FIN 502 Chapter 6: Chapter 6.docx
Document Summary
Chapter 6: the life cycle and financial intermediation. The financial life cycle: is the lifetime pattern of these stages- people have limited life expectancy, and during their lives they go through stages of differing financial positions and earning power. Early in your lifecycle, your consumption is likely to exceed your income at least some of the time (more likely to debt) As you proceed through the life cycle, you start to earn more than you consume. As children become independent and you pay your debts off, you find yourself with surplus income, or savings. Retirement is when your earning power becomes very low or zero. Group families into different categories in the family life cycle by looking at age and other factors. Useful for identifying and analyzing demand for consumer financial services, captures the effect of income patterns in the financial life cycle even thought they are more directly related to age.