Penstripe Student Planner Catalogue 24-25 - Flipbook - Page 105
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SAVING MONEY (2)
BORROWING
Saving Money
Borrowing
Copyright © 2025 Money Ready
Why save money?
Saving money helps when you want to be able to afford something special,
such as taking driving lessons or buying tickets for your favourite singer’s
concert. These things can be expensive.
Imagine you’re planning to go on holiday for 5 nights and have saved £600 to
spend. What might you need or want to pay for? What are the fixed costs, or
‘needs’, and what are the ‘wants’?
Plan and track your holiday spending so you have a budget for your holiday.
First, you’re going to have to work out how much you need to spend on your
fixed costs.
You have three price brackets for the fixed costs: luxury, basic and very basic.
Which would you choose in each of these categories?
Flights:
■ Direct flights in both directions: total flight duration is 2 hours and 25
minutes. Cost = £187.
■ Change flights on the way there with a short wait between flights, direct
flight home: total flight duration is 6 hours and 10 minutes. Cost= £167.
■ Change flights in both directions with a long wait between flights: total
flight duration is 13 hours and 55 minutes. Cost = £130.
Once you have chosen all your fixed costs, add them up and take that amount
away from £600. The amount left is the money you can spend on fun activities
on your holiday.
Different organisations offer different interest rates (AER or Annual Equivalent
Rate), so shop around. In any kind of savings account, you want this to be as
high as possible.
Description
Saving Money (2)
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Make borrowing make sense
If you don’t have savings to buy something you
want or need, you might decide to borrow money
in the form of an overdraft from your bank, by
using a credit card, or through a Buy Now Pay
Later scheme.
When you spend using a credit card, or Buy Now
Pay Later, you might have to pay back more than
you borrow. This is a type of interest called APR or Annual Percentage Rate.
You want this to be as low as possible.
At the time of writing, AER tends to be around 0.25% to 2% on savings
accounts. You can shop around for better interest rates. This percentage can
rise or fall over time, often to match inflation.
Inflation is a way things can cost more today than a year, or even a month,
ago. Sometimes this is because the cost of making them goes up. It usually
isn’t a big rise in price, but it means your money will buy you a bit less.
APR is often around 4.5% on loans, but can be far, far higher. This could mean
you need to pay a lot more back than you borrow. Like AER, APR can rise or
fall over time. Before borrowing, always take trusted advice.
AER vs APR
Saving vs Borrowing
What do you want?
AER=Annual Equivalent Rate
Earn on savings
Higher
So you can earn more interest!
APR= Annual Percentage Rate
Pay for borrowing
Lower
So you owe less
Money Ready is a charity dedicated to creating a financially fluent population.
We have 20 years’ experience delivering financial education across schools,
youth organisations and communities, with expertise in evidence-based
financial capability interventions, behaviour change and systems-level
advocacy across all four nations of the UK.
Find out more at www.moneyready.org
www.moneyready.org
All information correct as of November 2025.
Description
Borrowing
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Copyright © 2025 Money Ready
■ A Junior ISA is a tax-free savings account for children under 18. It’s a
long-term savings account. This means you can only take out the money
once you turn 18. At the time of writing, you can add up to £9,000 into a
Junior ISA each year.
The interest rate on Junior ISA’s is usually higher than on an easy access
savings account, but you won’t be able to get the money until you reach
the age of 18.
■ A Lifetime ISA, or LISA, is a tax-free savings account. You can start one
from the age of 18 and add funds up until your fiftieth birthday. You
can use it to save up to £4,000 a year, towards either your first home
costing up to £450,000 or for retirement. The UK government will add a
bonus of 25% each year on top, up to a maximum of £1,000 per year.
So, if you put in £400 the government will add in another £100. This is
far higher than your usual interest rate.
■ A Standard ISA allows you to deposit up to £20,000 per year.
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