1. SAVING AND BORROWING Saving and borrowing Money Works: Level 2 Topic 1

2. SAVING Saving is when you put some money away to spend later on. You might be saving for something in particular, e.g. new trainers, a moped, a CD. Depending on what you are saving for, it might take a long time to save the money you need. Banks and building societies will pay interest on all money you save. Saving and borrowing Money Works: Level 2 Topic 1 2

3. BORROWING Borrowing is when someone lends you money. You can borrow money from other people, banks, credit unions, loan sharks and shops. When you borrow money, you agree a date by which you have to pay the money back. You will usually have to pay interest on the money you borrow. If you don’t pay the money back in the agreed time you may have to pay a higher interest rate, or even go to prison. Saving and borrowing Money Works: Level 2 Topic 1 3

4. INTEREST RATES You can look at the interest rate (or APR) to work out: –How much interest you will get if you save your money –How much interest you will have to pay if you borrow money Saving and borrowing Money Works: Level 2 Topic 1 4

5. MAKE YOUR MONEY GROW Jane saves £100 in a bank savings account. The interest rate is 6%. At the end of the year her £100 is worth £106. She leaves the £106 in the bank for another year. At the end of the year it is worth £112.36 At the end of 5 years it is worth £133.82 She has made £33.82 in interest. Saving and borrowing Money Works: Level 2 Topic 1 5

6. WATCH YOUR MONEY GO! Rod wants £100 to buy an MP3 player. It will take him 6 months to save £100 but he wants it now. The bank charges an APR of 8%. This means he will have to pay back £108. 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 30%. This means he will have to pay back £130. 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! Saving and borrowing Money Works: Level 2 Topic 1 6