What are the theoretical foundations of personal finance business?

theoretical basis of personal finance business of banks

1. Life cycle theory (★★★★)

(1) Concept of life cycle

Life cycle theory is developed by F? Modigliani and R? Bloomberg, a? Amdo * * * was created together. Life cycle theory provides a new explanation for people's consumption behavior, which points out that individuals plan their consumption and savings behavior for a long time and realize the optimal allocation of consumption and savings in the whole life cycle. That is to say, a person will comprehensively consider his immediate income, future income, predictable expenses, working hours, retirement time and other factors to determine his current consumption and savings, so as to keep his consumption level at a relatively appropriate level at all stages without a large fluctuation in consumption level.

(II) Application of life cycle in personal financial management

(1) Professional financial management practitioners, such as financial planners, can help customers choose comprehensive financial management packages such as bank financial products, insurance, trust and credit that are suitable for their customers according to their family life cycle.

(2) Professional wealth management practitioners can give suggestions on asset allocation according to customers' needs for liquidity, profitability and profitability at different stages of their family life cycle.

second, the time value of money (★★★)

(I) the concept of time value and influencing factors

1. Concept

Generally speaking, the value of the same amount of money or cash flow is different at different times. People usually refer to the difference in the value of a certain amount of money between two time points as the time value of money.

Money has time value because:

(1) Money can meet current consumption or be used for investment to generate returns, and money occupation has opportunity cost;

(2) Inflation may lead to currency depreciation;

(3) Investment is risky, so it is necessary to provide risk compensation.

2. Factors affecting the time value of money

(1) Time

The length of time is the primary factor affecting the time value of money. The longer the time, the more obvious the time value of money is.

(2) Rate of return or inflation

Rate of return is the key factor to determine the degree of currency appreciation in the future, while inflation is the reverse factor to shrink the purchasing power of currency.

(3) Simple interest and compound interest

Simple interest always calculates the income based on the initial principal, while compound interest calculates the interest based on the principal and interest: tick base, thus generating the income multiplication effect of increasing interest and increasing interest.

(2) Calculation of time value and interest rate 1. Basic parameters

Present value: the current value of money, usually expressed by PV.

final value: the value of money at a certain point in the future, usually expressed by FV. Time: the reference system of monetary value, usually expressed by T.

interest rate (or inflation rate): that is, the fluctuation factor that affects the time value of money, usually expressed by R .. 2. calculation of present value and final value

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