Finance Unit 2.1

• Needs


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

  • Quite limited; people need enough clothes to keep them warm and dry, or to protect them from the sun in a hot climate
• Wants


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


  • Items and experiences that people wish they could have, over and above their needs; they cannot fulfil their wants until their needs have been met
  • No limit to what someone can want: a few clothes would cover their basic needs but they probably want to have a good choice of fashionable clothes
• Wants


  • Tickets for a festival
• It is important to distinguish between needs and wants
• Essential items such as water, basic food and clothing are needs for everyone
• More expensive food and fashion clothing are not necessary and so they are wants
• People need to be aware that they are making a decision to buy a want if they buy more food or clothes than they actually require, or choose more expensive products when cheaper items are available
• If a person's budget changed, they would make different decisions about what to buy under the heading of 'food'
• Needs and wants are related to the price of products and to people's ability to buy them
• Products such as new shoes or holidays might be seen as needs by many people in a developed country, whereas these items would be real luxuries and seen as wants by people in a less developed country
• In a less developed country, protection for feet is a need but good shoes are a want
• As people become better off, items that used to be wants become needs: they can afford to buy them and become used to having them
• Aspirations


  Hopes for the future; the items or experiences that people wish to have in the medium-term or long-term future
• Aspirations


  • Going on an exotic holiday
  • Sharing a flat with friends
  • Getting a good job
• Aspirations can be realistic (such as buying a nice car), or unrealistic (such as buying a luxury yacht)
• The emphasis in Unit 2 is on medium-term and long-term finance
• When people plan long-term finance, aspirations are a key consideration