Question 1: Define the term 'budget' and explain its importance when managing personal finances.

Answer: A budget is a plan that estimates income and expenses over a period of time. It helps individuals manage their money, avoid overspending, and save for future goals.

Question 2: List three reasons why it is important to compare prices before making a purchase.

Answer: To ensure you get the best value for money, to save money, and to make informed buying decisions.

Question 3: Describe what is meant by 'interest' in the context of saving money in a bank account.

Answer: Interest is the money earned on savings, usually calculated as a percentage of the amount saved, paid by the bank to the account holder.

Question 4: Explain the difference between a 'credit card' and a 'debit card'.

Answer: A debit card uses money directly from your bank account to make purchases, while a credit card allows you to borrow money up to a certain limit to pay later, often with interest.

Question 5: List two advantages and two disadvantages of using credit cards.

Answer: Advantages: Convenience and building credit history. Disadvantages: Potential for overspending and accruing high interest charges.

Question 6: Draw a simple diagram of a basic savings account setup, showing the flow of money in and out.

Answer: A correct sketch would include a bank, an arrow pointing from the individual to the bank labeled 'deposit', and an arrow from the bank back to the individual labeled 'withdrawal' or 'interest'.

Question 7: Identify three factors that can influence the interest rate offered by a bank on savings accounts.

Answer: Bank policies, economic conditions, and the type of savings account.

Question 8: Describe what is meant by 'financial risk' and provide an example related to investing.

Answer: Financial risk refers to the possibility of losing money or not earning expected returns. An example is investing in stocks, which can fluctuate in value.

Question 9: List five ways to protect yourself from financial scams and frauds.

Answer: Avoid sharing personal information, use strong passwords, verify sources before making payments, be cautious of suspicious emails or calls, and regularly monitor bank statements.

Question 10: Explain why it is important to have an emergency fund and suggest a recommended amount to save.

Answer: An emergency fund provides financial security in case of unexpected expenses like illness or job loss. A common recommendation is to save at least three to six months' worth of living expenses.