Question 1(a) — State 2 examples of personal financial products (2 marks)
Acceptable answers (1 mark each for two different products):
• ISAs (Individual Savings Accounts) • Premium Bonds • Cash savings accounts • Current accounts • Mortgages • Personal loans • Credit cards • Pensions • Endowment policies • Investment bonds
Total: 2 marks
Question 1(b) — Explain 2 factors affecting personal finance decisions at life stages (4 marks)
Level 1 (1 mark per point, max 2):
State a factor and life stage (e.g., "Young adults need to save for mortgages")
Level 2 (2 marks per point, 4 total):
Explain how a factor affects decisions at a specific life stage, showing understanding of impact
Example answers:
Factor 1: Income level — Young workers earn lower salaries, so budgeting must prioritize essentials (rent, transport). Middle-aged workers with higher income can afford debt repayment and investments. (2 marks)
Factor 2: Life events — Getting married increases joint expenses. Starting a family requires savings for education. Approaching retirement means shifting to lower-risk investments. (2 marks)
Total: 4 marks
Question 1(c) — Describe 2 advantages of personal budgeting (4 marks)
Level 1 (1 mark):
Simple statement (e.g., "Budgeting helps save money")
Level 2 (2 marks per advantage, 4 total):
Describe advantage with development of idea/example
Example answers:
Advantage 1: Spending control — Budgeting helps track outgoings and identify where money is being wasted on unnecessary purchases, allowing reallocation to savings or debt repayment. (2 marks)
Advantage 2: Goal achievement — By allocating funds to specific goals (holidays, cars, emergency funds), individuals prioritize their financial objectives and are more likely to achieve them systematically. (2 marks)
Total: 4 marks
Question 1(d) — Discuss debt vs. saving priority for young adults (6 marks)
Level 1 (1–2 marks):
Basic statement about debt or saving with limited discussion
Level 2 (3–4 marks):
Explains reasons for prioritizing debt OR saving, with some context
Level 3 (5–6 marks):
Balanced discussion of both priorities with evaluation of context (e.g., type of debt, interest rates, emergency funds)
Level 3 (5–6 marks) answer framework:
Young adults should generally prioritize high-interest debt repayment (credit cards at 15–20%) before aggressive saving, as interest charges erode future wealth. However, a small emergency fund (£500–£1,000) should be maintained to avoid further borrowing. For lower-interest debt (student loans under 5%), allocating funds to both debt and saving is balanced. The discussion should weigh risk, opportunity cost, and financial security.
Total: 6 marks
Question 1(e) — Evaluate effectiveness of budgeting for discretionary spending (8 marks)
Level 1 (1–3 marks):
Simple statement about budgeting benefits; limited analysis
Level 2 (4–6 marks):
Explains advantages and disadvantages with some supporting points
Level 3 (7–8 marks):
Comprehensive evaluation with balanced analysis of strengths/weaknesses and conclusion
Level 3 (7–8 marks) answer framework:
Strengths: Budgeting allows conscious control over discretionary spending (entertainment, hobbies), preventing overspend and enabling savings goals. Allocating a specific "fun budget" maintains financial discipline while permitting enjoyment.
Weaknesses: Rigid budgets may feel restrictive and unsustainable. Unexpected events require flexibility. Individuals may underestimate discretionary needs or experience "budget fatigue."
Conclusion: Budgeting is effective when realistic and reviewed regularly, allowing both savings and reasonable discretionary spending.
Total: 8 marks
Question 2 — Consumer Protection & Financial Services (22 marks)
This question focuses on Learning Aims B (financial sector) and C (government regulation, FCA, FOS, FSCS).
| Part | Requirement | Marks |
|---|
| (a) | Name 2 financial institutions | 2 |
| (b) | Explain 1 advantage of FCA authorization | 3 |
| (c) | Describe FOS role | 3 |
| (d) | Analyse importance of clear credit card terms (Level 2-3) | 6 |
| (e) | Evaluate FSCS effectiveness (Level 2-3) | 8 |
| Question 2 Total: | 22 |
Key mark scheme notes:
- Part (a): 1 mark per institution (banks, building societies, insurance companies, investment firms)
- Part (b): Requires explanation of one advantage (e.g., consumer protection, standardized practices)
- Part (c): Must describe FOS function (complaints handler, impartial, free service for consumers)
- Part (d): Analyse = examine in detail; must include multiple relevant points about clarity, consumer rights, decision-making
- Part (e): Evaluate = judge effectiveness; discuss strengths and limitations of FSCS £85,000 deposit guarantee
Paper 1 Total Marks: 22
This paper tests personal finance knowledge (Aim A), financial institutions (Aim B), and government regulation (Aim C). Questions 1(d) and 1(e) require evaluation; part 2 requires analysis of financial services.