1. Personal Financial Encounters Topic 1
Understand the
features of legal tender

2. 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

3. 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.

4. 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

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

6. 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.

7. 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

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

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

10. 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.

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

12. 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.

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

14. 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:

15. 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.

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

17. Overtime
Time and a half
Time and a quarter
Double time

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

19. National Min Wages
£3.68
£4.98
21 and over £6.08

20. 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

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

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

23. 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

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

25. 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

26. Overdrafts
Arranged
Authorised
Unauthorised

27. 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

28. 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

29. 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

30. Loans
Personal Loans
Mortgages

31. Personal Loans
Normally between 2000K and 10,000K

32. 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

33. 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

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

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

36. 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

37. 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)

38. Online banking
You have to access to a computer

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