PHSE - Economic wellbeing and financial capability Lesson 3 – Debt management L.O. – Capability...
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Transcript of PHSE - Economic wellbeing and financial capability Lesson 3 – Debt management L.O. – Capability...
![Page 1: PHSE - Economic wellbeing and financial capability Lesson 3 – Debt management L.O. – Capability 1.2b - Learning how to manage money and personal finances.](https://reader036.fdocuments.us/reader036/viewer/2022083007/56649e955503460f94b99c4d/html5/thumbnails/1.jpg)
PHSE - Economic wellbeing and financial
capability Lesson 3 – Debt management
L.O. –• Capability 1.2b - Learning how to manage
money and personal finances.• Economic well-being 2.4d – Identify how
finance will play an important part in their lives & in achieving their aspirations
• Economic well-being 3.h - Personal budgeting, wages, taxes, money management, credit & debt.
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1. the 16-17 rate for workers above school leaving age but under 18 will increase to £x.xx
2. the apprentice rate, for apprentices under 19 or 19 or over and in the first year of their apprenticeship will increase to £x.xx
Recap
£3.68
£2.60
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Debt isn’t bad, Bad debt is bad
Decide whether or not you consider the scenarios to be “good” debt or “bad debt” There may be arguments to support both.
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GCSE Maths – Percentages of amounts.
1. To find 12% of £45
2. Divide the amount (£45) by 100
3. Multiply your answer by the percentage (12)
• Mental percentages worksheet complete columns – 10%, 1%, 5% and 17.5% only
How could you work out 6% of £600?How could you work out 9% of £600?
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Credit cards and loansBorrowing from, and needing to pay back, a company or bank is not like borrowing a
fiver from your big sister and giving it back next week when you can afford to.
THEY WILL WANT INTERESTA credit card is just a pre-approved loan, so once we’ve got one we can borrow as much as we like from it, up to a set limit. Yet just like a loan, every penny needs to be paid back… and if not, be prepared to be chased for it.
The key difference, though, between borrowing in the form of a loan and using a credit card is that we decide how much (or how little) to pay off per month. In addition, we decide how much we borrow, within a pre-arranged limit.
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How is interest calculated?
• If you borrow £1000 on a credit card at an interest rate of 20% at the end of the year you owe £200
• This DOES NOT mean at the end of the 2nd year you just owe another £200 because they use COMPOUND INTEREST which basically means you have to pay interest on the interest you have already accrued.
• So after 2 years you now owe £1440 not £1400. This will keep going up and up each year the debt is not paid off.
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GCSE – compound interest questions
• John borrows £500 at an interest rate of 7%. How much would he owe after 3 years if he doesn’t pay any back?
• End of year 1 - £500 +7% (£35) = £535 • End of year 2 - £535 +7% (£37.45) = £572.45 • End of year 3 - £ 572.45 +7% (£40.07) = £612.52
Now attempt the GCSE compound interest questions on the sheet
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Choices
• Mia and Paul are recently married and want to go on holiday and need £3,000.
• Mia suggests a bank loan of £3,000 for 2 years at an interest rate of 18%
• Paul thinks he sees a better deal with a rival bank offering £3000 for 3 years at only 12%
• Which method will charge them less interest over the duration of their loan?
• Why do you think this is?
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Wonga.com
Wonga.com rates
360% interest means for every £1 you borrow you owe £3.60 at the end of the first year. (this doesn’t include any late repayment fees etc)
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£100 Borrowed and not paid back.
• End of year 1 - £100 x 3.6 = £360 (8gb iphone 4 – pay as you go)• End of year 2 - £360 x 3.6 = £1296 (family holiday)• End of year 3 - £1296 x 3.6 = £4666 (decent 2nd hand car)• End of year 4 - £4666 x 3.6 = £16,798 (deposit on a house)• End of year 5 - £16,798 x 3.6 = £60,473 (1/2 bedroom flat)• End of year 6 - £60,473 x 3.6 = £217,703 (family home)
Don’t forget this doesn’t include any late payment fees or possible court costs for non payment of debts!!!
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