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Saoirse is a 1st year college student living away from home and sharing a house with two other students - Leaving Cert Home Economics - Question 4 - 2016
Question 4
Saoirse is a 1st year college student living away from home and sharing a house with two other students. She has a weekly allowance of €220, for all her college expe... show full transcript
Worked Solution & Example Answer:Saoirse is a 1st year college student living away from home and sharing a house with two other students - Leaving Cert Home Economics - Question 4 - 2016
Step 1
Discuss four reasons why Saoirse should set out a budget.
Answer
Reasons Saoirse Should Set Out a Budget
Setting a budget is critical for managing finances effectively. Here are four reasons Saoirse should consider:
1. Prevents Overspending
A budget helps Saoirse keep her spending in check. Since she has a fixed amount of €220 weekly, it ensures that she lives within her means, thus minimizing the risk of financial strain.
2. Provides for Emergencies
Having a budget allows Saoirse to allocate a portion of her funds for unexpected expenses, like medical emergencies or urgent repairs. This preparation reduces stress when unforeseen costs arise.
3. Develops Money Management Skills
Creating and following a budget encourages Saoirse to develop vital money management skills, enabling her to track income and expenses effectively. Mastery of these skills can improve her financial literacy long-term.
4. Avoids Debt
By setting a budget, Saoirse can ensure that she manages her spending without relying on credit, thus preventing debt accumulation. It fosters responsible financial behavior and encourages saving for future needs.
Step 2
Set out a weekly budget plan showing how Saoirse should allocate her money to ensure her needs and wants are met.
Answer
Weekly Budget Plan for Saoirse
Here is a sample allocation of Saoirse's €220 weekly allowance:
| Expense Category | Percentage | Amount (€) |
|---|---|---|
| Rent | 25% | 55 |
| Food | 25% | 55 |
| Household Bills | 15% | 33 |
| Transportation | 10% | 22 |
| Study Materials | 5% | 11 |
| Clothing | 5% | 11 |
| Discretionary Spending | 5% | 11 |
| Savings | 5% | 11 |
| Total | 100% | 220 |
This budget helps Saoirse cover her essential needs such as rent, food, and bills while allowing for discretionary spending and savings.
Step 3
Suggest one suitable savings account that you would recommend for Saoirse. Give one reason for your choice.
Answer
Recommended Savings Account for Saoirse
Account Type: A Regular Savings Account
Reason for Choice
A regular savings account is suitable for Saoirse as it offers easy access to funds while providing a modest interest rate. This means she can save for emergencies or future expenses without worrying about long-term locks on her money, making it flexible for her student lifestyle.