London Institute of Banking & Finance (LIBF) Qualifications Certificate in Financial Studies (CeFS) — Personal Finance Syllabus

Certificate in Financial Studies (CeFS) — Personal Finance syllabus — full chapter and topic list

Expand any chapter to see its topics and sub-topics. This is the whole examinable outline for Certificate in Financial Studies (CeFS) — Personal Finance in London Institute of Banking & Finance (LIBF) Qualifications, not a summary of it.

1. 1

   Personal Finance Fundamentals

   4 topics

   • Money, needs and wants
     • Functions of money
     • Cash, digital and contactless payments
   • Income and expenditure
     • Gross and net income
     • Fixed and variable expenditure
   • Budgeting and cash-flow forecasting
     • Surplus and deficit budgets
     • Prioritising spending
   • The impact of life stages on finances
2. 2

   Borrowing and Credit

   4 topics

   • Types of borrowing
     • Overdrafts and credit cards
     • Personal loans and hire purchase
     • Payday loans and high-cost credit
   • Cost of credit
     • APR and total amount repayable
     • Secured versus unsecured debt
   • Managing and avoiding problem debt
     • Debt prioritisation
     • Sources of debt advice
   • Credit ratings and creditworthiness
3. 3

   Saving and Investing

   4 topics

   • Reasons for saving
     • Emergency funds and goal-based saving
   • Savings products
     • Instant access and notice accounts
     • ISAs and fixed-term bonds
   • Introduction to investment
     • Shares, bonds and funds
     • Risk and return trade-off
   • Pensions and long-term saving
4. 4

   Financial Risk and Protection

   4 topics

   • Identifying financial risks
     • Illness, unemployment and death
   • Insurance products
     • General insurance and life cover
   • State support and welfare benefits
   • Making informed financial decisions

Certificate in Financial Studies (CeFS) — Personal Finance flashcards for London Institute of Banking & Finance (LIBF) Qualifications

24 of 60 cards from the Certificate in Financial Studies (CeFS) — Personal Finance deck — real questions with worked answers.

1. In personal finance, what is the difference between a 'need' and a 'want'?

   A need is something essential for survival or basic living (e.g. food, shelter, water, basic clothing). A want is something desirable that improves quality of life but is not essential (e.g. holidays, designer clothes, entertainment).

2. What is the economic 'opportunity cost' of a financial decision?

   The value of the next-best alternative that you give up when you choose to spend money (or time) on one option rather than another.

3. Define 'income' and give the two main categories.

   Income is money received regularly. The two main categories are earned income (from employment or self-employment, e.g. wages, salary) and unearned income (from sources other than work, e.g. interest, dividends, rent, benefits, pensions).

4. What is the difference between gross income and net income?

   Gross income is total income before any deductions. Net income (take-home pay) is what remains after deductions such as Income Tax, National Insurance and pension contributions.

5. What is the formula linking income, expenditure and a surplus or deficit?

   $$\text{Balance} = \text{Total income} - \text{Total expenditure}$$ A positive result is a surplus; a negative result is a deficit (a shortfall).

6. Distinguish between fixed, variable and discretionary expenditure.

   Fixed expenditure stays the same each period (e.g. rent, loan repayments). Variable (essential) expenditure changes but is necessary (e.g. food, fuel, utilities). Discretionary expenditure is non-essential spending the person chooses (e.g. eating out, hobbies).

7. What is a personal budget?

   A financial plan that estimates income and expenditure over a future period, used to manage money, ensure spending does not exceed income and plan for saving.

8. What is a cash-flow forecast and why is it useful?

   A forward-looking statement showing expected money coming in and going out over each future period. It is useful because it highlights when a shortfall (deficit) or surplus is likely to occur, allowing the person to plan ahead and avoid running out of money.

9. In a cash-flow forecast, what is the difference between an opening balance and a closing balance?

   The opening balance is the money carried over at the start of the period. The closing balance = opening balance + income − expenditure, and it becomes the opening balance of the next period.

10. What does it mean to 'live within your means'?

    Ensuring that total expenditure does not exceed total income, so that you do not rely on borrowing to fund everyday spending and can ideally generate a surplus to save.

11. What are the main life stages used in personal finance and how do financial priorities differ?

    Typical stages: childhood/youth (dependent), young single adult, young couple/family, middle age, pre-retirement, and retirement. Priorities shift from spending and short-term needs toward borrowing (housing), then protecting dependants, then saving for and drawing a pension.

12. Why do financial needs typically change at the 'starting a family' life stage?

    Expenditure rises (childcare, larger housing) while income may fall if a parent stops or reduces work; protection needs grow (life insurance, income protection) and saving for the future (education, pensions) becomes important.

13. List the main types of borrowing available to individuals.

    Overdrafts, credit cards, store cards, personal (unsecured) loans, secured loans/mortgages, hire purchase, payday loans, and 'buy now pay later' / catalogue credit.

14. What is the difference between secured and unsecured borrowing?

    Secured borrowing is backed by an asset (e.g. a mortgage on a house) which the lender can repossess if you default; it usually has lower interest. Unsecured borrowing has no asset attached (e.g. personal loan, credit card) and typically carries higher interest.

15. What is an overdraft?

    A facility that lets you spend more than the balance in your current account up to an agreed limit. Arranged (authorised) overdrafts have agreed terms; unarranged (unauthorised) overdrafts usually cost more in charges and interest.

16. How does hire purchase (HP) work?

    You pay an initial deposit then fixed instalments to use a good (e.g. a car); you do not legally own the item until the final payment is made, so the lender can repossess it if you default.

17. What is the difference between a credit card and a debit card?

    A debit card spends money directly from your own current account. A credit card borrows from the card provider up to a credit limit, and you repay later (with interest if not paid in full).

18. What is APR and what does it represent?

    APR is the Annual Percentage Rate. It represents the total yearly cost of borrowing including the interest rate plus compulsory fees and charges, expressed as a percentage, allowing borrowers to compare credit products on a like-for-like basis.

19. What is the cost of credit and how is it broadly calculated?

    The cost of credit is the total extra you pay to borrow. Broadly: $$\text{Cost of credit} = \text{Total amount repaid} - \text{Amount borrowed}$$ It comprises interest plus any fees and charges.

20. What is the difference between a fixed and a variable interest rate on borrowing?

    A fixed rate stays the same for a set period, giving predictable repayments. A variable rate can rise or fall (often tracking the base rate), so repayments and total cost can change over time.

21. Explain simple interest with its formula.

    Interest charged only on the original principal. $$I = P \times r \times t$$ where $P$ is the principal, $r$ the annual rate (as a decimal) and $t$ the time in years.

22. Explain compound interest and its formula.

    Interest charged on the principal plus previously accrued interest. $$A = P\left(1 + \frac{r}{n}\right)^{nt}$$ where $A$ is the final amount, $P$ the principal, $r$ the annual rate, $n$ the number of compounding periods per year and $t$ the time in years.

23. What is a representative APR?

    The advertised APR that at least 51% of accepted applicants must receive. Other applicants may be offered a higher rate depending on their creditworthiness, so the rate you actually get can differ.

24. What is problem debt?

    Debt that a person cannot manage or repay sustainably, causing them to fall behind on payments, borrow further to cover existing debts, or be unable to meet essential living costs.

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