business b tec topic A

• 4 functions of money

  legal tender - cant buy something with in england with dollars

  store of value - cash allows us to use it in the future as it keeps value

  means of exhange - allows us to buy something

  unit of account- money
• 6 factors affecting the role of money

  interest rates - An interest rate is the amount of interest due on a loan or borrow from the bank

  personal attitude - attitudes affect different peoples choices on how to spend their money

  culture, religion ethical beliefs- different cultures or religions donate more based on there church

  life events, personal life cycle - wedding, babies, parties

  external influences or trends- state of the economy impacts wages
• planning personal expenditure reasons why

  you want to avoid

  going bankrupt

  getting into debt

  getting your house repossesed
• ways to pay


  BACS, bankers automated clearing service

  credit card

  cash

  charge card - given by financial institution allowing customers to delay pay for goods

  cheque

  chaps

  contactless

  direct debit - allows for 3rd party to withdraw moeny on a set date

  debit card

  electronic transfer

  mobile banking

  pre paid card

  standing order

  store card

  MPA, mobile phone app
• BACS ad + disad x2

  transfer of money between banks

  Advantages

  - easy to set up

  -direct cost savings

  Disadvantages

  - takes up to 3 working days
• credit card ad + disad

  allows customer to delay payments and services

  advantages

  - you get an insurance protection on things you buy

  - suitable for online transfers

  disadvantages

  - can encourage overspenditure

  - interest rates of charge balance
• cash


  real life form of money

  AD

  - most widely form of accepted exchange

  - budgeting is easier

  DISAD

  - can be lost or stolen

  - threat of counterfeit
• charge card


  given by financial institutions allowing customers to delay pay for goods

  AD

  - reduce risk of debt

  - doesnt come with a limit

  DISAD

  - must be paid in full each month
• cheque


  written order to a bank to make a payment

  AD

  -can be written amount

  - widely accepted face to face

  DISAD

  - cheque could be rejected

  - old fashioned
• CHAPS


  Clearing House Automated Payment System, a same-day payment system for high-value transactions, such as a house purchase.

  AD

  - no limit or amount

  - same day transfer

  DISAD

  - fixed charge per transaction

  - risk of interception
• contactless


  card that transfers money when it touches a terminal

  AD

  - gaining popularity

  - payment up to 100 pounds

  DISAD

  - security concerns because anyone can take card

  - limit
• direct debit


  allows for a 3rd party to withdraw money on a set date to pay for goods

  AD

  - easy way to pay bills on time

  - quick and easy to set up

  DISAD

  - payer makes mistake about payment its there responsibility

  - 3rd party can change amount without permission
• debit card


  payments for goods and services being dierectly deduced from account

  AD

  - dont need to carry cash

  - suitable for online transaction

  DISAD

  - short time lapse of money payed and withdrawed

  - not appropriate for small transactions
• electronic transfer


  money is transferred from a persons bank to someone elses bank

  AD

  - very quick

  - no need to carry cash

  DISAD

  - could lose money if you put in wrong amount

  - possibility of over spending
• pre paid card


  money is pre paid onto the card for use

  AD

  - can set a budget in advance

  - effective way of controlling amount spent

  DISAD

  - no protection if lost

  - requires initial fee to purchase/ set up
• standing order


  agreement with bank to transfer a fixed sum of money to a 3rd party account

  AD

  - set amount is paid each itme making it easy for payee

  - easy to set up and cancel

  DISAD

  - payments will continue to be made unless cancelled - if forgotten you will lose a lot of money

  - payments are taken regardless of customers balance
• store card
• MPA (mobile phone apps)


  apps on phone whilch allow you to pay for goods and services

  AD

  - easy and quick to use

  - track expenses

  DISAD

  - vulnerable to cyber hackers

  - extra charges
• ways to borrow


  overdraft

  personal loan

  hire purchase

  mortgage

  credit card

  payday loan
• overdraft


  - lets you borrow money through your current account by taking more money than you have

  AD

  - can be paid off without penalties

  - interest is only charged on amount outstanding

  DISAD

  - interest charges are often high

  - ease to be obtained could encourage over spending
• personal loan


  Ability to borrow a set amount of money to be repaid in regular instalments with interest

  AD

  - pre agreed payment make planning and budgeting easy

  - only issued to individuals who prove their ability to make repayments

  DISAD

  - may have to be secured to a asset so if payments are missed asset will be taken

  - not suitable for short term loans
• hire purchase


  have use of an item immediatly but pay for it in regular instalments

  AD

  - spreads cost of expensive item over long period of time

  - credit is secured against specific item

  DISAD

  - interest charges higher than other traditional loans

  - agreements can be manipulated to make purchase seem deceptively appealing
• mortgages


  long term loan to fund purchase of asset + payed back over long period of time (e.g 25 years)

  - suitable for asset which maintains value for long time

  AD

  - allows customer to spread cost over long period of time (house)

  - interest rates depending on mortgage deal can be fixed or tracked against standard rate of interest

  DISAD

  - interest rates although fixed can vary for short period of time

  - failure to meet payments may lead to repossess of asset
• credit card


  goods are paid for by card and can be paid for either at end of set period of time (end of month)

  - minimum payment will be percentage of balance on credit card

  AD

  - credit card holder can pay above minimum rate and hence speed up rate of repayment and reduce interest

  - provides protection on some purchases

  DISAD

  - encourage overspending

  - interest rates often higher than on personal loan
• payday loan


  A short-term loan that provides immediate cash by securing a borrower's written check or receiving authorization for automatic withdrawal from the borrower's depository institution account.

  AD

  - help solve immediate short term cash flow problem

  - relatively easy to secure

  DISAD

  - interest rates are very high

  - cumalitive amount can spiral out of control
• deposit and savings account


  A deposit account and savings account is a type of financial account offered by banks and other financial institutions that allow individuals and business to safely store their money while earning more
• isa - ways to save


  scheme allowing individuals to hold cash, shares, and unit trusts free of tax on dividends, interest, and capital gains

  AD

  - tax not charged on interest - saver keeps all rewards

  - interest rates are slightly higher than in alternate savings accounts

  DISAD

  - notice is required to make withdrawals

  - limit amount on how much can be put into a ISA
• premuim bond


  a govt scheme for individuals to save up amount by buying bonds + bond owner does not recieve interest on savings but each bond is placed into draw for cash prizes

  AD

  - chance of winning substantially more than could be earned in interest

  - can easily withdraw money with no penalty or loss

  DISAD

  - no guarrantee on return of investment

  - amount invested loses value due to inflation
• shares


  a share is a unit of ownership in a company or corporation. When you own shares in a company, you essentially hold a portion of that company's equity, and you become a shareholder or stockholder

  AD

  - price fluctuates so high reward

  - part owners of a business could mean there is benefits including discounts or special offers

  DISAD

  - high risk

  - no guarrantee of any reward
• pension


  a financial arrangement or plan that provides individuals with a regular income or financial support during their retirement years

  AD

  - encourages individuals to save throughout working life

  - depending on policy individual savnigs can be boosted from employers contribution

  DISAD

  - movement between jobs means one policy stops and another starts - savings can reduce

  - final outcome is difficult to predict
• bonds and guilts


  Fixed term securities where the lender lends money to companies and governments in return for interest payment. The money is invested for a specified time frame

  AD

  - regular fixed returns

  - spreads risk accross a range of markets

  DISAD

  - risk of losing some or all value of investment if bond or guilt value falls

  - interest payments may not be recieved if issuer is unable to make payments
• insurance


  car, home and contents, 3rd party vehicle and theft, fully comprehensive, life assurance and life insurance, travel, pet, health.
• car insurance


  the minimum level of cover you can take out for your vehicle, if you injure a third party or damage their property while driving. This includes the passengers in your car and any injuries they may sustain

  AD

  -covers any legal expenses after an accident that was not your fault

  DISAD

  -in the event of an accident, this insurance would not protect you from the damages that occurred to your vehicle.
• 3rd party and theft

  covers you for any damage made to a third party, their vehicle, or property due to an accident

  AD

  - Cost savings are one of the key advantages of Third-Party Fire and Theft Car Insurance policies since they usually have lower premiums than comprehensive policies, making them a more affordable option

  DISAD

  -There are some restrictions on the coverage offered by this policy. Most insurance plans cover fire and theft damage, but do not cover accidental damage to your own vehicle.
• fully comprehensive


  pays out if you injure another person or damage your car or another car in an accident, regardless of who is at fault.

  AD

  - The main advantage of fully comprehensive car insurance is that you are not just insured for third-party incidents when driving under a comprehensive policy.

  DISAD

  - higher price of the premiums that exceeds the cost of collision coverage.
• home/ building


  covers the cost of repairing damage to the structure of your property

  AD

  - Home and building insurance can protect you from significant financial loss in case of damage or destruction to your property due to perils such as fire, theft, vandalism, natural disasters, or accidents

  DISAD

  -Home and building insurance can be expensive, especially if you live in an area prone to natural disasters or have a high replacement cost for your property. Premiums can be a significant ongoing expense.
• contents


  - provides coverage for the personal belongings and possessions within a home.

  - typically a component of a homeowner's or renter's insurance policy.

  -purpose of insurance is to protect personal property risks, such as theft, damage, or loss due to covered events.

  AD

  -Contents insurance helps safeguard your personal possessions, including furniture, electronics, clothing, jewellery, appliances, and other valuable items.

  - In case of theft, fire, vandalism, or other covered perils, the insurance policy can help you recover the cost of replacing or repairing your belongings.

  DISAD

  -Contents insurance adds an additional cost to your homeowner's or renter's insurance policy.

  -The premium you pay for contents insurance depends on various factors, including the coverage amount, deductible, location, and the value of your possessions
• life assurance


  Life assurance is designed to provide financial protection and support to the loved ones of the insured in the event of their passing. Here are the advantages and disadvantages of life assurance

  AD

  - The primary advantage of life assurance is that it offers financial security to the beneficiaries or dependents of the policyholder in case of the policyholder's death. This can help cover immediate expenses, such as funeral costs, outstanding debts, and ongoing living expenses

  DISAD

  -Life assurance can be expensive, particularly for policies that offer substantial coverage or have additional features. The premium you pay is influenced by factors such as your age, health, coverage amount, and the type of policy, and it can become a significant financial commitment.
• life insurance


  Life insurance is a financial contract between an individual and an insurance company. In exchange for regular premium payments, the insurance company promises to provide a lump-sum payment, known as a death benefit, to the policy's beneficiaries upon the death of the insured person.

  AD

  -the primary advantage of life insurance is that it provides a tax-free lump-sum payment to the beneficiaries upon the death of the insured. This can help cover immediate expenses, such as funeral costs, outstanding debts, and ongoing living expenses, ensuring that the financial needs of the insured's loved ones are met.

  DISAD

  -Life insurance premiums can be expensive, particularly for policies that offer substantial coverage. The cost is influenced by factors such as the insured's age, health, coverage amount, and the type of policy. It can become a significant financial commitment, especially for individuals with health issues or older ages.
• difference between 2


  life assurance covers whole life

  life insurance is a set period of time