Financial Awareness: Money and Transactions

Internal & External Factors

Internal factors are those that come from within people themselves. The key internal factor that affects someone’s choices is their own personal set of values, beliefs and attitudes.

Internal factors are those that come from within people themselves. The key internal factor that affects someone’s choices is their own personal set of values, beliefs and attitudes. These may change with circumstances and as the person passes through the stages of the life cycle, but they will probably not change significantly, as beliefs and values tend to be fairly stable. Values, beliefs and attitudes affect the way people manage their money.

Sometimes, our perception of a situation is influenced by our own experiences. These will also be affected by our own values and attitudes. Our values, for example, may tell us that a risk to the well-being of people is more important than a risk to property, and this could affect how much of a priority we give to buying insurance products. In particular, many people perceive a higher risk in something they are particularly anxious about than in something they don’t much worry about.

Values
Values are general feelings or beliefs about desirable behaviour and goals. They involve the concepts of ‘good’ and ‘bad’ and of how people think things ought to be. Values fulfil two important functions with regard to buying financial products:
- They help people to distinguish between what they consider to be needs and what they consider to be wants, and to form their aspirations
- They help people to plan their finances and to decide between different alternatives
Values help people to decide their general approach to financial matters. For example, some young people live in the present and take each day as it comes. They do not know what they want to do when they leave school and they spend all their money every week on going out, phone top-ups, clothes, etc. Others believe in planning for the future. They may want to go to university or to start a business. They know that this will be expensive, and they save most of their money towards this longer-term goal.

Beliefs
Beliefs are more specific and detailed than values. They are less about the way that people think things ought to be and more about the way they think they are. Beliefs can be religious but can also include beliefs in, for example, enterprise or fairness.

Attitudes
Attitudes refer to how, at a given time and place, people think and feel about another person, an event or an issue. Attitudes can be changed by circumstances, events, experience or advice.

A financial example could be a person’s attitude to saving for their old age. When they are young, they probably do not find it important: they are more interested in immediate expenses or perhaps in saving up for a car or their own home. They feel that their retirement is so far away that it is not worth worrying about it now. As they get older, however, they begin to realise that they have not saved much and their attitude becomes more positive; because retirement is nearer, it seems more important to them.

Attitudes to risk are also important. Risk is the likelihood that a particular event will happen or that people might gain or lose from buying a particular financial product. Different people have different attitudes to risk.

External factors are those that are not within your control but are imposed from outside.

Major factors include:

Marketing and Advertising

Peer Pressure

Trends, fashion, and role models

Many people are influenced by trends and fashions, and these can sum up the mood of the times. For example, if people are worried about the future because the global economy is not performing well and there are few jobs, they may want to be more careful with the way they spend their money than they would when the outlook is good.

Trends also influences what people buy – for instance, some people like to have the latest smartphone. Current trends and fashions tell us something about the attitudes and values that people hold and can influence the decisions and choices that they make.

Trends are also found in the area of financial services, and they affect:

The way in which people pay for goods and services – for example with cards or cash

People’s attitudes to saving

How people view the use of credit

Social networking sites, such as Facebook and Twitter, are major influences on attitudes. They reveal what other people – especially peers – are doing and what is, or is not, fashionable, and they do it in a much faster way than ever before. It is easy to be influenced by such information.

Achieving Financial Awareness

Life Cycles

A personal life cycle attempts to summarise the key phases which all individuals go through during their lifetime matched with their changing financial needs

Needs, Wants and Aspirations

Needs are essential, ‘must-have’ items that everyone must have to survive

Money Value

Prior to making the decision of borrowing money, it is important to first decide not to buy the things that we want

Cards

Money Transfer and Exchange

GCC Countries

MENA

Asia

Europe

Americas

Financial Awareness: Money and Transactions

Internal & External Factors

Internal factors are those that come from within people themselves. The key internal factor that affects someone’s choices is their own personal set of values, beliefs and attitudes.