Teenager Money

Why can't we just print more money_ 12 things about money I wish I was taught at school!

Money is not just printed out and given to people. And no, you can’t just print more money.

Even now a lot of people even after graduating from universities still ask the same question: - Why can’t we just print out more money?

The simplest way to explain it is an example with water. Imagine water becomes a currency: you have one water bottle- that is all you have and you value it because your life depends on it. Everyone else also has water bottles and you can exchange and buy things for them.

Now imagine, that now everyone realises that you can fill up a water bottle from the tap, so now you have infinite water bottles, you think you are rich you can afford anything in this world.

However, the crucial part, is that everyone else now also has infinite water, water loses its value, no one values one water bottle anymore, so in reality, you are not rich, you just now need more water bottles in order to but the same thing as before... That’s what happens if you just print more money, due to inflation money loses its value.

Get more information here: https://www.moneyadviceservice.org.uk/en/videos/inflation

Wants and needs should be rationalised.

Again budgeting comes and helps here as well!

You don’t want to buy a fancy coat at the beginning of the month and then by the end of the second week realise you have no money for food.

Here are a few other examples of necessities:

-Cosmetics

For some cosmetics are a source of self-confidence, and struggle to get on without them, so these people will need to account for the purchase of cosmetic items in their budget.

-Cleaning products

These are a necessity to keep yourself and your home clean, to protect you from any allergies you have and stop germs from spreading so that you can stay healthy.

-Transport costs

You will need some form of transport to travel to destinations such as school, and shopping centres.

-Phone contracts

Phones have become an important part of our everyday lives as they allow you to communicate with others instantly and provide access to information/ educational resources. Without them daily life/ activities may become very difficult.

The difference between saving and having an emergency fund:

Saving money and having an emergency fund are 2 completely different things that serve their own purposes.

An emergency fund is when you set aside money for any unforeseen circumstances. This money can be put away in a separate savings account. So, when you are faced with a situation such as losing your job, which means you will lose your regular income and so your emergency fund can support you until you find another job. Also, if your car was to break down, it can be covered by your emergency fund as this is another ‘unforeseen circumstance’

Whereas savings accounts are usually opened with a particular goal in mind, such as saving for university fees, or to buy a new car etc. So, these are planned expenses are planned for in advance unlike the situations mentioned previously which are unplanned and therefore the reason for creating an emergency fund.

Management of money should be explained at school because the chain of wrong financial decisions just leads to significant consequences you wish you could escape from - but sometimes it is too late?

Hello everyone,

Welcome to our course, my name is Arinola Araba. I am a mum to 3, young adults and the founder of bMoney Wize Ltd.

We have put this course together to simplify money terminologies for young people.

I hope you will enjoy the content here and share this platform with your friends.

Please think about these key points:

●Educate yourself about money

●Establish Financial goals

●Create a budget

●Save each month by “standing order”

●Take advantage of compound Interest

●Take advantage of ISAs

●Research investments bases on your – goals, time, risk

●Control Debt

●Protect your wealth

All the best,

Arinola

Money can be measured as a value of labour.

Each toy that is bought to you as a kid, every ice cream or piece of clothes. All of the little items you cried for at the store are bought because your parents worked for it a certain number of hours. The realization of the value of labour comes when you usually start your first job and realize that to go out and get that meal you used to get every Friday you need to spend 3 h serving customers at the café, not just simply ask mom for the money.

You wish you respected more the money your parent gave you. Again, as a child you think, that money is just printed out, you don’t exactly understand where is it coming from, and that you have to work hard for it. If schools would have taught you that, you would have been much more rational with your spending.

Poverty exists in the world!

Some people have less money, while some people have more, but it is a harsh reality, that there are humans who do not even have money for food, water or shelter.

Wrong financial decisions can lead to going bankrupt or losing your home. If you had that understanding in school, how people become homeless and what it means to earn less, then a minimum wage could have saved so many adults from making a wrong choice.

Additionally, it is important to help those, who need it the most. Money makes you greedy, but at the end of the day, what is important is, what is in your heart.

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Don’t waste money, save it for a bigger fish

Don’t spend little amounts of money on 50 little things you will not remember you bought after a week. Save money and buy something valuable. Something that will last you longer is considered investing. It is very easy to do, by setting a financial goal for yourself.

Consistently saving little amounts will pay off when you invest in bigger purchases!

Save, but don’t be cheap.

People who try to get the cheapest option and save as much as possible, usually pay twice.

Yes, you wanted to get the best deal, the best offer, it was the cheapest option. Unfortunately, very often the price is too good to be true, and you will eventually have to pay more by either buying a more expensive alternative or spending a fortune trying to repair a broken item.

Emergency Fund

There always must be an available fund to you for emergencies, whether it is to repair something or simply get a taxi from somewhere. But I remember hearing this from my close friend, her dad once told her always to keep an emergency note in her wallet, no matter where she went.

And I have remembered this for life!

There always should be an amount that you don’t ever spend, but in an important situation, it will help.

Get more information here: https://www.moneyadviceservice.org.uk/en/search?query=emergency+fund

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Banking

Here are the key things you need to know about banking!

Current accounts

How about a bank you can instruct to pay someone a certain amount of money regularly?

Nowadays, the current account allows you to store money, spend it, put cash into your bank account or take some out. All these functions are easily accessible through a debit card.

The current account is similar to the wallet. However, rather than taking your wallet everywhere, it allows you to put money in and manage it however you like without the need to carry it around with you!

How to access money in your current account?

To make an online payment, you need to use your debit card and pin code or bank details to access funds in your account. You can also make contactless payments with or without your bank card.

What to do if you want to pay with cash?

If you would like to access cash, you can withdraw money from your current account at any available cash points. These are called ATMs (Automated Teller Machine). Cashpoints also allow you to put cash onto your account, so you do not have to walk around with large quantities of money in your purse.

To access ATM, you need your debit card and a PIN code.

But what are credit cards?

Credit cards are different to debit cards. If debit cards store money that you own, credit card stores money that you owe. With credit cards, you borrow money from the bank or from the company that owns the card. It does not mean that credit cards only have funds that you borrowed, but credit cards allow you to have an overdraft. This means paying for something now and returning the money later if you do not have sufficient cash at the moment.

When you borrow more money than you have in your account, with the bank's agreement, you use an Overdraft. It is a short-term form of borrowing.

What is Direct debit?

A direct debit is a request set up by a company you want to pay! It gives your bank permission to pay the company for a particular service. For example, when you pay your phone bill with a direct debit, the money is automatically paid out of your account monthly or as agreed.

Saving accounts.

These accounts are also known as deposit accounts. Essentially it is an account that allows you to store money and earn on it, depending on the interest rate. Some accounts allow to instantly withdraw from the account; others require the permission of the bank.

Interest

Interest is the payment you get from the bank from storing your money with them. It is paid as a percentage based on the balance that you keep in the savings so that the more money that stays in your account, the more you earn.

What is a bank statement?

The bank statement lists all transactions during a specific period (usually a month), specifically from your account. These not only include your spending, but the money received, withdrawn, or put onto account.

Please be aware that if you lose a debit or a credit card – you must report to the bank as soon as possible to prevent loss of your funds.

Credit vs Debit

There is a difference between a credit and a debit card. In simple words, a debit card is what you own and a credit card is what you owe. No, the credit card is not a magical card that makes all of your dreams come true. That’s only how they show it in the movies.

It is very helpful at certain times, however, you need to be very careful with your spending and rationalise payments from credit cards.

Get more information here: https://www.moneyadviceservice.org.uk/en/articles/borrowing-and-credit-basics

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Loans and Debt.

There is nothing wrong with having a loan or a mortgage. There is a certain stereotype that loans are dangerous or you should not ever get in debt.

However, in reality, loans are very helpful sometimes, especially when investing in something very expensive like property or student education. You wish they taught you at school how the instalments are being paid and how the credits are being given to people. What is good debt and what is bad debt and how to pay it back?

None of these ever explained to us and as a result, some people become victims of “fast loans” and are bound to pay big interest because they did not know what they were doing.

More information: https://www.moneyadviceservice.org.uk/en/articles/options-for-clearing-your-debts-england-and-wales

Borrowing

Borrowing is an important aspect of adulthood. At some point in life, borrowing money can help you buy something you cannot afford.

Loans

To borrow the money, you must be over 18 years old and prove that you can repay the money.

The contract with a lender, for example, a bank, is signed over a chosen period, e.g., 12 months.

The bank will let you know your interest rate, often referred to as APR Annual percentage rate. This rate will essentially tell you how much you are supposed to pay monthly and annual.

We can investigate an example:

For example, you borrowed £1000 as a loan for 12 months period. Your APR is 10% or interest rate. It is an actual cost of borrowing money from the lender.

1000*10%= £100 interest. This is the amount you will pay over a year as a payment to the bank for lending you the money.

Overdrafts

Overdraft is an agreement between you and a bank that you can borrow money from the bank short term at a low cost or no cost. Essentially this means that you can spend more money than you have on your credit card, and therefore you will have a negative (minus balance). This will be the money you owe to the bank.

This is very useful when you need to buy something immediately, but your payday is only next week. You will purchase something today and will return money to the bank once you receive your salary.

The limit that is set is agreed with your bank and the terms and conditions of the overdraft usage.

Mortgages

Essentially mortgage is taking a loan to buy a property from a lender (like a bank), but rather than simply borrowing money from the bank as it usually happens. You take a loan against your current value of the property. This means that if you fail to pay your loan back, the bank will take your existing property away. In simple terms, you take a loan for the house, but as a security for the bank that you will pay back the loan, you agree that when you fail to pay for the mortgage, the bank will have a right to take your house away.

Loan Sharks

Loans sharks are illegal money lenders who offer you a fast loan without a written agreement or contract in an amicable manner. They charge very high-interest rates and do not care about your ability to repay. If you do not pay money them yourself, they will take it with force.

Please avoid contact with a loan shark, and if you agreed with them, please seek support.

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Pensions.

You would think why children need to know about the pension?

They are just kids... However, a lot of people start to think about their pension only in their 40’s or even later and regret not starting to care about it earlier. If you would have known what are the pension schemes, when do you need to apply, what are the benefits and what exactly is a pension? Life would be so much easier, you would feel prepared and certain about your future decisions.

The more we learn about money as kids, the fewer mistakes we would make as adults in the future. By exploring to children how do banks operate, where the money comes from, what is money management we would be able to graduate from high school and be prepared for adulthood. Once you get a job you might not have enough time to research how to budget or how to apply for a loan. All these little, but important things should be explained while we are willing to learn and have time for that. Additionally, money is such an interesting topic, and by improving financial literacy from a young age we could save so many lives and prevent so many wrong choices adults make.

In summary, a pension is another tax saving way to grow your money, in preparation for your retirement. The sooner you start, the more tax you are likely to save. Money saved in a pension is best started as soon as possible, and possibly cheaper too.

In 2021, the tax relief you get when you pay into a pension works like this. When you pay £100 into a pension, if you are a basic rate taxpayer, you get £20 tax relief from the government.

More information: https://www.moneyadviceservice.org.uk/en/articles/why-save-into-a-pension

Mortgages

A mortgage is a terrifying word that no one explained to us!

You may remember playing the Monopoly Game and buying houses, hotels and land?

What is a mortgage?

Essentially mortgage is taking a loan to buy a property from a lender ( like a bank), rather than simply borrowing money from the bank as it usually happens.

in this case, you take a loan against your current value of the property. It means that if you fail to pay your loan back, the bank will take your existing property away.

In simple terms, you take a loan for the house, but as a security for the bank that you will pay back the loan, you agree that when you fail to pay for the mortgage, the bank will have a right to take your house away.

How helpful is a mortgage?

The mortgage allows you to buy property right now without the need to wait for 30 years to save up to do so! By taking a mortgage, you can move into your new home today and pay for it for the next decades when it is entirely going to belong to you.

By taking a mortgage, you essentially split up your big purchase on small payments throughout the period.

You need to know what these words mean:

Down payment: This is an initial amount to contribute to the purchase before taking a mortgage. For example, if you buy a house that costs £200,000, an initial 10% contribution would be £20,000.

Loan amount: The amount you borrow from the lender to cover up the rest of the property's price ( the difference between the price of the house and its down payment).

Loan term: This is when you need to repay your loan in full + interest.

Interest rate: It relates to the amount you are borrowing. Essentially this is how much you pay to the lender for allowing you to borrow the money for your purchase.

How long is it going to take to pay the mortgage back?

Usually, mortgages take around 20 to 30 years to repay. But this depends on the interest, your income, and current circumstances.

Key things to remember:

- Your monthly payments are usually the same if they are fixed. If you pay £700 per month in your first year, in year 25, you are likely to pay around £700.

- Your loan may have a fixed interest rate that does not change over time.

- You may have a fixed period to repay the loan—for example, 25 years or 300 months.

What if I don't want to live in my house anymore?

An essential aspect is that you are not required to live in the property for the entire mortgage repayment period. At any time, you can sell the home or refinance your mortgage.

- By selling the property, you should be able to pay the mortgage in full.

- By refinancing your mortgage, you can replace an existing loan with a new one that would benefit you more.

In Summary

One of the biggest purchases, you are likely to make, is buying a home. If you have to borrow money for a home or land, it is called a mortgage.

Some mortgages run for about 25 years, though, they can be for shorter or longer periods. The important thing to remember is that you money you borrow is secured against your home until it is paid off.

The lender may take your home (repossession), if you are unable to pay the loan. He may also sell your home to get his money back

There are different types of mortgages and ways to pay back this loan.

For more information:

https://www.moneyhelper.org.uk/en/homes/buying-a-home?source=mas

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Wages

What is National Insurance?

These are payments towards the NHS and access to social security benefits and state pension.

If you are an employee, your contributions are paid as a percentage of your income above a certain amount.

If you are self-employed, these payments are made at a set weekly rate. However, if your earnings are high enough, similarly, you pay a percentage of your income.

Income Tax

Income tax is a direct tax that the government directly collects from your earnings.

If you work for an employer, your income tax and national insurance are paid automatically without any need for paying them yourself. You never receive the money; you receive your salary after you have paid the contributions.

However, everyone starts paying taxes only after a certain income.

Currently, in 2021, it is £12,570 is called Personal Allowance, which is the amount of income you do not have to pay tax on.

There are different rates for various levels of earnings as well:

Basic rate: earning between £12,571-£50,270 and the tax rate is 20%

Higher Rate: from £50,271 to £150,000, it is 40%

Additional rate: over £150,000, it is 45%

Let's look at an example:

You earn £50,000 from those earning 20% are paid towards the government, so the income that is left is £40,000

While if you earn £150,001, you pay 45% of your income that leaves you with £82,500.

National Minimum Wage

In the UK, individuals aged 16 or above are entitled to a national minimum hourly wage.

Here are National Minimum wages for May 2022, at

- Age 23 and over £9.50

- Age 21 to 22, £9.18

- Age 18 to 20, £6.83

- Under 18 years old, £4.81

The rates change on 1 April every year.

Take a look at a sample payslip here: https://www.os-payroll.co.uk/post/payslip-explained

Benefits

What are the benefits?

Benefits are financial support from the government paid to those who are in need.

There are various benefits, and each of them has its criteria to be eligible for it and be able to claim it.

Who takes care of it?

In UK Department for Work and Pensions (DWP) deals with benefits and processes applications and queries. You may wish to search for additional information here:

www.dwp.gov.uk

Some of the benefits available?

Currently, there is a Universal Credit (UC), in place in the UK, which is a payment that helps you with living costs.

Every benefit depends on your specific circumstances and your income. Additionally, all benefits are subject to change. To claim benefit, please visit www.gov.uk

The UC replace the following benefits:

JOBSEEKER'S ALLOWANCE (JSA)

JSA is a benefit that supports unemployed individuals who are available for and actively seeking work.

INCOME SUPPORT

Income support supports people who are on a low income aged from 16 to State Pension Age.

Support to those individuals who cannot work for several reasons such as a lone parent, or caring for someone etc.

HOUSING BENEFIT

Housing benefit is a support for those who have a low income and struggle to pay their rent.

WORKING TAX CREDIT

It is payable to those who are working but are on low pay.

CHILD TAX CREDIT

This is a means-tested* benefit for people who have children. You can claim this benefit if your income is low enough and your child meets the criteria.

Most people receive this benefit because the income is not supposed to be very low.

Additionally, there are more benefits such as:

COUNCIL TAX REDUCTION

A benefit that reduces the council tax bill for those who are on a low income.

CHILD BENEFIT

Child Benefit is paid to people who have responsibility for a child. (Child is either under 16, either under 20 and in full-time education or someone aged 16-17 and registered for work with Careers or Connexions Service )

PERSONAL INDEPENDENCE PAYMENTS (PIP)

Help from the state to cover the extra costs of having a long-term disability aged between 16-64

CARER'S ALLOWANCE

This benefit supports people who regularly take care of someone who is ill or disabled in their own home.

Benefit fraud

If you provide false information or fail to report a change in circumstances, you may face a criminal offence and be prosecuted or asked to pay a penalty.

*The means test is based on income, family circumstances and essential living costs and works out whether someone or their family can receive some sort of benefit or payment.

Bills

When you become an adult and start to live independently, a part of your responsibilities become paying your bills.

Rent

You would typically pay rent as a fixed amount at a specific interval, for example, weekly or monthly. Usually, you pay rent in advance. When renting a property, you would pay a deposit to your landlord. It is a safety measure against any possible damages to the house or flat.

Mortgage

You would take out a mortgage loan to buy property or land. It is usually taken out over an extended period, such as 25 years. Your payments will include an interest amount on the loan you borrow. And if you fail to pay for a mortgage, the lender can repossess your current home, and you will have no place to live.

Utilities

Utilities include a water supply, gas and electricity.

Several companies provide electricity and gas in the UK, and you pay according to the electricity meter and gas meter. The payments are usually made quarterly.

You can pay your water bill in two ways. If It is unmetered, you pay a set amount per year, regardless of how much you use. While if you have metered water, you pay for units used.

VAT

What is VAT?

It stands for value-added tax. Already included in the price, when you buy goods and services, is the VAT. In the UK it is currently at 20% for most goods and services. VAT is usually at 5% for gas and electricity.

Council Tax

Council tax is a system of taxation by local authorities. You pay more tax for a larger property. Students and people under 18 are exempt from paying council tax.

TV Licence

Everyone who uses a TV has to pay for a TV license. If you do not pay a licence, you could be prosecuted and fined.

How to pay your bills

There are a few ways to pay bills :

• Direct debit. One of the cheapest ways to pay; as you may be offered a discount for this method. However, because you pay a fixed amount sometimes, you may end up overpaying or underpaying.

• Paying on receipt of the bill. This way, you pay for your usage when the supplier sends you an electricity or gas bill every 3 months. Payments could be made online, over the phone or by cash through a post office. This method allows you to know exactly how much to pay.

• Prepayment metres. This option allows you to pay before you use any energy. It is handy if you are on a budget, but you need to top it up every time you run out of balance.

Taxes.

There is part of your income that is paid directly to the government and you always need to remember that no matter whether you employed by a big company, or you are self-employed, or you just a part-time student who is tutoring someone at school- you have to pay taxes.

You wish during those maths lessons at school someone taught you how to calculate what amount of tax you are supposed to pay and how does it vary with different incomes. How often are taxes supposed to be paid? And all the important aspects you wish you knew before you started your job.

In the UK, HMRC collects Income Tax on behalf of the government. The tax collected helps provide funding for health services, education and the the welfare system. Tax is used for pay for maintenance of rail, housing, roads and public projects.

Some of the taxes we pay!

• Income tax – This tax people pay on their income

• Corporation tax – tax companies pay on the profit they make.

• National insurance contributions are a type of tax to pay for free healthcare

• Consumption tax – called VAT is 20% (2021)

• Excise duties, another tax paid on purchase of alcohol and tobacco. There's been talk of sugar tax and tampon tax

• Stamp duty – tax on buying houses/shares.

Some of your income is tax-free. For the tax year is from 6 April 2021 to 5 April 2022.
Take a look at tax rates for 20121:

Tax rate Taxable income Band

0% £12,5700. Personal Allowance

20%. £12,571 to £50,27020 Basic rate

40% £50,271 to £150,000 Higher rate

45% over £150,000. Additional rate

More information: https://www.moneysavingexpert.com/video/martin-lewis-explains-tax/

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