People need to be sure they understand the financial products they are buying and that the products are suitable for their needs
• Internal factors


  Factors that come from within people themselves
• Key internal factors


  • Personal set of values, beliefs and attitudes
• Values


  General feelings or beliefs about desirable behaviour and goals
• Values


  • Help people to distinguish between needs and wants, and to form their aspirations
  • Help people to plan their finances and to decide between different alternatives
• Beliefs


  More specific and detailed than values, about the way people think things are
• Beliefs


  • 'It's acceptable to charge a reasonable amount of interest on a loan but it's not acceptable to charge too much'
  • 'If interest rates rise, people will borrow less'
• Attitudes


  How, at a given time and place, people think and feel about another person, an event or an issue
• Attitudes


  • Attitude to saving for old age
  • Attitude to risk
• Perceptions


  People's understanding of the world around them, from a range of different inputs
• Preferences


  People's preferences for particular products, often depending on their personal values, beliefs and attitudes
• Preferences


  • Choosing distribution channel for financial products (branch, phone, online)
• External factors


  Factors that are not within people's control, but are imposed from outside
• Major external factors


  • Marketing and advertising
  • Peer pressure
  • Trends, fashions and role models
• Marketing


  Activities a company undertakes to promote the buying and selling of a product or service
• Marketing activities


  • Advertising
  • Product trials
  • Money-off coupons
  • Buy one get one free offers
  • Customer competitions
  • Sponsoring teams or events
  • Offering special credit terms
• Promotion


  Paid-for marketing activities, including advertising, to communicate with people, inform them of goods and services, and persuade them to buy
• Public relations (PR)


  Advertising that is not paid for directly but which keeps a business's product in the public eye
• PR activities


  • Product placement
  • Sponsorship
• Peer pressure


  Influence from people in the same position as us, to conform to the acceptable behaviour within our particular group
• Peer pressure can be particularly important for young people, wanting to have the same things as their friends</b>
• Trends and role models


  Influences on attitudes and values that people hold, and the decisions and choices they make
• Trends


  • Attitudes to borrowing money
  • Use of social networking sites
• Role models


  People we look up to and try to be like
• Family members are very important role models, especially parents, older siblings and sometimes aunts and uncles
• People are considered to be 'financially unaware'