banking optionsSESSION #7

Money Management

The Money Management sessions have been developed for the HSBC Opportunity

Partnership in collaboration with Catch22, St Giles Trust, The Prince's Trust, Tomorrow's

People and pfeg (Personal Finance Education Group)

7Session #7

banking

options

IntroductIon

This session considers the reasons that people use bank accounts as a place to keep their money. It looks at the range of options available, and how

decisions can be made appropriate to an individual’s circumstances.

By the end of the session the young people will:

Know the range of services, relevant to young people, which banks and building societies provide

Have considered the advantages of using a bank account

Be able to compare bank accounts based on individual needs

LearnIng outcoMeS reSourceS

Session #7

Facilitator's Notes

SettIng the Scene

Explain that the vast majority of employers pay the wages of the people that work for them directly into their bank accounts, or by cheque rather than paying them in cash. This means that most workers need a bank account to receive their pay.

Ask the young people in the group to consider what they would want their perfect bank account to do for them? This could be done as a mind map showing all of their ideas. At this stage there is no need to limit these ideas, just allow the young people to highlight as much as they can.

Once complete, review all of the young people’s thoughts and highlight those which most bank accounts would actually provide for them. Which of the ideas would banks certainly not provide?

Ask the young people what the advantages of being paid directly into your bank account are, rather than being paid in cash which is kept at home. This might include:

• The money is safer being paid directly to your bank account, rather than having to travel home with it and keeping it at home

• You may be able to earn interest on the money in a bank account• Having a bank account may also provide you with a debit card or cheque book, meaning you can

make purchases without the need to carry cash around• It can be easier to set up regular payments such as standing orders (controlled by the customer)

or direct debits (controlled by the supplier) – making sure you don’t forget to pay important bills• Managing a bank account responsibly can help build an individual’s credit history*

*a credit history is a record of an individual’s past borrowing and repayment details. a credit history that shows regular and managed repayment of borrowing increase the accessibility of future borrowing if required. More information regarding an individual’s credit history is provided in Session 4 – A Need to Borrow)

15minsStarter

Session #7

Facilitator's Notes

current account vS SavIngS account

10minsCore Activity

Explain that there are two main types of bank accounts. A current account used for everyday banking and savings accounts for savings. Do the young people know what the differences are between these?

Using Resource 1 – Account Characteristics ask the young people to sort the cards, showing which are the characteristics of a current account, and which are the characteristics of a savings account.

This activity contains financial terms and is a good assessment of the young people’s knowledge of financial terminology. In some cases you may need to provide further explanation of some of these terms.

10minsCore Activity BaSIc Bank accountS

Discuss the fact that some people can have a ‘poor credit rating’. This means that in the past they may not have managed their finances appropriately, and could have run up debts. People with a poor credit rating may be unable to have a regular current account, and most banks provide something called a basic bank account. This is a more basic version of a current account which allows money to be paid in, direct debits to be set up to pay bills, and money to be taken out with a cash card. They do not offer an overdraft, cheque book, and in some cases, a debit card.

A basic bank account can also be used as a foundation account, as it is easy to manage and does not enable the customer to get into debt.

The only money that can be spent is money that is in the account and this prevents the customer from getting into debt. What do they think about this idea? Is it fair? How do the young people think basic bank accounts could help some people? Emphasise that whilst a basic bank account can help to prevent an individual getting into debt it will not help to improve their credit rating. As the basic bank account does not allow borrowing the individual cannot show whether they are able to borrow responsibly or not – therefore their credit rating will not improve.

Session #7

Facilitator's Notes

chooSIng a current account

10minsCore Activity

Ask the young people to look at the three scenarios of the three individuals on Resource 2 – Choosing a current account. Using the information they have on each of the individuals and the details of the current accounts A B and C, ask the young people to choose which of the three accounts would be most appropriate for each individual.

Take feedback to understand how the decisions were made. There are teacher notes provided showing the answers and the reasoning.

Many bank accounts offer perks, which can range from sums of cash deposited into the account on opening to free travel insurance. Young people can often be swayed by such perks rather than considering the main features of the account. It is important that the young people understand that they should initially be comparing the main features of the account rather than the perks.

Although some of the young people may already have a bank account there will be others that may not. For some young people it can feel quite intimidating going into a bank to open an account. Discussing the process and what identification might be required can be useful in allaying these concerns.

revIew 5mins

Recap on the learning objectives for the session and discuss with the young poeple whether they feel they now understand those learning objectives:

• Know the range of services relevant to young people, which banks and building societies provide• Have considered the advantages of using a bank account• Be able to compare bank accounts based on individual needs

Core Activity

Session #7

Facilitator's Notes

extenSIon 15mins

The extension activity explores some common ‘What if...’ scenarios that the young people may be faced with.

There are five different scenarios in Resource 3 – ‘Banking What ifs...

You could give a different scenario to each young person or have small groups working on different scenarios.

Take feedback on what they think they might do in the situation they have been given.

There is a facilitator sheet with guidance under each of the different scenarios to help with feedback.

Core Activity

Session #7

Facilitator's Notes

Available Balance The amount in your bank account that is available for you to spend. This takes into account any recent transactions that are yet to clear such as debit card spending.

SeSSIon gLoSSary

Balance The actual total amount held in your bank account at that time. There may be transactions that have not yet cleared so it is also important to check the available balance.

BACS (electronic transfer)

An electronic form of one-off payment that goes direct from one account to another. Can often be used to pay salaries.

Bank charge Financial institutions can have strict rules for using some of their products. If you fail to meet these then they can give this as a charge.

Bank statement A written summary of your income and spending over a fixed period of time.

Budget A way of planning for the money you have coming in and going out.

Cash card A plastic card which allows you to withdraw money from an ATM. This is usually linked to your current account.

Credit card A plastic card providing revolving credit up to a certain limit. It is used as a method of payment.

Continued on next page

Session #7

Facilitator's Notes

Credit union Non-profit making organisations set up to provide saving and borrowing facilities to local communities.

Current account The most common type of bank account which allows you to do your everyday banking.

Debit card A plastic card that can be used to purchase goods and services. The money spent will come straight out of your bank account.

Direct debit An agreement allowing an organisation to debit your current account with the amount you owe them on a regular basis. Often used to pay regular bills.

Interest The reward paid for saving money, and the ‘cost’ of borrowing money.

Internet banking The ability to access your bank accounts online. You are able to make payments, transfer money and apply for certain financial products.

ISA An Individual Savings Account allows you to save a fixed amount of money tax free each year.

Joint Account A bank account shared by two people with equal rights in how it is used.

Mortgage A financial product that enables many people to borrow the money needed to buy their own home.

Continued on next page

Session #7

Facilitator's Notes

Overdraft A borrowing facility on your current account that, with agreement from the bank, allows you to spend more than you have in the account.

Unauthorised overdraft Occurs when you have withdrawn more money than you have in your account, or you have taken out more than your authorised overdraft limit without agreement from the bank. Unauthorised overdrafts are often subject to charges and fees which can be very expensive.

Standing order An instruction set up by you to your bank to pay out a regular amount to a third party, for example, to a relative or company.

Statement A document received from your bank or building society showing all of the transactions on your account for that month.

Session #7

Resource #1

Usually pay a higher rate of interest

You may only be able to take money out a certain number of times in a year

May allow you to have an overdraft

Would provide you with a cash card and a debit card linked to the account

You may have to let the bank know in advance if you are planning to take money out

allows you to set up regular payments

Usually provide a cheque book to make payments with

allows you to set up regular payments

account characterIStIcS

Session #7

Resource #2

Shannon is nineteen and following two years at catering college is going to travel around France for six months working in different kitchens. She will be earning money, but there may be times that she’ll need to use an overdraft. One of her biggest worries is how to get her money whilst she is in France – it can be expensive to withdraw money from foreign cash machines.

Ryan is twenty one and has not managed his money well in the past. As a result his credit rating is poor. Ryan would love to have an account which lets him have an overdraft and debit card, but recognises that he needs to start getting his spending and borrowing under control.

Sammi is nineteen and has been working part time for two years, but has now got a full time job. With this her income has increased and she is looking for an account which will pay a good amount of interest when she has money in the account. An overdraft is not really needed as Sammi’s income now more than covers her spending.

chooSIng a current account

account a account b account C account D

Interest 1% 0.5% 1.5% None paid

Cash card ✓ ✓ ✓ ✓

Debit card ✓ ✓ ✓ ✗

Overdraft Limit £50 £300 No overdraft No overdraft

Cheque book ✓ ✓ ✓ ✗

Free gift on opening the account

£50 added to your account

Free cash withdrawals

abroad for one year

£30 music voucher

Nothing

Session #7

Resource #2 FaCilitatoR's notes

ShannonShannon requires an account which can provide her with an overdraft for those periods she is moving around France and not working. Her income is a little sporadic so a good overdraft would be helpful to make sure she always has enough. The free cash withdrawals for one year is a great offer for her as she will make use of it during her six months away. She can now withdraw her money from cash machines in France knowing she will not be charged for doing so.

account

b

account

DRyanAlthough there are some facilities that Ryan would like on his account he recognises that he has a poor credit history, and as such Account D would be the most appropriate. The young people in the group may recognise Account D as a basic bank account. This means that whilst Ryan will be able to access his money using cash machines, set up payments from his account and pay money in whenever he needs to, he will not be able to access forms of borrowing such as an overdraft nor have access to a cheque book.

account

CSammiSammi has recently increased her income and currently has no need of an overdraft. She will be in credit on her account and therefore the idea of interest will be more appealing. Account C provides the highest amount of interest along with a number of other common current account facilities. The music voucher is a perk, but not something that made Sammi choose this account.

chooSIng a current account

Session #7

Resource #3

BankIng what IfS...

What if...

You buy quite a few things using your debit card on saturday, but when you check your bank balance on Monday morning none of them seem to have gone out.

What if...

You put in the wrong pin number, make a mistake, try again, make another mistake and the screen tells you that you have one further attempt.

What if...

You check the balance on your account and know there is not enough to pay for a bill which is due the next day.

What if...

Your wallet with your debit card in is stolen.

What if...

You check your bank statement and find a payment has gone out that you don’t think you have made.

Session #7

Resource #3 FaCilitatoR's notes

BankIng what IfS...

1 You put in the wrong PIN number, make a mistake, try again, make another mistake and the screen tells you that you have one further attempt.

Be very careful on your third attempt, and make sure you are confident that you have the correct PIN number for the correct card. If you enter an incorrect PIN number three times in a row at a cash machine most providers will freeze the card for twenty four hours and suggest you call their customer services line to arrange for a PIN reminder to be sent to you.

2 You check the balance on your account and know there is not enough to pay for a bill which is due the next day.

This depends on whether you have any money you could transfer in the account or have an agreed (agreed by the bank) overdraft facility. If you have money that could be transferred this might be the best option; however if not and you have an agreed overdraft this could be used to pay the bill. If there was not an agreed overdraft the best thing to do would be to contact the bank immediately and explain the situation. They may well be able to provide an agreed overdraft for a period of time. Using an unagreed overdraft can result in high penalty charges and high interest rates and should be avoided.

3 Your wallet with your debit card in is stolen

This should be immediately reported to your bank. They will cancel your card so that no one can withdraw money from cash machines or use your card to buy things. The police should also be informed, and a crime reference number may be required by the bank. The bank will order a new card to be sent out to you, and may provide you with a unique code to access some emergency cash from a cash machine until the card

arrives. You should also monitor your account to ensure there are no suspicious transactions, and contact the bank immediately if you notice anything.

Think about the other personal information that could be in the wallet. Things such as a driving license, can be used to steal an individual’s identity so should also be cancelled.

4 You buy quite a few things using your debit card on Saturday, but when you check your bank balance on Monday morning none of them seem to have gone out.

Don’t be tempted into another spending spree. The reason money has not gone out of the account is because the spending took place over the weekend. Such transactions will only be processed on the next working day (so remember bank holidays too). This means spending using your debit card over the weekend will only come out of your account on the following Monday or even Tuesday.

Some banks do offer the facility on their cash machines to check the ‘available balance’ which will take into account any authorised debit card purchases at the weekend, but this does not apply to all banks.

5 You check your bank statement and find a payment that you don’t think you have made.

This should be immediately reported to your bank. They are able to provide extra information about the transaction which may help you to identify it. If not, the bank will be able to start an investigation into how the money was taken from your account and may also involve the police if necessary. So long as you report this to the bank as soon as you notice it, the bank should reimburse any money that has been taken fraudulently.

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