Personal Financial Encounters Topic 1 Understand the features of legal tender

Learning Intentions By the end of this topic you will: Understand what is meant by money Explain the characteristics of money Explain the 5 features that make money legal State what is meant by “Legal Tender”. Explain what happens to old and damaged notes

What is money? “Money is anything that is generally acceptable as a means of exchange, which at the same time acts as a measure and a store of value”. A means of exchange A measure of value A store of value See page 1 for definitions of each.

Denominations Denomination means the different value of each note and coin. In the UK we have the following denominations of coins: £2 £1 50p 20p 10p 5p 2p 1p

Activity 1a Read pages 1 and 2 then answer the Activity questions 1a (a, b and c).

Banknotes The Bank of England issues the following denominations of banknotes - £5, £10, £20 and £50. Every banknote has “I promise to pay the bearer on demand the sum of” (amount) signed by the chief cashier on behalf of the Governor of the Bank of England.

Characteristics of money In order for money to meet the definition of money (a Means of Exchange, a Measure of Value and a Store of Value it must have certain characteristics: Recognised by everyone Accepted by everyone Easy to carry around Available in different amounts Worth the same amount Hardwearing

Activity 1b, 1c, 1d and 1e Read pages 3 to 7 answering the above activity questions.

Activity 1b Answer Activity 1b check if you were correct by looking at the banknotes on the this site: www.bankofengland/banknotes Name and describe the security features on the banknotes which are currently in circulation.

Legality of notes Legal Tender means that, by law, people must accept certain coins and banknotes “in payment of a debt”. However, payment for goods and services may be refused if too many coins are handed over. (see page 9) Other forms of payment are not illegal. If a form of money is generally accepted it can be used. For example, most shops in England will accept Scottish banknotes even though they are not legal tender.

Activity 1f Read pages 8 and 9 then answer Activity If.

Forgery The Forgery and Counterfeiting Act 1981 makes it a criminal offence for someone to reproduce banknotes. There are various security features on every banknote to help detect if the note is a forgery.

Activity 1g Read pages 10 and 11 then answer Activity 1g part b) You should have already answered part a) previously.

New Banknote Designs Pages 12 and 13 provide information on the most recent changes to banknotes as well as banknotes from other parts of the UK. Read through pages 12 and 13 Look at this website: www.scotbanks.org.uk/banknote

Review Questions Read through your Topic 1 notes then answer the Review Questions on Page15. Complete the Learning Activities on Page 16 of the booklet.

Personal Finance Homework Complete Topic 1 Review Questions Revise for Topic 1 Test For Friday 22 August 2014

Overtime Time and a half Time and a quarter Double time

Student Loan Only has to be paid back when you are earning over 15K See Case Study on page 46 in Topic 3

National Min Wages 16-17 - £3.68 18-29 - £4.98 21 and over £6.08

P45 Tax Document Used when you start a new job – given to you when you leave a job Decides what tax code you are on

P60 A summary of your annual tax paid - it gives you your tax code

Topic 4 – Different Accounts Current Accounts Savings Accounts Extra Featured Accounts Loans Mortgages

How bank accounts work. You can use them to pay S/O and D/D Pay bills Pay-in cash Use cheques On-line banking Telephone banking Use of ATM’s Credit cards, cash cards, debit cards

Special signing arrangements for accounts Joint mandate Joint and several liability Lasting power of attorney

Current Accounts Sort Code – 6 digits Account Number – eight-digits This information is needed if you pay-in, take out money. You can receive and electronic or paper- based statement Receive a cheque book or pay-in book for the account Pay S/O’s and D/D’s Overdraft facilities

Overdrafts Arranged Authorised Unauthorised

Packaged current accounts Can offer different incentives i.e. Travel Insurance Preferential savings rate Good loan rates Mobile phone insurance Lost key schemes Will-writing Additional charges for this could amount to £300 per year

Savings Accounts These can be operated by going to the counter to pay-in take out money You can make regular payments by setting up S/O’s Transfer money from one account to the other

Other accounts Instant access Notice required Regular savers Individual savings account (ISA) Savings accounts have to give the Annual Equivalent Rate (AER) this is because interest rates for savings are not always fixed

Loans Personal Loans Mortgages

Personal Loans Normally between 2000K and 10,000K

Mortgages Repayment – reduces the mortgage over the years Interest-only – You end up with the same amount that you have borrowed Loan to Value (LTV) You can only borrow on what your property is valued at You are always charges arrangement fees and these can be costly

Offset Mortgages If you have a large sum to save this can be offset in another account and the bank will deduct what you have in savings. Mortgage for 100,000K, 20,000K savings you repay on 80,000K This can reduce your mortgage by around 8 years

Current Account Mortgages The mortgage is shown as a large overdraft that you reduce monthly – payments can be flexible

APR Annual Percentage Rate – This can be fixed or variable AER Annual Equivalent Rate

How to take money out of an account Over the counter Sanding Order or Bank Transfer ATM Automated Teller Machine Cash Cards Debit Cards Direct Debit Cheque Clearance Pay it in, Day 2 Cheque Cleared for Interest Payments, Day 4 You can withdraw money, Day 6 the cheque will be paid

Cash Card Given to people normally 18 and under – They can only withdraw what they have in an account Debit Cards allow you to buy in shops, take cash, buy on line (only if you have sufficient funds)

Online banking You have to access to a computer

Telephone Banking Phone or mobile Some banks contact customers by phone using text messaging