The relationship between variables relevant to fin

The relationship between variables relevant to financial capability – for example, income and expenditure, and time

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The assignment Part A

Part A (50 per cent of the mark for this assignment)

Question 1

Table 1 shows different measures of the rate of domestic burglary and of vehicle offences for six regions of England in 2014.

Table 1:   Rates of domestic burglary and vehicle offences (selected regions, England, 2014)


Domestic burglary

Vehicle offences

North East

2.4 per 1000 households

4.3 per 1000 households

North West



East Midlands




1 in 333

1 in 192




(Adapted from Office for National Statistics, 2015a)

  • 1.1  Assuming that the rate of domestic burglary and vehicle offences in each region in 2014 is a reliable indicator of the risk of these offences in these regions now, transform the figures in Table 1 into one comparable measure of risk (probability of the offence expressed as a decimal, rounded to four decimal places) and rank the regions in decreasing order of risk of domestic burglary. (6 marks)
  • 1.2  What is the chance of suffering a vehicle offence and a domestic burglary in the North East in the next year assuming they are unrelated risks? (Your answer can be expressed as a decimal or as a percentage.) (4 marks)
  • 1.3  Give one reason why a household in London might be less at risk of burglary than a household in the North East. (2 marks)
  • 1.4  Give one reason why the average insurance claim following a burglary might be higher in the East than in the North West. (2 marks)
  • 1.5  Please do the following:
  1. Briefly explain ‘moral hazard’ in the area of home-contents insurance. (2 marks)
  2. When a household takes out home-contents insurance, identify two ways in which the insurer can design the policy to reduce the risk of moral hazard. (4 marks)
  • 1.6  Briefly explain the problem of ‘adverse selection’, and explain why premiums for insurance against vehicle offences might rise if the insurance ceased to be compulsory. (5 marks)

(Total marks: 25 marks)

Question 2

Florence and Milan are cohabiting and are in their early twenties. They live in Little Venice in London and have two children, Minaj and Muse, aged 1 and 4 respectively. Florence has been on maternity leave looking after Minaj full-time during the past year and she is now contemplating going back to work. She is employed as a sound technician and creates music jingles for a machinery and equipment company. She is paid £7 an hour. Milan, a musician, also earns an average of £7 per hour from various jobs in catering and bars.

As Florence plans to resume employment, the couple are considering the best combination of hours of employment to maximise their net income after childcare costs; in particular, the four combinations of weekly hours shown in Table 2 (below).

  • 2.1  In Table 2, fill in the empty cells and explain the details of your calculations, using both the ‘Tax and National Insurance calculator’ and the ‘Tax credit calculator’ for the tax year 2015–16. Assume each hour of registered childcare that is not provided free costs £5 per child and that the table provides the total number of hours they need to pay for both children (accounting for commuting time and 15 hours a week of free childcare for Muse provided through a government scheme). Neither employer provides childcare vouchers. (9 marks)

Table 2:   Florence and Milan’s options for employment and childcare











Hours of employment (Florence/Milan)





Total hours childcare to pay





Childcare cost (£)










Childcare cost (52 weeks) (£)





Gross earnings Florence (£)





Gross earnings Milan (£)





Gross earnings total (£)





Net earnings Florence (£)





Net earnings Milan (£)





Net earnings total (£)










Child benefit (£)





Working Tax Credit (£)





Working Tax Credit childcare element (£)





Child Tax Credit (£)










Total net income (£)





Total after childcare (£)





  • 2.2  Compare the source of differences between the four options and explain which one is more attractive financially in the short-term. (6 marks)
  • 2.3 During her maternity leave, Florence has actually managed to do a three-month training course that would allow her to get to the next level in her company as a technical supervisor and earn an extra £3 an hour. Calculate the implications for the couple’s overall financial situation after childcare for the two options below: (E) and (F), and explain two main differences with the other options (A) – (D).

(E)  Florence on 20 hours per week and Milan on 40 hours per week.

(F)  Florence on 40 hours per week and Milan on 20 hours per week.

Childcare hours and costs for options E and F are the same as those for option C.

(6 marks)

  • 2.4  Aside from maximising their short term household net income after childcare costs, briefly describe two other considerations the couple might want to take into account (e.g. long term and/or non-financial) when deciding on their allocation of paid and unpaid work in light with the results above. (4 marks)

(Total marks: 25 marks)

Word limit for Part A: 1000 words

The assignment Part B (50 per cent of the mark for this assignment)

Consider the following statistics and address the question below.

  • Over the last five years, the employment rate of women has been 10 percentage points lower than that of men on average and was 68.5% in the last quarter of 2015.
  • In the same last quarter of 2015, 27% of people in employment worked part-time (on average, for 16 hours a week), 74% of whom were women.
  • In 2014, female employees earned on average 39% less than their male counterparts annually and 20% less on an hourly basis.
  • With the threshold above which automatic enrolment into a pension is triggered (for those aged 22 and over) at £10,000 in 2015–16, many low paid employees do not qualify because their annual earnings fall short of the threshold (these were more than 60% of part-time employees, or fewer than 10% of male employees but more than a quarter of female employees, in 2014).

(Office for National Statistics, 2014, 2015b)

Taking the above statistics into account, explain how gender inequalities in earnings and employment affect men’s and women’s long-term financial planning and their financial security in old age, and also the impact of UK government policies on these inequalities in old age since the 1980s.

Word limit for Part B: 1400 words

Before you complete your EMA, make sure you read these guidance notes carefully so that you can follow the advice and instructions they contain.

In the following pages, you will find:

  • student notes for each part of this assignment
  • learning outcomes addressed by this assignment
  • a checklist to ensure you have done everything required for this assignment.

Student notes for Part A

Question 1 assesses your understanding of risk, probability and insurance. Chapter 9 of Personal Finance and electronic Tutorial 9 (from Tutorials in Study resources) have relevant material for tackling this question. Questions 1.1 and 1.2 assess your understanding of probabilities and require you to think about how a probability is calculated and to apply this understanding to some data in the table. In addition to Chapter 9 and electronic Tutorial 9, Section 8 of the Module and Study Guide on ‘Working with numbers’ might be helpful. Questions 1.3 and 1.4 ask you to think about the meanings behind the figures, while Questions 1.5 and 1.6 require you to define and apply important concepts of insurance.

Question 2 focuses on the impact of caring decisions and the influence of state support on employment decisions and household incomes. Material from Chapter 8 and electronic Tutorial 8 will be relevant as well as some revision of Chapter 2 and electronic Tutorial 2 for tax calculations and different types of state benefits. You will need to use the ‘Tax and National Insurance calculator’ and the ‘Tax credit calculator’ (from Financial Tools in Study resources) for questions 2.1 and 2.3. Although it may seem that a lot of cells need to be filled, you might realise that only a few calculations are actually required. Use 2015–16 as your tax year of reference for explanation and calculations. Question 2.4 asks you to think beyond the short-term financial scenarios provided in Table 1.

Student notes for Part B

Answering Part B requires you to think back across the whole module and write an essay that draws on material from a number of chapters. Given the amount of material that you could potentially use, it is essential that you carefully plan your essay to ensure that it has coherence and focus; you are not expected to cover every possible aspect of the module.

A good starting point is to deconstruct the question and make sure you have a plan to cover all the elements of the question (and only those).

You should use the statistics in ‘The assignment Part B’ and what you know from the module material about the differences between men and women in paid work (and therefore, unpaid work) and the likely implications for different households’ planning for their financial security in retirement. Explore the role of the state and consider how it has changed and how it is likely to change, and to what extent it has influenced the constraints and opportunities faced by men and women in different households in regards to their long term financial security. Also explore what government could do to support or hinder such financial security. As such, you are not asked to dwell on the causes of gender inequalities for working-age people but rather on the consequences later in life. Gender inequalities in old age may be reinforced by initial differences, and the State – through various government policies – may also have affected these inequalities. Therefore you are expected to describe the extent to which this might have been the case with relevant examples of such policies and reforms, and the result for different individuals. In any case it is very important that you introduce the issues you will cover in your essay, as there are many different ways to address the question.

This essay requires you to consider the four themes running through the module as well as the particular material contained in individual chapters and electronic tutorials. Questions you might ask yourself when constructing your essay include: how do the issues relate to broader changes in the social and economic context?; how might they relate to the interrelationships between individuals within households?; how might they impact on financial planning across the life-course?; which household differences, in terms of income, ethnicity and age mix, interact with gender and are most likely to relate to changes in government policy and long-term financial planning?

Also, remember that one individual might be a member of a number of different household types throughout the course of his or her life.

In terms of the specific chapters and electronic tutorials, you should start by considering significant changes which have taken place within the broader social and economic context. These are first discussed in Chapter 1. You should remember to consider the material that best illustrates both the financial implications of the statements and possible financial strategies. Chapter 2 and electronic Tutorial 2, for example, are directly relevant to a discussion on income differences and strategies to improve lifetime earnings. Chapter 7 and electronic Tutorial 7 have a discussion on pensions and pension reforms to address some of the gender inequality issues and planning implications. Chapter 8 and electronic Tutorial 8 discuss the financial implications of caring responsibilities and foregone revenue over the life-course.

While the above chapters are more likely to include key information to answer the question, you should also feel free to explore other material across the module, for example: Chapter 3 discusses household income management systems, Chapter 5 has a relevant emphasis on savings and investments, and Chapter 6 explores buying and renting and their implications for long term financial security.

As usual, make sure that any sources you cite or quote from are properly referenced (see Section 7.4 of the Module and Study Guide, and the module Assessment Guide for details of referencing procedure). In this last part of the final assessment for DB123, you are expected to display appropriate essay-writing skills. Please take time to plan and work out the structure of your essay before you start to write it. Guidance with essay writing is provided in the Module and Study Guide, Section 7. Guidance is also available from your tutor, so please contact them with questions. Your essay should be a continuous piece of writing, broken up into paragraphs for different ideas and illustrations, but avoiding sub-headings, bullet points and numbering. Your first paragraph should be an introduction, saying what you intend to include in the essay, and how you intend to answer the question. Your final paragraph should offer a conclusion that wraps up your points.

Learning outcomes

The learning outcomes (as listed in your Module and Study Guide) that this EMA is testing are:

1. Knowledge and understanding of:

  1. the relationship between variables relevant to financial capability – for example, income and expenditure, and time
  2. how financial decisions form part of a broader dynamic process of social and economic change
  3. the debates and negotiations around finance which take place within households
  4. the significance of trade-offs/opportunity cost in decision-making, with particular reference to financial decisions.
  5. describe and compare the impacts of social and economic factors on financial decisions
  6. interpret and use key financial and economic terms and concepts
  7. develop an understanding of the financial planning process.
  8. communicate effectively in writing
  9. interpret and use simple graphs, tables and charts
  10. use relevant numerical skills – for example, handle percentages and interest rates
  11. use feedback to improve your own learning
  12. acknowledge sources
  13. work to a timetable and meet appropriate deadlines
  14. use Information and Communications Technology (ICT) to work through and apply module themes and other relevant material.
  15. make connections between module material and relevant material in the financial press
  16. demonstrate use of relevant techniques and tools, including budgeting, cash-flow statements and financial balance sheets
  17. understand relevant financial products
  18. recognise diversity in relation to personal finance
  19. reflect on the ways in which you learn, and begin to develop as an independent learner and problem-solver. 

2. Cognitive skills – the ability to:

3. Key skills – the ability to:

4. Practical skills – the ability to:

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