Question 1: Define the term 'budget' and explain why it is important to create a budget when managing your money.

Answer: A budget is a plan that estimates income and expenses over a period of time. It is important because it helps you manage your money, avoid overspending, and save for future needs.

Question 2: List three different types of income that a person might receive.

Answer: Examples include wages from a job, money from a part-time job, and allowances or gifts.

Question 3: Describe two ways a person can save money effectively.

Answer: They can set aside a fixed amount regularly into a savings account and avoid unnecessary spending by planning purchases in advance.

Question 4: Imagine you receive £50 as a weekly allowance. You want to save £20 each week. How much money will you have left to spend on other things?

Answer: You will have £30 left to spend after saving £20.

Question 5: Explain the difference between 'credit' and 'debit' cards.

Answer: A debit card takes money directly from your bank account when you make a purchase, while a credit card allows you to borrow money up to a certain limit, which you will need to pay back later.

Question 6: List three items or services that are considered needs, and three that are considered wants.

Answer: Needs: food, clothing, shelter. Wants: video games, designer clothes, holidays.

Question 7: Draw a simple diagram to show the process of saving money in a bank account. Label the key parts: 'money coming in', 'deposit', 'bank account', and 'saving'.

Answer: A correct diagram would show arrows from 'money coming in' to 'deposit', then into 'bank account', with a clear label for each part. The diagram should illustrate the flow of money being saved.

Question 8: Imagine you want to buy a new phone costing £600. You save £50 each month. How many months will it take you to save enough money?

Answer: It will take 12 months (because £50 x 12 = £600).

Question 9: Identify two potential risks of borrowing money from a friend or a family member.

Answer: Risks include damaging the personal relationship if the money is not paid back on time and potential misunderstandings about repayment terms.

Question 10: Write a short paragraph explaining why it is important to read the terms and conditions before signing a loan or credit agreement.

Answer: Reading the terms and conditions helps you understand the repayment schedule, interest rates, and any fees involved. This ensures you are aware of your obligations and can make an informed decision.

Question 11: Sketch a simple chart or graph that shows the difference between saving and spending over time.

Answer: A correct sketch would depict two lines: one showing increasing savings over time (upward slope) and another representing spending, which fluctuates or remains steady. Labels should include 'time' on the x-axis and 'amount' on the y-axis.