Unit 2 1.6

Created by

Caitlin Elrick

Cards (13)

Feedback effect 
The fact that people's own attitudes mean that they affect the outcomes of events
Expectations 
What people expect to happen, which can be self-fulfilling
Financial examples of the feedback effect
If people expect a share price to fall, they will start to sell the shares
If interest rates are expected to rise, people will save more money and borrow less
If people expect increased unemployment, they may save more and reduce spending
Ethical investing 
Choosing to save in a way that means the money will be used for what that individual considers to be good purposes
Managing finance 
A person's financial choices are affected by what they borrow, spend or invest, and how well they feel they can manage the costs and consequences
Religious beliefs 
Islamic law (Sharia law) prohibits the payment of interest on a debt
Affordability 
An important concept in helping people to choose financial products, based on their ability to make the required payments
Buying a financial services product
1. Entering into a relationship with the provider that has implications for a specified time period
2. The customer must be aware of these implications and be able to afford to meet their obligations
Borrowing money 
The person must be reasonably certain they will be able to make the agreed payments, and not take on an unaffordable amount of debt
Buying insurance 
The person must consider whether they can afford the premiums, and whether they are buying too many policies
Saving 
The person must consider whether they can afford to save, how much, and the type of account to use
Setting priorities
Since nobody can afford to buy everything, they need to choose between alternatives and decide on their priorities
Attitudes to risk 
Cautious people avoid risky situations and take precautions
Risk-takers find it exciting to take risks and do not think of what might go wrong
Most people have some degree of risk tolerance but try to limit the risk they are exposed to