S2 Personal

Finance

Name:

1

Learning Intentions

This unit is an introduction to Finance.

In this unit you will look at Personal Finance and the financial record keeping for a Sole Trader, Partnerships, Plc’s and Club Accounts.

In this introduction you will be exploring

Topic Timescale

Date Completed

Personal Finance 2 periods

Business Banking 2 periodTypes of business structure 1 periodSources of Finance 1 periodCash Budgets 1 periodIKEA Project 3

periods

2

For this subject you

will be working with

numbers!

Literacy Numeracy Social Studies

Technologies Health and Wellbeing

Unit 1Personal Finance

3

Everyone uses money. We all want it, work for it and think about it.

Dealing with money is a daily reality for adults and most young people. Our relationship with money begins before we've left school. This unit shows how good money management skills help in everyday life.

Where do people get money from?

What do people spend money on?

What else do people do with their money?

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To share with the class…..

To share with the class…..

To share with the class…..

Bank Accounts – Personal Current AccountA current account is a bank account for every day use. It allows you to pay money in and withdraw it easily.

Benefits of having a personal current account:

You can set up direct payments to pay your monthly bills eg mobile phone contract.

You can get your money at a cash machine - Automated Tellor Machine (ATM).

Could earn interest on the money deposited at the bank.

Your money is safe.

Ways of depositing money into your personal current account:

Handing over cash/cheque at the bank.

Wages could be paid directly into your account by your employer. This is called a bank giro credit (BGC).

Ways of withdrawing money from your personal current account:

By visiting your bank with your cash/debit card.

By inserting your card and pin code (Personal Identification Number) into an ATM.

By writing a cheque made payable to a company/person eg Tesco

By setting up direct payments to be withdrawn eg. phone contract.

By using your debit card in a shop with your pin code (cash back).

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The Banks are planning to stop

people using cheques in

2018.

Task 1

Ben is 15. He’s been playing drums since he was nine. Six months ago he and 3 friends formed a band. They want to make a demo disc.

This will cost them £500 to hire the studio and a sound engineer for the day. Between them they can just about scrape together £80.

How will they raise the rest of the money?

1. Borrow the money from their friends and family.

If they borrow £420 and they each pay back £10 per week, how many weeks will it take them to pay it all back?

2. Save up until they have the money.

If each band member earns £15 per week for a Saturday job and they save all of it how many weeks will it take to save the rest of the money?

_____________________________________________________

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Task 2

Identify benefits to you of saving money in a bank account.

Write your answers in sentences.

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Task 3

Describe one disadvantage to you of paying money into a personal current account.

Write your answer in sentences.

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Task 4

Claire wants to go on holiday with a group of friends next year. She has looked at her weekly budget and sees that every week she overspends. Can you help? Look at the budget - what is essential expenditure? What would be the best way to save money?

Clare's weekly Income £157.60

Weekly Expenditure £191.96

Clothing £17.00 Contents Insurance £3.00

Travel Expenses £10.00 Gas bills £5.00 Housekeeping £30.00 Electric bill £5.00 Rent £52.00 Mobile (contract) £15.00 Prescriptions £6.00 Entertainment £20.00 TV Rental/Licence £5.90 Water Rates £5.06 Council Tax £13.00 Meals at Work £5.00

 

Suggest ways in which Claire to stop overspending her budget each week:

Name the items which are essential and explain why:

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Task 5

Use the link below and register for the RBS Moneysense website resources

https://mymoneysense.com/

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Cash Cards/Debit Cards

They allow you to take cash out of ATMs (cash machines) using your PIN (Personal Identity Number).

Cash cards are available with some accounts for young people aged 11 years and over.

Some banks give 11–18s cash cards with the Solo logo on them. This means that you can pay for things in shops and online wherever the Solo logo is displayed. This is known as a debit card.

Debit cards can also be for telephone and Internet purchases, and the funds are transferred from the your bank account immediately.

An example of the front of a typical debit card: 1. Issuing bank logo

2. EMV chip

3. Hologram 4. Card number 5. Card brand logo 6. Expiration date 7. Cardholder's name

An example of the reverse side of a typical debit card:

1. Magnetic stripe 2. Signature strip 3. Card Security Code

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The name EMV comes from the initial letters of Europay, MasterCard and VISA,

Using an ATM

If you’re aged 11 or over and have a bank account some banks will let you have a cash card to use at an ATM (Automated Teller Machine) to get cash.

ATMs are very convenient because they are placed outside banks and sometimes in shops – so you can get money out at any time of the day or night.

ATM Safety Hints

You must always be carefull when using an ATM and make sure that no one is standing close enough to see you enter your PIN code.

If you think someone has seen your PIN code you should go into your bank and ask for it to be changed.

Also check the ATM before using it, if it is broken, damaged or looks suspicious do not use it. It may have been tampered with on purpose.

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Credit Cards

This card allows the purchase of goods before payment is made (on credit) from many different stores.

The account can be paid in full each month or by smaller payments, if you don’t pay the account in full you will be charged interest (an extra charge) on the remaining balance.

You need to be at least 18 years old to apply for a credit card.

Benefits of credit cards

You'll be able to buy things on the spot, even if you don't happen to have cash.

You get a "loan" on purchases for about 25 days before you start getting charged interest.

You get some purchase protection. If your card is lost, stolen and used by someone else you will not

be charged from the moment you register it stolen.

The risks of using a credit card

Think carefully before using a credit card. If you don't repay your bill in full by the date shown you're charged interest on the whole amount of the bill for that month. The rates of interest can be very high.

If you take cash out with a credit card you're charged daily interest from the moment you take out the cash until the credit card bill is paid in full. This is a very expensive way of borrowing money.

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If you can't afford to repay your credit card bill you could quickly fall into serious debt. Paying For GoodsWhen in a shop goods can be paid for using the following different methods:

CashChequeDebit cardCredit card

When order goods online or using a catalogue, goods are usually paid for using a credit or a debit card. You must make sure that the website is one you feel safe using or has been recommended to you to ensure your card details aren’t being used fraudulently.

There are many different expenses that people will have to pay throughout their lives.

Examples of personal expenses are:

Paying for rent/mortgage for a house Paying for electricity/gas for your home Council Tax (paying the government for water/waste

collection/street maintenance) Phone bills Gym membership Health insurance (to protect you in case you fall ill) Food Clothing Paying to book a holiday Going out/entertainment/dining out

You have to make sure that you only spend money that you can afford to spend. When you start earning money you will have to learn to prioritise what your money gets spent on. Eg. Paying the rent for your home is higher priority than paying for entertainment (cinema).

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Task 7

When purchasing ________, cheap items, cash is the most common method of payment.

If you pay too much money to the shop assistant you will receive _______________ back.

This could be in the form of _____________ or ______________.

When ordering goods _______________ you can pay with either a _____________ / _____________ card.

Examples of personal expenses which would have to be paid are _____________, ____________ or _______________ shopping.

Expenses which must be paid first are called high ______________.

rent credit food notes debit

change electricity coins priority online

small

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Task 8

Calculate what change you would get if you paid each scenario below. Do not use a calculator – it is simple!

Cost of product Amount paid

Change

£10

£1000

£80

£1

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Task 9

Identify which of the following methods of payment would be used to pay for each of the expenses listed below a sentence explaining why you would use that method of payment. (The first one has been done for you).

Methods of payment:CashChequeDebit CardCredit Card

Remember to read your notes to find out what each method is.

Expense Method of payment

Reason for choice

Newspaper from newsagents Cash It will only be a small amount of money to

pay.Paying employees wages each weekOrdering a new Ipod from Ebay

Paying £200 rent to your landlord Paying your O2 phone bill every monthPaying £100 for a meal in Roos LeapHoliday to France booking with Thomas Cook

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Extension Task

If finished create a poster encouraging people to save their money in a bank. You can use a new document. You can use another document.

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Unit 2Personal Banking

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Everyone need somewhere to keep their money save and somewhere to turn to for advice. The banks

provide this service as well as a wide variety of other services to the customer to make the handling of

money easier.

Bank Services

Banks provide customers with many services.

STANDING ORDERS (SO)

A standing order is when the bank makes a payment on your behalf of a set amount on a set date each month.

Eg Rent £200 the first of every month.

DIRECT DEBIT (DD)

A direct debit is when the bank makes a payment on your behalf of a varying amount on varying dates each month.

Eg. Telephone Bill – amount is different every month and can be asked for on different dates (the first Friday of every month).

BANK GIRO CREDIT (BGC)

This is when amounts can be automatically added to an account without anyone having to visit the bank.

Eg. Wages can be deposited into employees accounts every month.

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Task 1

Complete the following sentences by filling in the missing words.

Use the word bank below to help.

Order Debit Amounts StandingDirect Regular Same Wages

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A _________ _________ is when regular bills of different ____________ maybe paid automatically.

A ____________ _____________ is when ___________ bills which are always the ______ amount maybe paid automatically.

Bank Giro Credit is when amounts can be automatically added to an account without anyone having to visit the bank. Eg. ______________

Cheques

Cheques are an alternative to paying by cash. They are largely going out of use, however while they were going to be stopped in 2018, there are those who still use them, including abroad. So it is still good to know how to use them.

Cheques are safer than carrying around large amounts of cash.

The cheque is accompanied by the cheque guarantee card/debit card.

The amount is written in figures and in words as a security measure.

The cheque is always signed and dated. This signature is checked against the debit card/cheque guarantee card signature.

Warning: It is important to always remember to put a line to the end of part completed lines on your cheque, this avoids anyone making additions to the amounts.

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Pay

Date

£

BANK OF SCOTLANDMr Smith

Ten Pounds only ----------

Today’s Date

10-00

Your Name

Person receiving cheque.

Amount in words must match the amount in figures

Amount in figures must match the amount in words

Insert today’s date

Sign here

Signature must match name on the debit card

Cheque won’t be accepted if dated in the future

The Banks are planning to stop

people using cheques in

2018.

Task 2

Prepare two cheques for the following scenarios.

1. You are paying your milk delivery from Merry Milk, the bill is calculated at £10.45.

2. You are ordering a new iPod from a seller called Jerry Hallet on Ebay. You bid £100 for the iPod and the delivery costs £3.95.

Insert text boxes onto the main sections of the cheques below and insert the information.

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£

BANK OF ACCOUNTING AND FINANCE

Date Pay

£

BANK OF ACCOUNTING AND FINANCE

Date Pay

Task 3

Print out the blank cheques on the next page. Remember to only print current page.

Now complete cheques for the following payments.

1. Window Clean Co for £6.50, dated 03/01/20--

2. Mr A.Khan for £25.00, dated 10/01/20--.

3. Kirby & Bob Builders for £12.95, dated 11/01/20--.

4. Henderson & Anderson Accounting Ltd, £1,234.65, dated 12/01/20--.

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1

25

2

3

4

Task 4

Describe 2 reasons why a cheque may not be accepted by the bank.

Write your answers in sentences.

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Check the booklet to help you!

Paying Money into a Business Bank Account

Businesses have to pay money from the sale of goods into their bank accounts. This can be coins, notes or cheques. Each needs to be counted individually when being banked.

To do this a Bank Paying in slip needs to be completed.

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Today’s Date

Number of

cheques being banked

Company details

Summary of

amounts being

paid in.

Total amount

including cheques

Task 5

IF YOU CAN

Print out the blank pay in slips on the next page. Remember to only print current page.

Now complete the pay in slips with the following information.

Montrose Window CleanersAlbert Smith24 Elm Street DriveMontroseDD10 5FR

1. 2nd January 20--Cheque from Meg Patullo for £10.00, 5x £10 notes, 23 x 50p, 21 x £5 notes, 10 x 10p, 56 x £1 coins.

2. 9th January 20--Cheque from Miss Horn for £15.00, Mr McInally for £50.00, Mr Henderson for £5.00, 20 x 20p, 10 x 10p, 24 x 5p, 45 x 2p, 32 x 1p.

3. 16th January 20--15 x £2, 12 x £5 notes, 42 x 10p, 46 x 20p, 25 x 50p, 50 x £1 coins.

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Bank: HSBC MontroseAccount Holding Branch:

Customer’s Name:

Paid in by:

Address:

Bank: HSBC MontroseAccount Holding Branch:

Customer’s Name:

Paid in by:

Address:

Bank: HSBC MontroseAccount Holding Branch:

Customer’s Name:

Paid in by:

Address:

Task 6

Match the descriptions below to the correct banking terms by drawing a line.

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CASH

CHEQUE

DEBIT CARD

CREDIT CARD

DIRECT DEBIT

STANDING ORDER

Regular bills of different amounts maybe paid

automatically using this method.

A plastic card that enables you to borrow money to

pay for goods.

Actual notes and coins that can be exchanged for

goods and services.

A paper based form of payment.

A plastic card that allows money to be taken

directly out of your bank account.

Regular bills which are always the same amount maybe paid automatically

using this method.

Task 7

Highlight the correct answer using Text highlight Colour tool above.

1. At what age are you legally required to have a bank account? There is no law that insists you open an account By law you must have a bank account by the age of 16 By law you must have a bank account by the age of 18

2.What is not an advantage of having a bank account? Interest can be earned on your savings. You do not always have immediate access to your money. Your money is more secure than having it under the bed!

3.You need to prove your identity to reduce the risk of fraud. Which of these documents can't be used as proof of identity when you open a bank account?

Signed, current passport Bus pass or travelcard Birth certificate

4.PIN stands for Personal Identification Number; who should know your PIN number?

Just you Just you and the bank staff You and your parent or guardian

5.Who can use your cash card? You should never share your cash card with anyone else Other people (such as friends and family members) can use your cash card if you give your

permission Your parent or guardian can use your cash card

6.When you make a withdrawal from an ATM you can choose to get a receipt. Which of the following information won't be printed on the receipt?

Location of the machine The date and time of the withdrawal Your full account number

7.What can't you use your debit card for? Paying for a meal in a restaurant Guaranteeing a cheque Borrowing money

8.When writing a cheque for £5.90 how should you write the amount? 5 pounds and 90 pence exactly Five pounds and ninety pence only £5.00 and 90p precisely

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Unit 3

Business and Finance

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Businesses come in many shapes and sizes: sole traders, partnerships, limited companies and not for profit organisations (charities and clubs).

Each of these organisations has different benefits and drawbacks which must be considered before choosing which business to start.

All these businesses need finance to start up and get running, the choice of this finance can vary depending on the amount, the type of business and the time available.

SOLE TRADER

Anyone who starts up a business on their own is a sole trader. He/she:

•

provides the capital and owns the business• controls the business and makes all the

decisions• takes all the risks of running the business • takes all the profit

Benefits

▪ Usually small and easy to set up and run▪ Generally only a small amount of capital is

needed▪ Owner has total control over the business and

makes all the decisions▪ Owner does not have to share profits

Drawbacks

▪ Unlimited liability – owner is personally responsible for all the debts of the business

▪ Difficult to compete with large companies

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▪ If owner is ill or wishes to take a holiday there is no-one to cover

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Task 1

Answer the following questions:

1. Describe a sole trader.

2. Explain one disadvantage of being a sole trader.

3. Explain one advantage of being a sole trader.

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Partnerships

• This is a business set up and run by 2 or more people.

• A maximum of 20 partners is allowed in a general partnership.

• Typical examples of partnership firms include solicitors, accountants and estate agents.

Benefits

▪ Shared responsibility of the workload▪ Easy way to bring in extra capital. Two/three

people can raise more money for starting up the business

▪ There is someone to consult with about business decisions

▪ Costs of the business are shared amongst the partners

Drawbacks

▪ Each partner has unlimited liability – each partner is personally liable for debts of business

▪ Shared responsibility may lead to arguments and disagreements

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▪ Profits have to be shared

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Task 2

1. Identify the maximum number of people that can join a partnership.

2. Explain 2 benefits of forming a partnership business.

3. Give an example of types of businesses, which would most commonly be a partnership.

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Limited Companies

A limited company is owned by the people who invest money into it. These owners are called shareholders. Benefits

▪ Company can raise more capital by selling more shares

Drawbacks

▪ More difficult to set up compared to sole trader and partnership

Task 3

1. Identify another name for the owners or investors of a limited company.

2. Suggest why some businesses may choose to become a limited company.

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Task 4

Using the word bank below complete the following sentences about sole traders.

1. A sole trader is a business with one ********.

2. The sole trader makes all the ******* on their own.

3. All the ******** is kept by the owner.

4. Unfortunately if the business owner is ****** or wants to go on ********* the business may suffer.

5. A ******* could be an example of a sole trader business.

6. The main disadvantage of being a sole trader is if the business falls into ******* the owner has ********* *********.

DECISIONS OWNER PROFIT ILL HOLIDAYHAIRDRESSERS BUSINESS DEBT UNLIMITED LIABILITY

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Sources of Finance for Businesses

When businesses start up they must make sure they have capital (MONEY) to invest.

There are various sources of finance that are available for owners to use for this purpose.

• Owners Capital– Personal savings of the business owner is often used

when starting a new business.

• Loan From Family or Friends– Borrowing a sum of money which then has to be repaid

over a period of time, usually without any interest.

• Loan from Bank– Borrowing a sum of money which then has to be repaid

with interest over a period of time.– eg repay £100 a month for 3 years.

• Grants– Grants are given to businesses by the government.

Grants do not have to be repaid.

• Share Issue– Limited companies can sell shares in the company to

raise additional finance.

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Task 5

Complete the following paragraph about sources of finance using the word bank below.

When an ********* starts their own business they invest ********* to purchase the goods they are going to sell.

If the entrepreneur does not have enough of their own money they will have to borrow some. ****** often lend to businesses but charge interest.

Some entrepreneurs arrange to borrow money from ******* and friends to avoid paying interest.

If a private or public limited company wishes to raise finance they sell more *****.

Capital Loan FamilyEntrepreneur Bank Shares

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Extension Task Try this word search to see if you can identify the various sources of finance we have discussed in this resource.

N Z R G Y J I K O G V F A S E

A G B N U M L S R C E C G N T

O W N E R S C A P I T A L I A

L V D G Y M N X N M R M N J S

K A E E R T G H N H A N B U S

N C R R S Z B F H M D T T F E

A E Y E D D G T U M E A S P T

B L R T C R E D I T C A R D S

S O A A S H A R E S R V N T A

M T E I R D I F B C E L P Y L

A T B N P S G H T K D C K J E

F E R E T P L E A S I N G C M

C R D D P R O F I T T U H N D

B Y N E B Y M O R T G A G E L

N L A T I P A C E R U T N E V

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Owners Capital

Trade Credit

Venture Capital

Lottery

Bank Loan

Leasing

Credit cards

Retained profit

Asset Sale

Grants

Shares

Overdraft

Mortgage

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Unit 4Cash Budgets

The term budget means a list of all planned expenses (money out) and revenues (money in). It is a plan for saving and spending.

In a personal or family budget all sources of income are showns and expenses are planned with the aim to match outflows to inflows (making ends meet).

Tips on how to cut spending when you leave school…

1 Keep a diary for a month – Record everything you spend, whether by cash, card or direct debit.

You’ll quickly spot the trivial among the essential.

2 Don’t just pay the minimum – Only paying the minimum amount on your card bills each month is barely enough to cover the interest. Focus on using any spare cash to reduce the balance on the bill with the highest interest rate – then move on to the next one.

3 Shop around – There are lots of price comparison sites on the web, covering everything from books and CDs, to flights and petrol. When you’re in-store, don’t be scared to negotiate.

4 Target your energy bills – Turning your heating down by one degree, or your hot water by five degrees can make a real difference. Turn off lights when you leave a room, and don’t leave electrical items on standby.

5 Consider switching suppliers – It’s often cheaper to buy your gas from an electric company, and vice versa. Or you may be entitled to a discount if you buy both from the one company. Do the same with your telephone and internet providers.

6 Look at your TV subscriptions – If you only watch movies now and again, it might be cheaper renting a DVD or video.

7 Get the bus to work – It will be cheaper than driving. Better still, cycle or walk if you can.

Example Budget

A Student’s Monthly Budget

Income per month Amount £ Expenditure per monthAmount £

Student loan for maintenance

£385.42 (from an

annual loan of £4,625) Rent £320.00

Part-time job at restaurant

£150 Utility bills (water/gas/electricity) £30.00

Parental contribution £200

TV licence £12.00

  Music    Mobile phone  Total income £735.42 Food £100.00

  Books and stationery    Going out £10.00

  Travel £10.00

  Contents insurance    Laundry    Clothes £10.00

  Hairdressers    Toiletries £10.00

  Club / Society subs    Other         Total expenditure £502.00

   Excess or deficit at month end £233.42

Task 1

Complete the following cash budget detailing your own income and expenditure.Eg, paper round (income) / mobile phone top up (expenditure).

This is for one month!

Your own budget

Income per month Amount £ Expenditure per monthAmount £

      Total income                     Total expenditure

   Excess or deficit at month end

(If you don’t have a part time job – imagine you have a newspaper round and you get £15 a week)

Put in a least expenses over the month!

Use your imagination if you have to.

Task 2

Read the following case study about a young student who is having problems making ends meet and then complete the cash budget to show the position she is in.

Hi My name is Lea and I am in my first year at college. I thought life would be great once I got to college but I never seem to have any money to do the things I would like to do eg go to the pictures with my friends or go to the local disco.

My income is limited to £80 per month that I make as a waitress and £10 per week that my parents give me. I don’t want to ask them for any more as I want to be as independent as possible.

My expenditure each week always seems to be too high with £10 going on my mobile phone top up and £10 per week being spent on my bus fares. On top of that I have to buy my lunch at £2 each day I am at college leaving me with no money to do the things I thought I would be able to do now I am at college. To make matters worse it is my sister’s birthday next month and I am worried I will not be able to buy her a present.

Lea’s budget

Income per month Amount £ Expenditure per monthAmount £

      Total income               Total expenditure

   Excess or deficit at month end

Task 3

Refer back to the case study about Lea’s budget in Task 3 and answer the following questions.

1 Give a suggestion of how Lea could increase her income each week (without asking her parents)

2 Give a suggestion as to how Lea could decrease her expenditure each week. Justify your suggestion.

3 Explain how preparing a cash budget would help Lea plan for future spending.

AssessmentIKEA Project

Internet shopping is becoming much more popular. People are finding that it saves time and effort by not having to visit the stores to purchase goods. In this project you are going to visit a virtual store and cost out the goods needed to set up a home of your own.

Project Instructions

During this project you will be working on your own and with a partner. You are to imagine you are moving into a new flat and need to buy furniture to put into your bedrooms and in the living room.

The bedrooms will be furnished individually.

The living room will be a joint exercise and you will have to agree on the items to be included.

The bedroom budget is to be £750 each.

The living room budget is £2,000.

You have a maximum of 3 periods to complete this project!

Task 1

Create a list of items you would like to have in your bedroom using Microsoft Excel (spreadsheet).

Click on the link below and using the IKEA catalogue find the prices for the items on your list.

Find the total costs for your bedrooms.

Remember your budget is £750 per bedroom.

Your spreadsheet should look like this:

A B C D1 Product

nameCost per item

Number to be bought

Total cost

2

http://www.ikea.com/gb/en/catalog/allproducts/

Task 2

Consult with your partner and agree on what items have to go into your living room.

Create a spreadsheet, as above, with the items listed and the costs.

Remember your budget is now £2,000 for the living room

Task 3

=B2*C2Format to Currency

A problem has happened in the new flat – the washing machine has broken and needs to be replaced. The cost of a new on is £250.

With your partner you have to decide what item(s) you will have to do without in your flat.

Write a report on what item(s) you agreed to do without, include how you came to this agreement.

Extension Task

On a sheet of blank A3 paper, or on paint spa, recreate the rooms that you have designed.