Consumer and Financial Decisions PDF

Resources: Old textbook: https://drive.google.com/file/d/1aG30SzPuqmMTZVUmhDWE5w-Wt0BB-WPW/view?usp=sharing Slideshow:...

Resources: Old textbook: https://drive.google.com/file/d/1aG30SzPuqmMTZVUmhDWE5w-Wt0BB-WPW/view?usp=sharing Slideshow: https://classroom.google.com/c/NjU4MzgzNTg3NDQz/m/NjcxMTIwNzIzOTM1/details (Up to 1.14) Glossary of key words: Glossary of key words | NSW Government Study up to pg51 in current textbook ⭐ Outline: Topic: Consumer and Financial Decisions KEY CONCEPT: Choice Learn about: Learn to: The nature of Commerce investigate the scope of commerce, including the concepts of: consumer, needs and wants, goods and services, resources, scarcity and how Consumer needs/wants these may impact on choice Goods and Services Resources Scarcity Choice Consumer and financial explain factors influencing consumer and financial decisions, for example, advertising/marketing, age, convenience, culture, customer decisions service, disposable income, environmental considerations and social media examine how individuals make particular decisions, including: Factors influencing consumer and - whether to spend or save, eg being prepared for unexpected expenses financial decisions - what to buy, eg different types of goods and services How consumer decisions are made - where to buy, eg locally, regionally, interstate or globally; physical or online store Different payment options investigate advantages and disadvantages of different payment options, including: Own purchasing decisions - deciding whether to use cash or cashless transactions - the use of credit to make purchases, including the facilities offered by lenders and financial institutions - selecting and applying appropriate criteria to rank alternative purchasing options reflect on their own purchasing decisions, including affordability, the decision-making processes they have used in the past, and how they might change these in the future Consumer protection investigate the need for consumer protection Need for consumer protection Features explain the reasons for, and features of, a simple contract, for example through the construction of a written contract for a financial of a simple contract Legal rights and transaction responsibilities of consumers investigate the legal rights and responsibilities of consumers, including protection through legislation, for example the purpose of the Types of assistance and protection Competition and Consumer Act 2010 provided explore the assistance and protection provided by consumer protection agencies and independent bodies and organisations, including Processes of consumer redress state and federal government agencies examine the processes of consumer redress, for example proposing options for a consumer who has purchased a product that is not fit for purpose/of acceptable quality Financial Management investigate the consequences of poor financial management, including: Consequences of poor financial - excessive debt decision-making - impact on wellbeing of the individual and families Role and importance of long term discuss the role and importance of long-term financial strategies, including superannuation investigate tools financial strategies and strategies for effective financial management, including: Strategies for effective financial - monitoring and record-keeping to avoid over-commitment, eg managing mobile phone costs - budgets, eg using management digital technologies to develop a financial plan Options for addressing financial difficulty - savings and superannuation plans compare options for addressing financial difficulty, including: - negotiating an alternative payment plan - seeking support via a financial institution Current Issues investigate a current issue that influences the decisions consumers make, for example: Current issue that influences – the impact of technology on payment processes consumer decisions – housing affordability and the impact on savings – various types of scams, eg relating to online shopping, banking and identity theft – management of personal superannuation, eg tracking and consolidating lost superannuation accounts 1.2 Commerce in Our Lives Commerce is all around us, involving the exchange of goods and services. As consumers, we make many commercial decisions daily, such as: What to buy (goods or services) Where to live  What career to pursue How to spend and save money Consumers: Purchase goods (physical items) and services (actions performed for others) ○ Needs: essential items for survival (food, clothing, shelter) ○ Wants: desired items that are not essential (cars, phones, computers) Types of Goods: Durable: can be used multiple times (cars, TVs) Non-durable: used once (food, gasoline) Opportunity Cost: What you give up to fulfill a need or want Resources for Production: Land: natural resources (forests, coal, soil) Labor: physical and mental effort of workers Capital: goods used to make other goods (e.g., tractors) Enterprise: ability to combine resources for profit Scarcity: Resources are limited, requiring producers to make choices to meet consumer needs and wants. 1.3 Factors Affecting Consumer Decisions Consumers make decisions based on various factors including:  Customer Service: Good service keeps customers coming back, while bad service can drive them away. Price: Consumers seek value for money, wanting the best quality at the lowest price. Unit pricing allows easy comparison between different sized packages. Convenience: Shopping should be hassle-free. Factors like distance, store location, opening hours, and online shopping options all influence convenience. Marketing & Advertising: Consumers are exposed to a lot of marketing daily. Successful campaigns can convince consumers they "need" a product even when it might be a “want” Gender: While there's some overlap, genders tend to gravitate towards different products. Think Mother's Day vs. Father's Day gift ideas. (and how boys often tend to like different products than girls) Age: Our wants and needs change as we age. A baby wants toys, a teen wants a phone, an adult wants a car, etc. Disposable Income: The amount of money available for spending and saving after taxes affects what consumers can afford to buy regularly. Environmental Considerations: Consumers are becoming more aware of environmental issues and may choose products with minimal or recyclable packaging. Social Media: Social media influencers can influence purchasing decisions through their posts and recommendations. Cultural Factors: Cultural values, beliefs, and habits learned from family and background influence buying decisions. 1.4 Making Consumer Decisions Spending vs. Saving: Consumers must decide how much income to spend and how much to save.  A financial plan, or budget, helps track income and expenses to improve financial well-being. Choosing What to Buy: Comparison shopping is essential to get the best deal. Consider price, quality, availability, and after-sales service. Online shopping allows easy comparison across stores. Resist impulse buying and take time to make informed decisions. Comparison Shopping Tips: 1. Know what you want. 2. Shop around for the best price. 3. Research product features. 4. Plan your payment method. 5. Check return and refund policies. 6. Don't sign pressured or unclear documents. 7. Compare after-sales service and guarantees. 8. Keep receipts and invoices. 1.5 Choosing Where to Buy: This passage discusses how products move from manufacturer to consumers and the different factors to consider when choosing where to buy. Distribution Chain: Manufacturer -> Wholesaler -> Retailer -> Consumer Each step adds a markup to the price. However, in some instances, the line can be interrupted with consumers purchase goods directly from the manufacturer or wholesaler which decreases the price. Types of Retail Stores: Convenience stores: Small stores with limited selection but convenient locations (e.g., 7-Eleven). Specialty stores: Focus on a specific product or service (e.g., hairdressers, gift shops). Discount variety stores: Offer basic customer service and lower prices (e.g., Kmart, Target). Factory outlets: Sell products directly from factory at a discount (e.g., near the factory). Department stores: Large stores with a wide range of products (e.g., Myer, David Jones). Supermarkets: Large self-serve stores selling groceries and other goods (e.g., Woolworths, Coles) Choosing a Location: Local: Convenience stores for basic items. Regional: Shopping centers with department stores, supermarkets, and specialty stores. Interstate/Global: Online shopping allows for purchase from anywhere in the world. Considerations: Price: Compare prices across locations (online and physical stores). Selection: Choose a location with the desired product variety. Convenience: Consider travel time and ease of access. Service: Specialty stores may offer better service and product knowledge. Online Shopping: Online shopping allows consumers to purchase from a wider range of sellers than physical stores, potentially leading to greater selection and competitive prices.  Convenience is a major advantage of online shopping, allowing purchases from home at any time. Comparison shopping is easier online, as consumers can quickly visit multiple stores. However, online shopping also carries risks: ○ Scams and fraud can occur, so be cautious of deals that seem too good to be true. ○ Consumers cannot physically inspect products before buying. ○ Returning unwanted items can be inconvenient and time-consuming. Secure payment methods and reputable retailers are essential for safe online shopping. Mail Order: Mail order shopping involves selecting and purchasing products from a catalogue or advertisement, typically by mail or phone. Advantages: ○ Wider selection of products compared to local stores, especially for those in remote areas. ○ Convenience for people with disabilities or limited mobility. Disadvantages: ○ Risk of scams from disreputable companies. ○ Inability to physically inspect products before buying, leading to potential disappointment. ○ Difficulty in tracing a company that only uses a post office box number if a refund is needed. 1.6 Payment Options This passage discusses different payment options available to consumers and factors to consider when choosing a payment method. Furthermore, it outlines the advantages and disadvantages in a very succinct way. Payment Options: Cash: Convenient for small purchases but can be risky to carry. Credit Card: Convenient and allows building credit history, but interest rates are high. Store Credit: Cards issued by retailers that are similar to credit cards but usually are associated with discounts, bonuses and a rewards program. These are often with higher interest than credit cards. (and cannot be used everywhere) Debit Card: Directly accesses your bank funds, avoiding interest charges. EFTPOS (electronic funds transfer at point of sale): Uses a debit card to electronically transfer funds for purchases. BPAY®: Transfers funds electronically via phone or internet to pay bills. Direct Debit: Authorises automatic bill payments from your bank account; can be difficult to manage Cheque: Safer than cash but takes time to clear and may incur bank charges. Lay-by: Pay a deposit and make regular payments to own the goods. Replaced by "buy now, pay later" options. Book-up: Credit provided by a retailer to be paid later, potentially with interest. Afterpay (and similar services): "Buy now, pay later" option with split payments but high late fees. Choosing a Payment Option: Consider your income: Can you afford repayments or interest charges? Personal preference: Do you value convenience or security more? Privacy: How comfortable are you with sharing financial information? Fees and interest rates: Compare fees and interest to find the most cost-effective option. Convenience: Consider ease of use and accessibility. Security: Choose methods with strong security features to protect your financial information. 1.8 Consumer Protection This passage explains the importance of consumer protection laws and highlights some common scams. Why Consumer Protection? Consumers deserve fair treatment in the marketplace. This includes: ○ Products of good quality ○ Accurate information from salespeople ○ Adherence to contract terms by all parties Unethical business practices like scams and misleading information can disadvantage consumers. ○ Laws exist to protect consumers from such practices. ○ Key Laws are stated below. Key Legislation: Competition and Consumer Act 2010 (Cwlth): Protects against unfair practices. ○ Including misleading information and advertising, unfair trading practices etc. Fair Trading Act 1987 (NSW): State-level law complementing federal consumer protection. Common Scams: Bait and Switch: Luring customers with low prices for advertised products that are unavailable, then pressuring them to buy more expensive items. Misleading Advertising: Making false or deceptive claims about a product's features or quality. Referral Selling: Offering discounts or commissions for recommending a product to others, but not always following through on the promised benefit.  Unordered Goods: Receiving unsolicited goods and being pressured to pay for them. The law protects you from this practice. Special Prizes and Offers: Using free gifts or prizes to pressure you into buying other products. Be cautious of deals involving "free" items or lucky numbers. Get-Rich-Quick Schemes: False promises of easy money, often requiring upfront fees or sharing bank details. These are scams designed to steal your money. Pyramid Schemes: Multi-level marketing schemes where most participants lose money. You typically pay a joining fee to participate. Remember: If a deal sounds too good to be true, it probably is. Be aware of these scams and do your research before making a purchase. 1.9 Contracts in Everyday Life Contracts: Agreements that outline rights and obligations. They can be oral (spoken) or written. Most contracts are often small and are oral, however, upon purchasing more expensive and/or important goods and services, contracts tend to be more formal and written on paper. Elements of a Legally Binding Contract: Offer: A proposal from one party (offeror) to another (offeree) that clearly communicates the intention to exchange something of value. ○ In stores, displaying items is usually an invitation to treat, not a legal offer to sell. (demonstrated in Carlill vs Carbolic case) Acceptance: The offeree's agreement to the offer, communicated through words or actions (e.g., handshake). Consideration: Each party giving up something of value. This can be money, a promise to do something, or giving up the right to something else. 1.10 Consumer Rights and Responsibilities Consumer Rights: Australian Consumer Law (ACL): National law protecting consumers from unfair practices. Four Basic Rights: a. Safe products: Proper instructions and quality testing. b. Accurate information: Clear labelling and product descriptions. c. Full disclosure of terms: Upfront pricing, including credit contracts. d. Consumer guarantees: Refunds or replacements for faulty products. Consumer Protections: Competition and Consumer Act 2010 (Cwlth): Enforced by ACCC and state/territory agencies. Protection against: ○ Misleading advertising ○ Unreasonable business practices ○ Misrepresentation of products ○ Unfair trade practices ○ False claims Common Misleading Advertising Techniques: Fine print with important conditions. (often T&C’s) Before-and-after images with exaggerated differences. (filtered) Unsubstantiated claims about tests or surveys. (inclusion of members from the company to boost the numbers or non-existent surveys) Deceptive labelling of country of origin.  Packaging that misrepresents product quantity. (Chips packets nowadays) Consumer Guarantees (Goods): Automatic legal rights. Goods must be: ○ Acceptable quality ○ Fit for purpose ○ As described or demonstrated ○ Backed by any warranty offered ○ Legally owned by seller (no outstanding charges) ○ Have spare parts available (when reasonable) Consumer Guarantees (Services): Services must be: ○ Fit for purpose ○ Provided with reasonable skill and care ○ Delivered within a reasonable timeframe Consumer Responsibilities: Pay the correct amount. Purchase from ethical and legal sources. Use products eco-friendly. Accept some risk when buying ("caveat emptor" - let the buyer beware). Businesses aren't obligated to disclose everything. 1.11 Consumer Assistance Organizations Government Agencies: State Government Agencies: (e.g., NSW Fair Trading)  ○ Assist with consumer complaints, product safety, and business practices. Federal Government Agencies: ○ ASIC (Australian Securities & Investments Commission): Protects consumers in financial areas like credit, investment, and insurance. ○ ACCC (Australian Competition & Consumer Commission): Enforces consumer protection laws and monitors fair pricing. Industry Ombudsmen: Resolve disputes between consumers and specific businesses (e.g., TIO - Telecommunications Industry Ombudsman). Independent Organizations: CHOICE: Australia's largest consumer advocate. Provides information, conducts product tests, and lobbies for consumer rights. (Acts as a watchdog over the market) Media: Current affairs programs and consumer columns can expose bad business practices and offer advice. 1.13 Consumer Rights and Dispute Resolution Consumer Rights: You have the right to refunds or exchanges under certain circumstances, even if signs say otherwise. Steps to Resolve a Consumer Issue: 1. Contact the Seller: Explain the problem calmly and assertively. Keep records of phone calls, emails, and receipts.  2. NSW Fair Trading: If contacting the seller fails, seek advice and mediation from NSW Fair Trading. 3. NSW Civil and Administrative Tribunal (NCAT): If mediation fails, file a claim with NCAT for a hearing and potential order (e.g., refund, repair, replacement). NCAT can handle claims up to $40,000. 1.14 Financial Management Financial management is about planning and using your money wisely to live well now and in the future. Consequences of Poor Financial Management: Personal: ○ Can't afford basic needs or wants. ○ Stress, anxiety, and illness. ○ Loss of possessions (e.g., car). Social: ○ Social isolation due to inability to afford activities. ○ Strained relationships with friends and family. ○ Relationship problems. Legal: ○ Garnishment of wages: When a court orders your employer to withhold money to pay creditors. ○ Garnishee (if not clear above) - a third party legally allowed to surrender money to rid debt ○ Writ of execution: When a court order allows officials to seize and sell your property to pay debts. ○ Bankruptcy: Giving up control of your assets and finances to pay creditors. Financial Stress and Wellbeing Financial stress can cause health problems and hurt your overall well-being. Tips for Recovering from Financial Stress: Create a budget. Combine debts into one loan (consolidation). Save regularly. Build an emergency fund. Talk to loved ones about your finances. Seek help from your bank or financial advisor. Consider financial assistance programs. 1.15 Financial Planning for Retirement Importance of long-term financial strategies Long-Term Financial Goals: Retirement is a common long-term financial goal (7+ years). Superannuation: Compulsory savings account for retirement. Funded by employer contributions and (optional) additional contributions. Choose your own super fund based on fees and returns. Minimise fees and maximise returns by having only one super account. 1.16 Financial Management - Tools and Strategies Monitoring and Record Keeping: Track income and expenses to avoid overspending. Keep records of income (salary, interest). Keep records of expenses (fixed expenses like rent, variable expenses like groceries). Regularly check account balance and reconcile statements. Budgeting: Create a budget to track income vs expenses. Steps to create a budget: ○ Calculate total income (salary, interest). ○ Record expenses (fixed and variable). ○ Total your expenses. ○ Compare income to expenses. ○ Adjust budget if needed (reduce expenses or increase income). - assess your financial position Savings Plans: Develop a savings plan based on your goals (short-term, long-term). Reasons to save: ○ Short-term goals (laptop, car, vacation). ○ Long-term goals (house deposit, retirement). ○ Emergencies (illness, accidents). ○ Security and peace of mind that the funds have been sorted out Superannuation: Compulsory savings scheme for retirement in Australia. You contribute throughout your working life.  You receive a lump sum or pension upon retirement. Choose between retail or industry super funds. ○ Retail funds: offered by banks or investment companies, keep some profits. ○ Industry funds: offered by industry associations, return profits to members. Thanks, guys GL & GG Well played Peace - Sivichan :)