1. Saving and Borrowing

2. Learning Objectives
To understand how and why saving and borrowing can help us to manage our finances
To appreciate that interest payments play an important part in our personal finances

3. Reasons we might save or borrow
Saving for a holiday
To buy a car

4. SAVING = putting some money away to spend later
You might be saving for something in particular e.g. new trainers, a day out, a music download or for the longer term e.g. towards a car, or simply for a ‘rainy day’
You can save money with a bank, building society or credit union
Banks and building societies will pay you interest on all the money you save
For example if you had saved £100 you would ‘earn’ interest on this amount from the bank or building society
Having savings enables you to manage the unexpected

5. Borrowing
BORROWING = using someone else’s money which they have loaned to you for an agreed amount of time
You usually borrow money for a bigger purchase e.g. a car, or a house or something you need now but haven’t got the savings to pay for immediately
You can borrow money from family/friends, banks, credit unions, shops, loan companies and loan sharks
You will usually have to pay interest on the money you borrow
For example, if you borrowed £100 from a bank for a year, you would have to pay back extra money for doing so
If you don’t pay the money back you may run into money problems and even be in trouble with the law

6. You can look at the Interest rate to work out:
Interest Rates
You can look at the Interest rate to work out:
How much interest you will get if you save your money. This is called the AER (Annual Equivalent Rate). The higher the number the more you earn.
How much interest you will have to pay if you borrow money. This is called APR (Annual Percentage Rate). The higher the number the more you pay.

7. Make your money grow
Jane saves £100 into a bank savings account. The interest rate is 3%.
At the end of the year her £100 is worth £103.
She leaves the £103 in the bank for another year.
At the end of the year it is worth £106.09
At the end of 5 years it is worth £115.93
She has made £15.93 in interest.

8. Watch your money go!
Rod wants £100 to help buy a smartphone. It will take him 6 months to save £100 but he wants it now.
The bank charges an APR of 9%. This means he will have to pay back £109.
A credit union charges an APR of no more than 12%. This means he will pay back £112.
The electrical store charges an APR of 35%. This means he will have to pay back £135.
A loan shark might charge him an APR of 100%. This means he will have to pay back £200.
OR he could save up for 6 months and then he will only have to pay £100!

9. Who and where?
Think about who you can save money with and where you might borrow money from.
Family and friends
Banks
Building Societies
Credit Unions
Payday Loan Companies
Loan Sharks

10. Making choices about saving and borrowing
In pairs discuss your two scenarios
What advice would you give to each person?
Are you and your partner in agreement about this advice?
Now share your ideas with another group – what do you think about each others advice?
Pick one of your situations to explain to the whole class and then explain the advice you have given.

11. What do you know?
Working in pairs – find out three things your partner has learned during the session.
Write these onto sticky notes
Now write down one thing you would like to know more about concerned with saving and borrowing
Display your sticky notes under the two headings:
Today I learned …
I would like to know more about …