Long term planning and borrowing Money Matters Key Stage 4&5 Long term planning and borrowing

Financial Planning Short Term Long Term REF 3A

Life events and financial goals Planning for the future will involve: Earning Saving Insuring (to help protect our financial situation) Borrowing REF 3A

Types of borrowing credit cards Bank Loans Bank overdraft Mortgage Store cards Pay Day Loans Hire Purchase REF 3B

Essential facts about borrowing Borrowing is when someone lends you money. You can borrow money from other people, banks, credit unions, loan sharks and shops. You agree a date by which you have to pay the money back. You will usually have to pay interest on the money you borrow. The amount of interest you pay is shown as an APR (Annual Percentage Rate). The higher the number the more you pay. For example, if you borrowed £100 from a bank for a year at 10% APR you would pay back £110. If you don’t repay a loan you may have to pay even more interest and charges, the bailiffs may call to remove personal possessions to the value of the outstanding debt, you may end up with a criminal record and even a prison sentence. REF 3B

Average APR… Loan sharks – 5000% Pay day loans – 2000% Store cards – 30% Credit cards – 29% Credit unions – 26% Bank overdraft – 20% Hire purchase – 15% Bank loans – 5% Mortgage – 4%

Calculating APR… £150 a). What is 10% of £150? 10/100 x 150 = £15 b). Add the interest to the original cost of the television… £15 ( APR) + £150 ( cost of TV) = £165 £150 10% APR

Today we have learnt… Which lifetime events we may need to save money for and which ones we might need to borrow money for That financial planning is really important and that saving and borrowing are both useful ways in which we can manage our money There are quite a few different ways we can borrow money. We need to check the APR for each of these methods to see which is the cheapest