Money acts as a medium of exchange that in our modern society is legally accepted in payment for goods and services. Money can also serve as a standard of value for measuring the worth of various goods and services. Some authorities explicitly require money to be a standard of a deferred payment. Money can include both currencies, particularly the many circulating currencies with legal tender status value, and various forms of financial deposit accounts, such as demand deposits, savings accounts, and certificates of deposit. In modern economies, currency is one of the smallest component of the money supply since everything is done with either paper cheques or virtual terminals.
Money is not the same as real value. Money is central to the study of economics and forms its most cogent link to finance matters. The absence of money causes an economy to be inefficient since the economy requires a coincidence of demands and supplies between the two parties, and an agreement that these needs are of equal value; of course that is before a barter exchange can be done. The efficiency gains through the use of money are thought to encourage exchange and the division of labour, in turn increasing productivity and wealth of the economy and society.
Insurance is the undertaking of one party to indemnify another, in exchange for a premium, against a certain eventuality. Uninsurable risks: * Bad debt * Changes in fashion * Time lapses between ordering and delivery * New machinery or technology * Different prices at different places
Questions in personal finance revolve around * How much money will be needed by an individual (or by a family) at various points in the future? * Where will this money come from (e.g. savings or borrowing)? * How can people protect themselves against unforeseen events in their lives, and risk in financial markets? * How can family assets be best transferred across generations (bequests and inheritance)? * How do taxes (tax subsidies or penalties) affect personal financial decisions? Personal financial decisions may involve paying for education, financing durable goods such as real estate properties and cars, buying insurance, e.g. health and auto insurance, investing and saving for retirements, etc Personal financial decisions may also involve paying for a loan too.