1. How to manage money – Key Stage 4
Can debt ever be good?
How to manage money – Key Stage 4

2. Meet the family
Maya and Rohan live with their parents on a small island, but are about to move to the UK mainland.
The island is expensive and their parents have not always managed their money well so feel the need to move.
Maya and Rohan have four cousins; Henrik, Alice, Max and Izzy, who they often chat to online.
The cousins give advice to Maya and Rohan, but it can often be very different.
Take a look at the profiles and messages from Maya and Rohan and
their cousins and see if you can come to any conclusions about the
differences between their lives. Keep in mind the topic of this session is
personal finance and write your ideas onto the sheets provided.

7. Good debt Good debt = cautious investment in your financial future
Should make you more affluent in the long-term.
There should be a specific reason for taking out a loan.
You should have a sensible plan for re-payment.
Examples of good debt which demonstrate how taking on debt could make you wealthier in the long-term:
Student loan
Graduates usually get paid more than non-graduates.
Interest rate is low.
Pay back only when your earnings reach a certain amount.
Buying a car
Only if it is essential to enable you to earn a living.
Repayment costs and the running costs of the car should be affordable from your income.

8. Good debt cont.. Mortgage Enables you to buy a house to live in.
When the mortgage is paid off, the house will become a financial asset.
Monthly mortgage payments could be cheaper than rent.
Investing in your own business
You will need to have a carefully thought through business plan.
If your business is successful it could end up being worth much more than the original loan.

9. Bad debt Bad debts = risky long term outlay for short-term gain
Drain your wealth.
Are not affordable.
Offer no real prospect of ‘paying for themselves’ in the future.
Examples of bad debt which demonstrate risk for a quick-fix gain
A car you don’t need
If a car isn’t essential then don’t buy one.
In particular don’t buy a new car as they always lose their value.
Borrowing money to pay bills 
You are likely only to increase your debt.
Get financial advice to help you get through.
A luxury holiday 
Save up for that trip of a lifetime.

10. Good debt / bad debt scenarios...
Melanie wants to go to university. No-one in her family has been to university before. Her Mum isn’t that keen about her leaving home. But she really feels that university is for her. There’s been a lot on television about how expensive it is to go to university.
Should Melanie get a student loan and go if she gets the grades? Why?
Many students won't need to repay the total cost of their tuition fees.
Student loan repayments are calculated in relation to your income.
If you lose your job you don't need to make repayments while unemployed.
You can't lose your house if student loans aren't repaid (unlike secured debts).
The interest rate is quite low. It is positioned between inflation and inflation + 3%, depending on earnings. In the long-term, this is likely to be far cheaper than bank loans or credit cards.
Full time students start repaying student loans and the interest in the April following graduation. The repayments are solely based on earnings, not on the amount borrowed. The key fact is you repay 9% of everything earned over £21,000, though it's wiped after 30 years, regardless. If you never earn above £21,000, you'll never repay.

11. Good debt / bad debt scenarios...
Toni is in debt. She took out a bank loan to furnish her flat and then she lost her job. She was convinced that she would get another job quickly so she took out a pay-day-loan so that she could cover the debts of her original loan. She is still hopeful that she will find a job.
Was Toni right to get a bank loan?
Was Toni right to get a pay-day loan?
Good debt / bad debt?
Why?
The bank loan
If you take out a bank loan there are clear terms and conditions to stick to. If you lose your job you should go to your bank and see if you can renegotiate the repayments. Toni may have been better advised to borrow furniture and going to charity shops to furnish her flat as cheaply as she could. The temptation to get a new home exactly how you want is great but in the long-term it can be so much better if you wait.
The pay-day loan
Pay-day loans can be easy and quick to negotiate so can appear to help you out when you need money fast. If you need an urgent repair to your car and that’s the only way you can access money fast, it can be cheaper and quicker than taking out a bank loan but only if you can be absolutely sure you can pay it back on time.

12. Good debt / bad debt scenarios...
Ashram was convinced that he could make a good living from his new business venture. Although there was a number of cafés in the area he was convinced he could make his the best. He had worked in his Uncle’s café for a few months and was convinced that his Uncle’s business (which had been running for 20 years) was very out of date. He’s tried to get a loan from a bank but couldn’t convince them of his plans. He’s looking for other ways to take out the loan.
Is Ashram right to get the loan?
Good debt / bad debt?
Why?
Although Ashram has a vision for his business he needs to get firm plans sorted to be sure he will get a return on his money before a bank will give him a loan.
Ashram should get help from the jobcentre – it may be able to put him in touch with a business advisor.
Ashram may be entitled to grants to support his business if his business plan is good enough.
Ashram should consider taking advice from his Uncle as he has run a successful business for a long time.

13. Good debt / bad debt scenarios...
Jonas has an offer of a job. He’s been looking for a job for some time. Having bought a flat 18 months ago he has been struggling to keep up the repayments. If he accepts the job he will have to buy a car as there isn’t public transport to take him to his job. The job is subject to a 6-month trial period. Jonas really wants the job but he is anxious as it is more taxing then any job he has had previously and he is not sure he will be able to make the grade.
This is a tough one!
If Jonas succeeds then it will be a good debt, if he fails it will be bad!
On balance the fact that he has been offered the job is optimistic. The employer can see some aptitude and is prepared to spend time and money investing in Jonas.
The fact that Jonas doesn’t feel the same is probably as a result of his self-esteem being knocked as he is out of work and under pressure to get a job.
is that he needs to invest in a reliable car to make sure that he is punctual.