LiBF Unit 2, Question and answers, 100% Accurate, rated A+

LiBF Unit 2, Question and answers, 100% Accurate, rated A+ 1.1 Outline the need for financial planning. - ✔✔-Make better financial decisions Avoid unnecessary debt Help make decisions on savings, spending and progr ...

LiBF Unit 2, Question and answers, 100% Accurate, rated A+ 1.1 Outline the need for financial planning. - ✔✔-Make better financial decisions Avoid unnecessary debt Help make decisions on savings, spending and progress in reaching goals Helps show what you have to do to get to where you want to be 1.2 Explain the personal factors which influence financial planning. - ✔✔-Factors influenced by stage in life cycle Attitude to risk Attitude to Risk - ✔✔-a. Risk tolerance - how does the individual feel about the possibility of losing money? b. Capacity for loss - how much money can the individual afford to lose? Stages in life cycle - ✔✔-Childhood 0-12 Teenage 13-19 Young Adult 18-25 Mature Adult 26-40 Middle Age 41-54 Late Middle Age 55-65 Old Age 65+ Each of the stages has its own typical opportunities, challenges and needs. 1.3 Identify sources of financial planning information and advice. - ✔✔-Advisory services (CAB, Money Advice Service, charities, financial advisers) Financial service providers (banks, building societies, credit unions) Citizens Advice Bureau - ✔✔-Citizens Advice provides free, confidential and independent advice to help people make the right choices, including help to deal with debt problems, how to avoid losing their home and how to get their finances back into shape. Money Advice Service - ✔✔-Free and impartial money advice, set up by government. Offers advice and guides to help improve finances. Tools and calculators to help keep track and plan ahead. Support over the phone and online The Money Charity - ✔✔-empower people across the UK to build the skills, knowledge, attitudes and behaviours, to make the most of their money throughout their lives Financial Advisers - ✔✔-Independent financial advisers (IFAs) must recommend products and solutions from the whole of the market Restricted advisers can offer products from one company or a limited number of companies Short-term planning - ✔✔-a period of between one week and 12 months Medium-term planning - ✔✔-a period of between one year and five years Long-term planning - ✔✔-a period of five years or more a need - ✔✔-something that we should - or must - have as part of our life e.g. food, shelter and clothes. a want - ✔✔-something that a person would like or would aspire to, rather than something that they absolutely need e.g. the latest smartphone personal objectives - ✔✔-what the individual needs or wants financial objectives - ✔✔-how much money a person needs to achieve what they want and how best to get there Prudential Regulation Authority (PRU) - ✔✔-the UK regulator responsible for making sure that financial firms are authorised to operate in the UK and are financially sound Financial Conduct Authority (FCA) - ✔✔-the UK regulator responsible for the way in which financial firms market and sell their products Financial Services Compensation Scheme (FSCS) - ✔✔-protects savers' money up to £85,000 per person 1.5 Describe the need to review and adjust financial plans linked to the various stages of the personal life cycle. - ✔✔-Priorities change when moving from one stage of life cycle to another Anticipating foreseen and unforeseen events Emergency fund Plan should be fluid Emergency Fund - ✔✔-a pot of money that can be used to cover emergencies, such as unexpected spending, loss of income or other unexpected financial problems Budgeting - ✔✔-managing day-to-day money to pay bills, buy food, save and pay for other essential spending 2.2 Tools used to manage a personal financial budget - ✔✔-bank statements; balances; online and telephone banking; keeping track of expenditure; cash flow forecasts Savings options - ✔✔-deposit accounts, instant access, notice accounts, bonds, Sharia compliant, credit union, ISAs Corporate bonds - ✔✔-similar to gilts, but the borrower would be a large company, rather than the government. Gilts - ✔✔-The government issues gilts when it needs to borrow money, and promises to pay a guaranteed rate of interest each year and repay the money at the end of the term. Gilts usually have a fixed term of between 5 and 30 years and are usually bought by large organisations and investment companies Shares - ✔✔-the shareholder actually owns a share in the company. Shares will go up or down in value, according to how investors and large financial organisations think the company is doing. Deposit - ✔✔-cash in a savings accoun