Global Citizenship for PSHE in Schools

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Living in the wider world

Financial choices

In this lesson, we’re going to go over financial choices. Everyday, people work, spend and save, and the implications for now, a year from now and decades from now, can be enormous. Many people’s relationships with money and the choices we make are most influenced by our parents – good, and bad. Many go throughout their lives without fully understanding the implications of their financial decisions.

For you, that ends today! 

Financial success looks different to everyone, and can include:

  • Owning a dream car
  • A positive credit score
  • Financial security
  • Supporting family and loved ones
  • Owning your home
  • Retiring at 50
  • Being able to travel the world
  • Not fearing losing their job

It’s important you think carefully about how you define financial success for you.

Key questions:

  1. Where are you heading financially & what does financial success look like to you?
  2. Do you know how to track and manage your income and expenses in a sustainable and beneficial way over the longer term?
  3. Do you know your rights as a consumer, and how to behave ethically?

In this lesson, we are going to help you answer the above questions and will cover the headlines captured to the right.

Let’s get into it!

The Importance of Money

“Too people spend money they haven’t got, to buy things they don’t want, to impress people they don’t like”

Reference?

Money can’t buy happiness, but it can buy security and safety for you and your loved ones. Money can cause a lot of problems if you don’t know how to manage it. Its fundamental for obtaining the things you need to survive, so an understanding of personal finance is essential. You need to be responsible with the money you earn and save enough for the future to ensure you will still have enough leftover when you can no longer work.

Task 1: Take 5-10 minutes to write down what financial success looks like to you, and what your long term financial goals are for the future.

“Wealth consists not in having great possessions, but in having few wants.”

Reference?

How much will I earn? (could turn this into a video and bring in the payslip one too?)

Could a short knowledge checker/quiz be added in here?

Of course, the majority of people will be in employment and the points above will be relevant to them. There is also another source of income for people that you need to understand. This is the benefit payment system. There are complexities to this system beyond the scope of this course but download our factsheet below to learn the key headlines. This information could be vital to you if you lose your job or are faced with serious health challenges.

What can you do with your money?

There are broadly three different options with what you can do with your money; Spend it, Save it, or Invest it.

All of these areas are important – but rarely is the balance right between the three! Most of us spend too much, save too little and invest not at all. 

“Its not how much you make, but its how much you KEEP. That’s the key to a successful financial life.”

Reference?

How did you find that exercise? The main things to say are that;

  • This requires judgement, and there is no right or wrong answer. Gym memberships for example would largely be considered a discretionary, non-essential spend, but if you felt that it was key to your health, then you could argue it was a necessity.
  • Discretionary spend is not evil! Discretionary spend is important for our quality of life and sanity. Coffee is a 100% discretionary spend – but most of the working world relies on it daily!

How to budget

“Telling your money where to go; instead of wondering where it went”

Reference?

Budgeting is keeping track of your income and expenses, so you know where your money is going each month. There is significantly more data available from banks around transactions now than ever before.

A good budget will; let you live within your means, get out of debt, have a cushion for unexpected expenses, save for bigger things and ultimately, plan for the future. They can be done with pen and paper, on a spreadsheet or on one of the multitude of apps available (‘Emma’, ‘HyperJar’, ‘Monzo’ ‘Yolt’) but however they are done, the fundamentals are the same. 

Download our budgeting cheat sheet here:

Glossary of key terms
  • Income – Money in
  • Expenses – Money out
  • Asset – Resource that will bring future economic benefit
  • Liability – Obligation to transfer economic benefit
  • Stocks – Units issued by a corporation that represent ownership
  • Funds – Type of investment and collection of resources
  • Bonds – Issues by governments and corporations to raise money
  • Principal – Initial amount invested or borrowed
  • Interest – Monetary share for borrowing money
  • Credit score – Represents ability of a person to fulfil their commitments

Budgeting fundamentals – video I think including step by step and the task

Managing a transition

Going to university, moving house, renting with friends, entering the workforce, changing jobs or buying a property are all significant life events and financial events. Or perhaps later in life, getting married, divorced or having children are all significant events.

Moving out from your parents’ house generally involves an initial outlay of money. There are the go forward costs (rent etc) which we should budget for, but there could also be significant one-off expenses, such as security deposits (as much as three months rent), furniture or decorating costs, which need specific planning for.

With regards to going to University specifically, did you know;

  • Accommodation aside – the average student spends £247 per week? This skyrockets to £427 in freshers’ week alone (UCAS ‘Spend Student Lifestyle 2020’ Report).
  • Three quarters of students who applied to a scholarship or bursary, were successful? (UCAS ‘Freshers Experience 2019’ Survey – January 2020). If you haven’t done so yet, explore these extra sources of funding (Appendix X – UCAS..)

Whether a move is to uni or somewhere else, there are options when moving out to prepare for the financial obligations which will be new, to help ease the financial burden;

  • Location; One way to make your day-to-day life easier, while also saving money on transport, is to choose an area within a short a journey as possible from your workplace or place of study, or the places you go to most often. Walking or cycling where possible is a good way to fit physical activity into your day while also greatly reducing greenhouse gas emissions (thereby helping to protect the environment).
  • Housesharing; If you can’t afford to live on your own, you can share a place with other people. It will save on expenses like rent and bills related to the household, as these are shared among the people living there. This can also be a good way to gradually learn how to manage your finances and prepare to go for it alone.
  • DIY; You can save even more money by doing it yourself, whether that’s cooking at home more, buying ingredients and chopping and peeling them yourself, or fixing things around the house. At the end of these materials are some further money saving hacks which could be useful here!

Moving into your own place and becoming independent will enable you to develop the skills necessary to able to make your own decisions. Leaving the family home in a planned way will help you reach your goals and maintain good financial health in the present – and in the future.

Managing debt

Debt isn’t always a bad thing, in that some can help you build your credit history (For instance, having a credit card which you utilise a little each month, but pay off in full on time) and it’s often necessary (eg/ to buy a house or pay for university). We can distinguish between good debt and bad debt.

task

List all the possible ways in which you could borrow. See if you can think of at least 3 different options.
Reveal answer

Hopefully you came up with some of the following:

  • Family and friends
  • Secured loan
  • Overdraft
  • Personal loan
  • Credit card
  • Payday loans

The cost of borrowing is determined by the interest rate charged, and the length of time you borrow for. All forms of borrowing are required to display the APR – Annual Percentage Rate. This should allow all forms of borrowing to be easily compared, but in reality it can be complex. 

Looking at some specific type of borrowings, pay day loans can charge over 4,000% APR (!), compared to an approximate average of ~20% APR for an overdraft, the next highest form of borrowing. Whereas a loan, depending on the current economic climate, could be anywhere from 4% -> 15%. Payday loans are a form of borrowing which many young people have exposure too without full understanding – being able to understand how quickly the interest can build up illustrates how careful young people (or all people!) need to be with this form of borrowing. 

Hopefully this makes it apparent that some debt can be ‘good’ and ‘bad’, both in terms of the cost, but also the use of the money, which we’ll look at next. 

Going back to what we learned about budgeting, once you have an emergency fund established, and are on track with your saving goals, before you begin to invest it’s sensible to consider paying off any debts. Debt can become out of control – like if you’re paying more in interest on something than it cost in the first place, as per the debt spiral illustrated in the budget cheat sheet.

Paying down debt will add financial security and provide flexibility when deciding what to do with your money afterward. But if you have a large debt balance, it can be hard to feel like you’re making a real dent in the amount owed.

Whilst there is no way to make your debts shrink overnight, there are strategies that can help ensure you’re making consistent progress. 

Reducing your debt load can help you to;

  • Improve financial flexibility
  • Reduce stress
  • Increase your credit score
  • Give you extra money for discretionary spend, saving or investing.

The interest rate you pay on the vast majority of short-term debt is likely to be many times higher than the rate of return on any investment you make. You should prioritise paying off things like credit card debt and payday loans before making any investments. There are largely two approaches to paying down debt;

If you do have any debt or continue to have debt, make sure you don’t miss making any payments ahead of their due date – any penalty fees/charges and the interest you incur will more than offset any gains you’d make on an investment. Missing a payment will also damage your credit score, making it harder and more expensive to get credit if you ever need it in future.

Note that if you are in significant debt and there is no clear route out, there are many specialists to talk to for free, the most prominent of which would be citizens advice.

Financial ethics

Splitting bills

When living with others, knowing how to split rent and utility bills fairly seems like a no-brainer…until you try and do it. While lost friendships could undoubtedly be a shame, other significant consequences can come about if you’re not candid about cash with fellow housemates. Whoever’s named on the bill is liable for the entire sum should the account fall into arrears. There are several ways to split bills, including straight down the middle, based upon income, based upon rooms or usage – overall it doesn’t really matter. What’s important is agreeing the approach up front – talk it through before moving in. Making sure that everyone is explicitly aware of what they’re expected to pay, when it’ll be due, and who they’ll need to pay it to now will save any headaches later on. 

Should the worst happen and one of your housemates gets behind on the bills, or flat out refuses to pay, things can get a little tricky. Unfortunately, the legal aspect of such situations isn’t straightforward either. Refer to Appendix X – Problems in Shared Accommodation from the Citizens Advice Bureau, for further information here.

[Placeholder – money mule]

[Placeholder – age of getting a job]

Being an ethical consumer

Companies spend billions on advertising, marketing and teaching their staff to sell – while consumers get no buyers’ training. This imbalance could be devastating to the wellbeing of millions of people; and we see scams, mis-selling, poor decisions and over-indebtedness in abundance.

Many companies have very questionable practices even in todays day in age, whether than be exploitative labour, environmental impact or dubious tax practices. Ethical consumerism is all about choosing goods that are ethically sourced, ethically made and ethically distributed. When enough consumers shop in an ethically conscious way, it can cause companies to take notice and address their supply chain practices. When we don’t have a lot of disposable income, which often is the case when we are young, it can be hard to consider these matters, and cost is often the primary determinant of where and what we shop. It is important to be aware of these issues regardless – even in the scenario that we cant do a great deal now, at some stage we will have more choice and flexibility, at which point we can closer align our spending habits to our moral values.

Snapshot of consumer rights and financial contracts

Gambling

Gambling is all around young people today – from advertising during sports events, and the behaviour and habits of reality TV stars, through to the betting shops on our high-streets.

And it is a popular pursuit amongst Britons, with at least two thirds of the population spending money on a gambling activity in the last year.  While for many people gambling is a pleasurable activity done in moderation, for a minority it can lead to substantial problems – financially, psychologically, and socially. 

Evidence also shows that many school students are involved in some form of gambling-related activity – such as playing cards for money and betting with friends – long before they are legally old enough to place bets online or at the local bookies, or enter a casino.

More coming on this… (probability/risk/case studies/links to support etc)

GIST – good ideas for starting things…

  • Download our free ‘Budgeting cheat sheet’ and work through it to reflect on your current financial situation.
  • Follow our money saving hacks to the right to make the money you have go further.
  • X

Want to learn more?

  1. Access this Budget Planner spreadsheet from the money saving expert
  2. Learn about your responsibilities when renting from the money saving expert too
  3. UCAS share some helpful information about bursaries and scholarships related to further education
  4. Understand more about problems that can arise in shared accommodation

I think we need a short quiz to finish off the lesson – 5 questions with helpful extensions if correct and corrections with explanations if wrong.