PSD: Managing Own Money Challenge 3

Level 2 – Challenge 3 You are about to look at 4 different situations. For each you need to consider/discuss with family… How regularly these events/situations occur Whether you or your family have ever been affected by any/all of them How did you or your family pay / budget for them?

Buying a Car

You could save the money up front perhaps in a savings account and buy a car outright but remember there are additional expenses (insurance & road tax). You could sign up to a finance agreement – look out for good ones with 0% APR for the first few years – where you put down a deposit and then pay for the car (plus interest) over a fixed period of time, making monthly payments to the company you are buying from! You could go to a bank and take out a loan – there are lots of ways of repaying off a loan, but the most popular is by setting up a monthly standing order for your repayments.

Planning an Event

Is the event a one-off or annual event? How much is it likely to cost? Is it something very expensive – e.g. wedding or holiday abroad? This may require a bank loan or for you to have saved the money in advance by putting some money aside each week/ month for a fixed time period. If it’s not very expensive, like a party at home only requiring the purchase of food, drinks and paper plates then it may be paid for on a credit card which is paid off at a later date.

Paying Bills

You can get ‘quarterly’ bills sent to you which you then pay off at a bank – from a bank account, by cheque or with cash. You can set up a monthly standing order or direct debit to pay off your ‘predicted’ (forecast) bill values. Many students (aged 18+) live in shared digs and have meters which you have to pay into in order to continue to get gas, electricity and access to a phone. The meter is emptied when the ‘quarterly’ bill arrives and the money should (if correctly costed per unit) pay off the bill.

Shopping

Consider how often you buy certain items such as food, clothes and other household goods. The frequency of these purchases may influence how you save/pay for them. Some people pay for everything on a credit card and then pay off all/some of their credit card bill when it comes each month. Some people pay for everything using a debit card or by cheque so it is automatically paid for directly from their bank account. Some people only deal with cash so they know they have the money to pay for the things they need when they buy them.

Challenge 3 Having looked at the 4 situations and read through some suggested methods of paying for them, discuss with your friends and family how they ‘budgeted’ and paid for such events. Make notes. Now fill-in the Challenge 3 document called: PSD-MOM-L2-C3.doc, save your updated document and it back to me.