Please enable JavaScript.
Coggle requires JavaScript to display documents.
Unit 2 topic 6 - Coggle Diagram
Unit 2 topic 6
-
-
a short term plan might just run over just one year. it determines the success of the longer term ones, if someone overspends in the short term, then they ghave no savings to put by to finance the medium term want or aspiration
-
can be achieved after a few years, like a car over the three years. people use medium term plans for different wants at different stages of their life cycle.
-
these span over a longer periods of years. like paying back mortgage and saving for retirement. a normal mortgage period is 25 years and have to meet their obligation every month this effects the short term and medium term plans since the mortgage leaves them with less money to save or spend.
-
there are many different products on the market to fulfil peoples many various financial needs. a person should look carefully at their wants and aspirations, at their position of risk/ reward spectrum.
-
-
-
the products chosen by any person depending partly on their risk profile, it can differ according to the nature of a life event. looks at how risks can be assessed in terms of impact, severity and probability and it is worth reading it again now. any financial product can carry out some risks and there is no risk-free savings, loan or insurance products. someone who chooses a riskier investment has a different view of the balance between risk and reward. they are prepared to take a higher risk in order to have a return. this could be because of their: personality, the amount of money they have at their disposal and the stage of the life cycle they are in.
-
saving and investment- saving by its nature is not a risky exercise. it is considered as being sensible and to ensure that they reduce the risk of their future events. the risk associated with saving is based on the fact that a saver has to hand their money over to a provider to loo after it for them. they hope to make a return but there is always a risk that the provider might fail and they might lose their uninsured deposits.
borrowing- borrowing borrowing is always risky because the borrower has to commit to repaying out of their future income but cannot be sure that they will have enough income.
insurance- insurance by nature is a risk transfer and so it helps people to manage their risk. But there is a risk that an insurance company might fail. And not be able to pay compensation.
-
Match the product to its intended purpose and to the characteristics of the person buying it.
the intended purpose- achieving an aspiration or paying for a life event
timescale- medium term or long term
affordibility- that is taking into account the persons income and other expenses.
attitude to risk and the risk profile of the product and brand
how the product fits into the overall product mix.
-
Savings and investment
borrowing and insurance
these product are necessarily mutuallly exclusive as many people buy products from all groups at the same time.
financial products are example of derived demand
-
Their income- there is a strong relationship between income and savings. Someone with small income will not likely be able to save
the amount of current consumption(spending) in their short-term plan- since saving means giving up current consumption, the more people consume in the short term, the less they can save for longer term.
the necessity of saving- someone who is desperate to buy an expensive item and cannot access a loan is forced to save up for it over a number of years.
People’s attitudes to saving - some people save over a long period because they feel it’s sensible thing to do
-
Their income- this determines the amount they are able to repay over a given period and also determines the amount a provider is willing to lend them .
the other expenditure, especially the mandatory and necessary items- the mores someone spends on the other items, the less they can afford to borrow
the time period of a loan - cost if the item relative to their income. Borrowing is seen as necessity depends on the nature of life event or aspirations used to funds.
peoples attitude to borrowing- some people do not like the Idea of being in debt over a long period while others are not concerned about this at all.
6.4.3 savings and borrowing
many people save and borrow at the same time and they have a more complex product profolio. They need to achieve a balance between the amount they save and the amount they have to repay on their loans. If they get into financial trouble, they will give
-
in some cases, people buy several financial products at the same time. An independent financial adviser who knows the range of the products available in the market, can recommend different service providers for different products. their recommendations are not only about price, but also about the suitability of product feature for a particular customer.
-
competitive demand is the opposite to joint demand as it is a situation in which two or more products fulfill the same need or want and therefore are in competition with each other for the customers money. the purchase of the one product excludes the purchase of another.
-
inflation is a gradual increase in the general price level of an economy over time and it reduces the purchasing power of money. inflation affects different people in different ways and to different degrees. important factor that affects the individual is their income can keep up with rising prices. savers money loses value when prices rise and their position depends on whether the interest, they receive covers inflation.
-
the bank of England changes the interest rates depending on whether it wants to slow down or speed up the economy whether it wants to encourage people to save or spend.
-
if the country economy activity slows down or of the country becomes less competitive in the export market, the demand for manufactured goods will decrease then there will be less workers and 4,444 will have to rely on benefits. meaning they have to reduce their expenses and won't be able to save.
-
in a growing economy thier is a lot of demand and house prices rise, but when the economy slows down and there is more uncertainty about the future,