Functions and role of money

What are the 4 functions of money?

• Unit of account.

• Means of exchange.

• Store of value.

• Legal tender.

What does the unit of account function refer to?

Allows the value of something to be expressed in an understandable way, and in a way that allows the value of items to be compared.

What does the means of exchange function refer to?

Money allows goods and services to be traded without the need for a barter system.

You can easily buy your lunch or any item using money.

What does the store of value function refer to?

Any asset whose ‘value’ can be used now or at a later date i.e. its value can be retrieved at a later date.

Means people can save now to fund spending at a later date.

What does the legal tender function of money refer to?

A legally recognised form of payment that is backed by the government.

How can the role of money differ?

Different people may have different attitudes to money and their attitude may change depending on situations they find themselves in.

What factors may influence the role of money?

• Personal attitudes to risk/reward, borrowing/saving.

• Life stage

• Culture

• Life events e.g. university

• Interest rates

What are financial needs and wants during childhood?

• Limited needs.

• Rely on adults.

• May want to use pocket money to buy toys.

What products would children be looking for?

Adults may set up a savings account for them and put birthday and Christmas money in there.

What are the financial needs and wants for adolescents?

• Want to be more independent.

• May socialise away from family and need money.

What products/actions would adolescents be looking for?

May look for a part-time job.

What are the financial needs for a young adult 18-30?

• University or a career.

• Buy a car/leave home.

• Have a partner and settle down.

What products would young adults 18-30 be looking for?

• Student loan

• Car loan

• Mortgage

• Credit/debit cards

• Retirement planning

What are financial needs and wants for middle ages 40-60?

• Supporting a family and pets.

• Saving for family’s future.

• Moving to a bigger property.

• Luxury holidays.

What actions or products would middle ages 40-60 need?

• Savings account.

• Mortgage

• Retirement planning

• Age where you have worked up the career ladder.