Money Matters Teachers Guide by Anna Coenen

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TEACHERS’ GUIDE about managing money

0 The Money Trap – Teachers

The Money Trap1 Today it is a new Play station, tomorrow a new mobile or a pair of a new designer jeans. Life is expensive for young people. Some of them can't manage and get trapped. Banks provide bank accounts for young people, but often before the end of the month the account is empty and the ATM won't dish out any more money. However there is a bank card and once young people discover the ease of this transaction, using it as a credit card; they are lured into buying on credit. Banks target young people by offering soft and easy loans or leasing a car. Salesmen and bankers need sales and credit and those young and inexperienced young men and women are easy prey!

Consultation is Needed Roughly 40% of all persons between 18 and 24 years have defaulted on previously taken financial obligations, being it a bank loan, an outstanding credit card bill or account with suppliers, even more often debts to friends and parents or grandparents. Most of those debts are higher than one thousand euro and in 15% of the known cases the debt exceeds the monthly available income.∗ Most young people fall in the debt trap before they reach the age of 25 and won't get out during the next ten years. 15% of youngsters below the age of 25 show signs of shopaholics or depend on shopping to lift their emotional behavior. How did it get so far and what should be done?

Role Models Parents who buy a new car every two years, buy furniture or clothes, take out hire purchase and or leasing contracts and pay for their groceries with cheques or credit cards are role models. Parents often resort to easy options such as increasing pocket money or settling their children’s bills which, on the contrary, aggravate the problem within the family. Peer pressure, the "show-off-encounters”, Keeping up with the Joneses" in our almost closed society lure youngster to the banks, money lenders or elsewhere for financial support. Shoplifting, social isolation and our present recession are all related to the lack of knowledge about "Money Matters". ∗

Source Nibud The Netherlands

All text is gender neutral: “he/she” has been avoided for simplicity and easy reading.

The Money Trapp – Money Matters -@ 2009

Lesson 1 - Teachers

Your Money – money on the loose Objective: Students should be made aware of the importance of planning their income and expenditure. The students are taught to prepare a simple list of their income and expenditure. Students should understand the difference between “I Must” and “I May”.

Teaching Options Class/group project: What do I buy and how much do I spend? Every student makes a list of his expenditures starting with items on which he spends most. Students compare their income and spending. Students draw up a plan of their spending for next week. How much money will they get next week? Which one of the items are a MUST and which ones MAY they get? How much money can they afford to spend next week? The teacher might select the top five expenditures of the group. Those can to be compared with the top five of the National Students Survey, (see below). Individual approach: discuss with the students which expenditures have been listed. Make an inventory of those which match. Please note that the following data from Holland show no expenditure for hobby or sport! Data from Malta is not available but assumed not to be much different. Boys: Top Five Expenditures 12-14 years 1. clothes 2. sweets and snacks 3. soft drinks 4. computer/games 5. alcohol

15-16 years 1. alcohol 2. clothes 3. sweets and snacks 4. soft drinks 5. mobile phone

Girls: Top Five Expenditures 12-14 years 1. clothes 2. sweets and snacks 3. mobile phone 4. gifts 5. cosmetics

15-16 years 1. clothes 2. alcohol 3. mobile phone 4. going out 5. cosmetics

Lesson 2 - Teachers

What Does It Cost - about being price conscious Objective: To develop a feeling for prices. The students are taught to compare prices and to understand the importance of price comparison for everyday life. Students should understand the concept of getting value for money.

Teaching Options Daily cost of living Students will actively compare prices, in shops, outside the school premises. Discussion: Who had the cheapest shopping? Discuss the result during the lesson. Use key-words: brand shops, attractive shops, discounters, promotions, flyers, special offers. Evaluation: Are you price conscious? Understanding the price-tags (price per kg / three for the price of two etc) related to the shopping list. Give answers and discuss the results. Individual approach: Costs of Living Ask the students to make an estimate of what their personal costs are per day. Include not only sweets, soft drinks and mobile phone, but also showering, rent and TV-watching. References: 1 sms equals € 0.15 10 minutes call from a mobile phone: € 1.50 10 minutes call from a fixed net phone: € 0.10 1 cinema ticket: € 4.00 1 pair of jeans: € 35.00 1 subscription to a journal: € 25.00 1 subscription to the library: € 0.00 1 pair of shoes: € 30.00 What does It Cost – Money Matters - © 2009

Lesson 2 - Teachers

List of Examples of Expenditures Rent/interest related to the student’s room; energy, water, other fixed costs like cable TV, etc; Insurances; home insurance; liability; sickness; Extra costs; glasses, aids; contact lenses; Annual school contribution, books, writing material; money for school trips, etc. Membership fees of clubs, Internet; Transport including maintenance of transport vehicle; School Uniform; sport clothes, shoes; Free time expenses, hobby, holiday, trips; Food (estimated): Girls of 16 yrs cost € 4.60/day Boys of 16 yrs cost € 5.20/day; Personal care / maintenance € 10/month (shampoo, toothpaste; cosmetics; soap); Pocket money. Family Matters When parents are shopping in supermarkets or other shops 40% of family purchases and the acquisition of particular brands are the result of the influence that the children exert on their parents. Here are some practical suggestions about efficient spending and about getting the best value for the money. Useful for parents and children alike: •

Compare prices of food and other items your family members spend money on; find the best price in relation to quality. Family members can share the savings when the item is bought.

•

Use regular shopping trips as opportunities to teach children the value of money. Going to the grocery store is often a child's first spending experience. About a third of our take home pay is spent on grocery and household items. Smarter spending at the grocery store - using coupons, buying seasonal products, sales, and comparing unit prices - can make the stretch the family budget.

•

Help young people understand how to plan economical meals, avoid waste, and use leftovers efficiently. When you take children to brand and other kinds of stores, explain how to plan purchases in advance and make unit-price comparisons.

•

Show them how to check for value, quality, reparability, warranty, and other consumer concerns. Spending money can be fun and very efficient when spending is well-planned.

•

Establish a regular schedule for family discussions about finances. This is especially helpful to younger children.

Lesson 3 - Teachers

Advertising – about ads and commercials Objective: Making students aware of the influence of advertising. The students learn that everybody is influenced by advertising. The influence is caused by suggestion. The student is taught to understand advertising as being subjective.

Teaching Options Compare two advertisements Students choose two advertisements: one they like, the other they don’t like and answer the questions. Questions Which ads did they chose and why? Will they fall for the message? Why do companies advertise? Do they feel that their shopping is influenced by advertising? Quiz Have a break….have a…. Who knows which brand belongs to which slogan? Students make a number of slogans themselves. Drama/Stage performance Students prepare a short drama or TV commercial for a product or service of their own choice. Group discussion Erick got new shoes, but isn’t happy with them. Which solution would the students offer? How would they feel about a “clothes allowance”?

Lesson 4 - Teachers

Can We Afford It? – about money and spending Objective: To understand money patterns. The student should be aware of his spending habits and where his money goes.

Teaching Options Introduce yourself Does any student identify himself with any of the four students in the lesson? Is there a similarity related to the character, the way of life or the financial situation? Collage: Who Am I? Each student prepares a collage expressing his identity: clothes, brands, mobiles, music, hobbies, pop-stars, family background etc. Put them on show: will the other students be able to guess “who is who”? Task Each student makes a list of his income and expenditure/outlays; Who has been able to make a balanced list? Where are the bottlenecks? Let the students exchange and collect tips on how they get or earn. The tips can be put on a display in the classroom. Discussion: Making Choices The students make a list of their last five expenditures. What else could they have bought with that money? Why didn’t they choose that? What would have been the best choice? Do they regret certain expenditures? Do they have priorities?

Lesson 5 - Teachers

The Bank – about accounts and statements Objective: To understand the basics of banking operations. Students are made aware of the importance of having a bank account. Students are taught to read and understand a bank statement.

Teaching Options Investigation: Opening a bank account In which bank – why? Through the web students can open a bank account online. Students make a plan how to deal with the account. Explain/investigate the difference between a current and a savings account. Talk by a Bank Manager Invite a Bank Manager who explains how money is processed by the bank. How do you open a bank-account; why would you open a bank-account? What is the difference between a current and a savings account? What is an ATM? Excursion: Visit to a local branch or bank-training center.

Individual Exercise: Discuss with the students the exercise in the lesson.

Group Exercise: Students in small groups answer the following questions: What can you do with a bank card? What is the difference between a debit card and a credit card? Why do you pay by cheque and why by internet? How does a savings account work?

Lesson 6 - Teachers

To Borrow or to Save – How to make a purchase Objective: To understand the importance of planning a purchase. The student should be aware of two possibilities: either to save or to borrow. It is important to plan the purchase and consider the pros and the cons of each method.

Teaching Options Discussion: Who is the smarter? In the student’s booklet Natasha and Sam show how they finance their new television. Natasha is going to save and Sam is going to borrow. Discuss the pros and cons of both methods. Individual Task: Make a savings plan Have a look at the task in the student’s booklet. Students make a saving plan for something they are eager to buy: expensive jeans, a holiday, a computer game, etc. The students should find the cost of what they want to buy. Which way and which method would they chose to reach their objective? In the coming weeks ask if the plan still stands; if they still are on track. Remind them once in a while of the savings plan and their objective. Competition A competition “The Best Saver” can be organized. Students can report their savings progress on a chart or in any other visual way. Criteria possibilities: savings in relation to total income; savings in relation to regularity; savings in relation to duration. “The Best Saver” gets a Merit Award. Young people mainly borrow for:

Young people borrow from:

Clothes

12%

Parents

Mobile Phone

10%

Other family members

45% 8%

Bike/transport

Friends

Holiday

Banks

Others

Cost of Living Study

10% 1%

60%

(Source NIBUD The Netherland 2008)

Lesson 7 - Teachers

Getting into Trouble – about debt and solutions Objective: To understand that borrowing and debt lead into problems and stress. The students should understand the consequences of borrowing. The students learn that borrowing from friends can have nasty consequences. The students are also taught that serious consequences of borrowing need to be addressed with outside help.

Teaching Options Role Play: I want my money back. In the student’s booklet Nathan writes a letter about the problem of repaying his friend Karl. He and his friend Karl have a quarrel over borrowing money and repaying it on time. Role-play: the student asks for his money back. How do you do this? How do you tell your friend you don’t have any money? How do you tell your best friend you don’t want to lend him money? How do you make a good agreement about borrowing money? The students exercise the role play in small groups. Afterwards ask them what they found easy and what was difficult. Have they ever experienced such a problem? Writing Task: Letter to the school newsletter. The students write a “Letter to Aunt Sally” about their problems with borrowing money. Students exchange their letters, and then answer the letter of the other student. Guest Speaker A guest speaker explains how one gets into debt and what happens if the money is not repaid. Some banks or social agencies have people who are able to tell a good and true story. Calculation: What is the cost of borrowing? Borrowing from banks incurs interest. The average interest on bank cards is over 10%. Borrowing is thus very expensive. Let the students make a calculation of interest if they borrow money. Designing a poster or a campaign Ask students to identify and write down all kind of advertising they see outside school that tempts them into borrowing money. They could then, in groups, design a campaign warning others. Getting into Problems – Money Matters - © 2009

Lesson 8 - Teachers

Dreaming about Later – about the future and money Objective: Students should start to think about their financial future. The students should understand that they will face a lot of choices in life. Every decision will have a price tag.

Teaching Options Collage: In 15 years’ time I want to be…. Students make a collage illustrating their future ambitions. Task: On the Internet and in journals the students should investigate the costs related to their wishes and ambitions: a house, marriage, a car, children, household, membership, travel, support, etc. Interview: The students interview adults about how they manage money. They should not ask about how much they earn or spend, but ask about ask questions related to expenditure. Examples of questions to be asked: What is the most expensive item you have ever bought? Why? Have you ever run out of money? Why? Have you ever borrowed money? Why? What would you buy if you had more money? Why? Group Task: What is the cost of living for a family of four? Students make a monthly family budget, so they will get an indication of the cost of living. They make a pie chart showing different components of the family income and spending. Family Budget Example Income Net income father Net income mother Child allowance:

€uro 1’220.00 558.00 210.00

Expenditure Rent/Interest Mortgage Energy Levies/Taxes Telephone Insurances Study/School Contributions Transport Clothes Maintenance Medical costs Free Time Household & Food

Total

1’888.00

Total

€uro 400.00 100.00 50.00 45.00 65.00 55.00 58.00 300.00 100.00 100.00 25.00 140.00 450.00 1’888.00

Crossword

Barter – direct swapping of goods Notaphily – banknote collecting Numismatics – coins collecting De La Rue – company printing banknotes for over 150 national currencies Legal tender – a payment that by law, cannot be refused in settlement of debt Cheque ‐ an instrument instructing a bank to pay a sum of money from a current account held in the depositor's name with that bank Bankruptcy ‐ formed from the ancient Latin bancus = a bench or table, and ruptus =broken Gold Standard –an exchange of bank notes for that amount of gold which it represented Coin – a small flat plate made of precious metals with the face of a ruler Marco Polo – in 1275 wrote about the use of banknotes in the Empire of Khan Mulberry ‐ The oldest surviving banknote in the world made from a ……………………….. tree IOU ‐ a handwritten promise of payment Specialisation – when people concentrate on one task, e.g. who was good at building huts became a builder Durable – money has to be long lasting Homogeneous – a property of money, meaning that each item has to be like the other Turkey ‐the first golden coins in history were minted by King Croesus in Lydia, in today’s ………… Money – anything that is generally accepted in exchange for another good or a service Interest ‐ a reward offered by the banker to the depositor of money Real value – the quantity of goods or services we can buy for money Face value – value written on the banknote, e.g. €10

Lesson 9 - Teachers

Taste and Money - advertising and your money Objective: Getting it right about lifestyle and money. The students should understand why not to follow every trend and why not to buy every new gadget. The students should learn how to evaluate advertising.

Teaching Options Discussion: Can you live without brands? Students discuss the values of brands and advertising. Play: What are the costs of being “cool”? The students find two adverts of somebody who is dressed in the latest, most expensive trend and one who is dressed a less expensive way. Students estimate the costs in both cases. Play: Fashion show What is the lifestyle of the students? Organise an imaginary Fashion Show during the lesson. Students will bring images or advertisements from magazines of things they want to wear: jeans, shoes, etc. Which brands are “in”? At the end of the show: What would it cost? Who would pay for the clothing? Invite some of the students to walk over the “catwalk” and invite comments on the costs of the garments, discuss whether these garments changed the image of the boy / girl… Discussion How important are schoolbags and school equipment for the students? How often do students go to the hairdresser? Which kind and brand of toiletries do they buy? Do they have the latest mobile phones and MP3-players etc? Role play The students design an advertisement / commercial for a new mobile phone or a pair of shoes. Would this add persuade the other students to buy the product? Horoscope/Moneyscope (on inside cover of the booklet) Does the horoscope/moneyscope fit? The students describe their money management. How do they handle saving, borrowing, spending? Let them describe their attitude towards: savings, brands, fashion, lending, borrowing, expensive taste, second hand goods, clothing allowance. What do they get from wearing a “brand”?

Lesson 10 - Teachers

No Free Ticket - money and budgeting Objective: To understand that planning and budgeting makes sense. The students should learn how to make their budget and why it is important to have a budget.

Teaching Options Task: Prepare a Budget The student’s booklet shows an example of a personal budget. Students prepare their own budget. Discuss the income and expenditure items the students wrote down. Are they similar or are they different? Prepare a list of “top five” expenditure items. The students draw a financial plan for next week. What happens if the income and the expenditure do not match? What do the students suggest? Group Task: The budgets of Naomi, Tim, Rachel and Kevin. Divide the class in four groups, each group completes one of the budgets. A discussion may follow.

Lesson 10 - Teachers

Task Results: NAOMI Income Pocket money Clothes allowance Babysitting money

€uro 19.50 30.00 30.00

TOTAL

79.50

TIM Income Part time job Pocket money

€uro 60.00 26.00

TOTAL

86.00

RACHEL Income Clothes allowance Pocket money Part time job

Spending Presents Brush Sweets Magazine Clothes Saving Make-up TOTAL

€uro 11.00 5.50 10.00 5.00 28.00 10.00 10.00 79.50

Spending Comp games DVD rental Sweets Saving Textbook TOTAL

€uro 23.00 9.00 17.00 25.00 12.00 86.00

€uro 60.00 22.50 55.00

Spending Mobile card Bicycle Clothes Volleyball club

€uro 35.00 26.00 60.00 16.50

TOTAL

137.50

TOTAL

KEVIN Income Part time job Pocket money

€uro 146.00 32.00

Spending Disco DJ equipment CDs Holiday Savings Clothes Magazines

TOTAL

178.00

TOTAL

137.50

€uro 65.00 34.00 20.00 20.00 29.00 10.00 178.00

Lesson 11 - Teachers

Everything Costs Money - life is expensive Objective: To understand that the students’ lodging and living at home cost money. The students should become aware that they incur many more costs besides pocket money. The students should be prepared to deal with these costs when living alone.

Teaching Options Discussion: Living at home – your costs Students discuss the task. Are their costs lower or higher than expected? Would they be willing to contribute to the household budget if they had a job and still lived with their parents? Computer Students prepare a budget for their clothes for next year. Do they get “clothes allowance”? What do they buy with it? Would they buy cheaper clothes? Information for the Teacher What to include in the calculation of cost of living? -

Lodging cost: rent, mortgage interest, energy, water, levies and taxes, broadband, telephone;

Insurances: fire, disability, health, travel, life;

School contributions, school material, text books, school trips, private lessons;

Travel and transport: car, petrol, road tax, maintenance, insurance, garage rent;

Household costs (furniture, bed, linen) approx €18.00, child, month;

Medical costs: doctor, pharmacy, glasses, contact lenses, dentist;

Free time expenditures: travel, hobby, cinema, sport equipment;

Food: approx girl (16 year) €4.70, boy (16 year) €5.25 /day;

Personal maintenance: toiletries; shampoo; etc, approx €12.00/month;

Pocket money.

Lesson 11 - Teachers

Solution Task: Work out the following costs. 1.

Having a shower €0.20

Breakfast €0.50

Electricity for the fridge €5.16

An apple €0.40

lunch €1.50

A soft drink and a packet of chips €2.85

Dinner at home €1.80

One hour Internet €0.50

Three hours light in your room €0.08

10.

One load in the washing machine €0.90

11.

A magazine €1.75

12.

Two hours watching TV €0.10

13.

Calling a friend for fifteen minutes from a mobile €2.45

14.

A cinema ticket €4.00

15.

Shampoo, soap, toothpaste per day €0.28

Lesson 12 - Teachers

The Internet and Your Money – buy it online Objective: Learning about shopping on the Internet. The students should be aware of the advantages and of the risk of buying online.

Teaching Options Computer Online Visit some popular internet shopping sites: http://www.amazon.co.uk – payments direct with credit card – in GBP http://www.marksandspencer.com – payments direct with credit card – in GBP http://www.ebay.co.uk – payments through PayPal, Bank Transfer or credit card in GBP Online shopping checklist Before buying online, the students should be aware of the following: • • • • • • •

•

Will the seller ship/mail to Malta; The currency in which the item is priced; Is the payment possible through a safe system like PayPal, VeriSign etc.; The buyer’s credit card should be in the same currency as the item (as the exchange rate has an influence on the price); Bank transfers – even in €uro – might be rather expensive; Be careful about “What is in the box”; some sellers might sell an incomplete product, (e.g. they might sell a digital camera without the usb cable); A buyer may be able to track the status of his parcel at any time of the day, anywhere in the world through a tracking system, if it is done through DHL or a local Post Office; Different guarantee: Some products bought from outside the EU might not have an EU guarantee. Some items have an EU limited guarantee; some an international after sales service; Feedback and past activity ratings: EBay and similar sites offer a feedback system which shows the sellers’ profile.

Discussion: online shopping - pros and cons: Price comparison with local stores. Availability of goods and services 24/7. Delivery through postal or courier services. Out of stock, spare parts, rare items, or collectors’ items, second hand books, etc can be bought at auction prices. Show the students some of the traps: Make sure you are visiting a site which has secure payment systems. Identity theft and phishing are used to collect credit card details. A wrong product may be purchased or delivered; to return it may be complicated.

Lesson 13 - Teachers

Bank Matters – in the plus or in the minus Objective: understanding banking matters. The students learn what facilities and services the banks offer. They learn about the advantages of internet banking. The students should understand the importance of being organized and keeping records.

Teaching Options The Bank Statement Students bring their own bank statements and compare them. Which bank offers what services? Discussion: the pros and cons of standing orders. What are the advantages of standing orders? Are there any negative aspects? Visit to a bank training center The bank manager will explain the pros and cons of internet banking, standing orders and other facilities. The students may have hands-on experience. Computer – Internet. On a web page of a bank the students identify different types of accounts (current account, savings account, term deposit) and their features. Compare web pages of some local banks and overseas banks. Discuss their similarities and differences.

Lesson 14 - Teachers

Saving or Borrowing - being short of money Objective: Understanding the consequences of the choice between saving and borrowing. He who borrows, immediately has funds for his purchases. Whoever chooses to save, delays the purchase. Borrowing however, entails the payment of interest, whereas saving generates interest.

Teaching Options Tasks: Luke’s dream Engage the students in a discussion “Would Luke be better off if he borrows or if he saves?” See table next page. Task: Computer Internet Let the students calculate the interest generated by saving. Students should make a saving plan in order to purchase a notebook. What kind of savings accounts are on offer? Which would you choose and why? Warn for unsecured high loans that may look tempting by offering a “low” rate of interest per month, disguising the actual annual interest rates.

Lesson 14 - Teachers

Principal = €2000 Interest = 6% repayment in 24 months Month Principal 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

2'000.00 1'920.00 1'839.60 1'758.80 1'677.59 1'595.98 1'513.96 1'431.53 1'348.69 1'265.43 1'181.76 1'097.67 1'013.16 928.22 842.86 757.08 670.86 584.22 497.14 409.62 321.67 233.28 144.45 55.17

total payments

% Interest Interest annual 6.00% 120.00 6.00% 115.20 6.00% 110.38 6.00% 105.53 6.00% 100.66 6.00% 95.76 6.00% 90.84 6.00% 85.89 6.00% 80.92 6.00% 75.93 6.00% 70.91 6.00% 65.86 6.00% 60.79 6.00% 55.69 6.00% 50.57 6.00% 45.42 6.00% 40.25 6.00% 35.05 6.00% 29.83 6.00% 24.58 6.00% 19.30 6.00% 14.00 6.00% 8.67 6.00% 3.31

Transfer Interest Repayment rest interest monthly monthly monthly principal paid 90.00 10.00 80.00 1'920.00 90.00 9.60 80.40 1'839.60 90.00 9.20 80.80 1'758.80 90.00 8.79 81.21 1'677.59 90.00 8.39 81.61 1'595.98 90.00 7.98 82.02 1'513.96 90.00 7.57 82.43 1'431.53 90.00 7.16 82.84 1'348.69 90.00 6.74 83.26 1'265.43 90.00 6.33 83.67 1'181.76 90.00 5.91 84.09 1'097.67 90.00 5.49 84.51 1'013.16 93.16 90.00 5.07 84.93 928.22 90.00 4.64 85.36 842.86 90.00 4.21 85.79 757.08 90.00 3.79 86.21 670.86 90.00 3.35 86.65 584.22 90.00 2.92 87.08 497.14 90.00 2.49 87.51 409.62 90.00 2.05 87.95 321.67 90.00 1.61 88.39 233.28 90.00 1.17 88.83 144.45 90.00 0.72 89.28 55.17 55.44 0.28 55.17 0.00 32.29 2'125.44

Lesson 15 - Teachers

Debts - About borrowing and repaying Objective: Understanding the consequences of borrowing. The students should be aware that it is easy to get into debt, but maybe difficult to regain their financial control. The students learn what borrowing options there are and what the consequence of defaulting on the debts may be.

Teaching Options Real life story with discussion Invite a speaker from a social agency like Appogg, or a church or a bank…to tell a story of a young person who lived beyond his financial means. Invite a lawyer or a judge to explain the legal consequences of failing to repay a debt. Discussion Discuss the possibility of buying on credit or hire purchase. The teacher could use the “scooter story” from the previous chapter. Ask the students about their attitude towards buying on credit and about its advantages and disadvantages.

Lesson 16 - Teachers

Holidays - About hotels and travel Objective: Understanding the planning and budgeting for travel, a trip or a journey. The student should be aware of a number of options and limitations within his travel budget.

Teaching Options Group Discussion Divide the students in groups and let them draw up a holiday plan: •

Destination: where and for how long;

•

Accommodation: camping, youth hostel, agro-tourism, all inclusive;

•

Transport: plane, ferry, train, bike;

•

Food: self-catering, restaurant, take-away, supermarket;

•

Activities: sports, cycling, culture.

The groups calculate the cost of their holiday, including travel, food, excursions, mobile roaming, and insurance. The students use the Internet to find out the cost. Can they find possibilities to reduce costs; combine expenditures, find alternatives? Individual Task Ask the students to design a personal holiday plan. What would the budget be? How much would the holiday cost? What would happen if they ran out of money during the holiday? How would they get extra money?

Lesson 16 - Teachers

Discussion: Borrowing to go on holiday Would the students borrow to go on holiday? Why, from whom? Why wouldn’t they borrow? What are the advantages and disadvantages of borrowing for a holiday? Internet Ask the students to find the cost of a two week holiday in their own country. Find the most expensive offer and the cheapest one. What is included? What is the extra cost? Compare a package holiday with a made-to-measure holiday. What are the differences? Information for Teachers Travel and accommodation should include: •

Transport to and from destination;

•

Trains, buses, boat trips;

•

Entrance, museum tickets, excursion fees;

•

Food & drinks, restaurants, discos, supermarket, ice-cream;

•

Travel insurance – in Europe approx €3.50-€10.00 pp/day, world coverage from €4.00 - €10.00 pp/day;

•

Special events like mountain climbing, diving, bungee jumping, etc are usually excluded from insurance;

•

Cost of travel documents, passport, visa, departure and other taxes, replacement costs of lost documents.

Other information •

Holiday with a difference: holiday exchanges, sleeping in convents, agro-tourism, working during holidays, working on a farm;

•

A group travelling together may appoint a treasurer who would take care of some general expenses;

•

Average daily cost of food (not in a restaurant) is approx €4.50 - €5.50 pp/day.

Lesson 17 - Teachers

Insurance - comes in handy! Objective: Understanding the need for insurance. The students learn about different types of insurance and how they work. The students should be aware of the need to have a provision for risks they themselves cannot influence and cover.

Teaching Options Discussion: Bad Luck The students complete the story about the stolen bike. Discuss the stories and widen the discussion by bringing in students’ similar experiences. Other type of insurance: The students compile a list of risks and their related insurance. Individual task What is insurance? Have any of the students signed an insurance contract? Why would they buy insurance coverage?

Information for the teacher: Recommended insurances: Medical Insurance Disability insurance coverage. In the event of a personal injury or illness, the insured will be reimbursed in relation to his income. In case of death, total or partial invalidity, a lump sum might be paid. Personal liability coverage In case of damage caused by the insured himself, members of his family or his pets to third parties, the insurance company will pay for the damage caused. Sometimes this can be combined with a legal assistance insurance covering the costs of legal advice. Home contents and building coverage The home and its contents can be insured against “Acts of God” – so named because they are unforeseen, like fire, water, lightning, storm. Car Insurance Provides protection against losses incurred as a result of traffic accidents and against driver’s liability that could be incurred in accidents. It is compulsory to have the car / vehicle insurance. Furthermore, one can insure his car against fire, third party damage and theft. Driving without claiming damage might give a rebate on the premium paid. Further information • There are many types of insurance: life assurance, savings insurance, unemployment insurance, theft insurance, travel insurance etc; • It is possible to insure almost everything: a farmer may insure his harvest against any risks or a professional singer may insure his voice; • In all insurance contracts it is important to keep a balance between the premium to be paid, the risk and the payout sum; • The “sum insured” should reflect the true value of the object insured. The insurance coverage has to be updated when the value of the items insured changes; • Insurance contracts are often longtime and difficult to cancel; • It is advisable to shop around as insurance companies are competing for customers. Insurance – Money Matters - © 2009

Lesson 18 - Teachers

Taxes - about Gross and Net Objective: Understanding the reasons for paying taxes and the purpose of taxes. There are two things in life which are unavoidable: taxes and death! The students learn why taxes are paid. The students should understand that taxes are an important instrument for the re-distribution of income. The students are informed about where to get information about taxes online and how to calculate the tax online.

Teaching Options Group Task: a bonus of €1.000.000 from the EU The students will distribute 1 million €uro to different sections of the Budget. They should first make a list of the country’s priorities. Distribution of €1.000.000 – how would they distribute these amounts? € € € € € € € € € €

250.000 150.000 125.000 100.000 95.000 85.000 75.000 65.000 35.000 20.000

Computer Calculation of net income The Students will calculate net income. They will create a pay slip and calculate their net income based on different salary levels. Different VAT Students choose a number of products (chocolate, car magazine, cleaning material, bread, milk…) and calculate the VAT to be paid on each product. Remember some may be VAT exempt, some may have a lower VAT rate.

Lesson 19 - Teachers

How Much Will You Earn - About balancing the budget Objective: To get a realistic view of living independently. The students should get prepared for an independent life; they should understand the cost of living independently The students should learn to set priorities in relation to their income and their particular situation.

Teaching Options Tasks: Discussion Discuss the stories of Sonja, Lydia & Romano and John. How do the students feel about them? Would they have handled matters differently? Individual Task How do the students see their own future? What kind of a job will they look for? What salary/ income do they expect? Where would they live? At home, or renting, or sharing an apartment? Would they share the cost? Renting an apartment: Students find out the cost of renting an apartment – different sizes and locations. Internet How much does it cost to furnish a kitchen; a bedroom; a living room? Students can use “online home designer” offered by some furniture chains or simply find out prices on the net. Minimum Wages and Social Security Show the students the internet link with a complete list of social benefits in Europe (and in the world): http://www.ssa.gov/policy/docs/progdesc/ssptw/2008-2009/europe

Lesson 20 - Teachers

Dreaming about Your Own Home – buying or renting Objective: to get a basic understanding how to get a step closer to home ownership. The students learn about the two possibilities: renting a property and buying a property. They evaluate both options.

Teaching Options Discussion: buying versus renting The Class is divided into two groups. Each group makes a list of arguments in favour of renting / buying. An exchange of arguments follows. Renting is not always the best option. The relationship between income and investment in one’s own home will be explained. The students should consider the additional costs of maintenance and repairs, insurance etc. These are often offset by the higher quality of construction of owneroccupied apartments and houses and their appreciation. Over the last 50 years investment in property has been a good deal. Affordability of owning a house: Annual costs comprise interest, repayments and maintenance costs. When added together, they should not exceed one-third of the gross income. Property search Students search for their dream property online or in the newspapers. Students list their requirements: preferred location; area attractiveness; architecture, interior fittings and configuration of rooms; schools; shopping facilities, public transport connections, ground rent burden, etc. Nowadays, more than 80% of people find their new home on the internet. The real estate agents' websites offer search facilities. There are also adverts in the newspapers which are owner direct offers. Banks, estate agents and architects based in the area often know of available plots of land and construction projects.

Lesson 20 - Teachers

When does ownership transfer to you? Signing the contract does not yet automatically transfer property ownership. The contract of sale between buyer and seller must be officially notarized. The transfer must be entered in the land register - which can take place on a different date - only then will seller and buyer fulfill their respective contractual obligations. Task Solution Bernice and Claudio task:

Income Salary Claudio Salary Bernice

€uro 1631.00 1169.00

Expenditures Mortgage repayment Electricity & Water Telephone Bernice Telephone Claudio Insurances Car Clothes Maintenance Holiday Savings

Total

2800.00

Toiletries Pocket Money Bernice Pocket Money Claudio Food & Drinks Savings total

€uro 681.25 95.00 50.00 20.00 218.00 90.00 200.00 70.00 75.00

Financing Salary Claudio

€uro 19'572.00

Salary Bernice total income costs maisonette

14'028.00 33'600.00 130'000.00

legal & other fees total costs savings mortgage interest per year

5'000.00 135'000.00 26'000.00 109'000.00 2.50%

30.00

annual interest

2'725.00

50.00

yearly repayment

5'450.00

50.00 350.00

annual burden monthly burden

8'175.00 681.25

200.00

(20 yrs) monthly repayment

2179.25

681.25

FEEDBACK please Any suggestions, comments, critics would be very much appreciated. Feel free to suggest an additional topic. This course is open for evolution. I would appreciate if you could inform me about a positive experience with a particular speaker. Please make notes on this page and email them to: money.matters.malta@gmail.com

Thanks for your feedback and rating. Anna

About the Author and This Publication Born in Czechoslovakia, Anna Ignacak settled in Malta in 1989 and became a Maltese citizen shortly afterwards. She graduated from the School of Economics, Slovakia, Faculty of Economics of Tourism and Services and worked for the Institute for Further Education of the Ministry of Justice. Anna has been teaching Economics at Stella Maris College, Gzira since 1990. She has been a member as well as a chair person of the Syllabus Board of Economics advising the University of Malta. She realized the need to address the topic of financial education at schools as in a changing society the responsibility for financial independence has taken a more prominent role. All young people need to leave school with basic financial knowledge, skills and confidence to live full adult lives. Numerous reports in all European Union countries stress the importance to educate young people to manage their money. Money Matters addresses those problems young people face when confronted with a vast array of financial decisions. The publications aim at increasing and improving personal finance education and stress the importance to have a balanced budget and save for the future. The Nibud (Nationaal Instituut voor Budgetvoorlichting in Utrecht, Holland) has been the source of inspiration for this publication and Anna is extremely grateful for the support and cooperation from Dutch colleagues. The Nibud the National Institute for Budget Information is financed by the Dutch national government and the private sector. Its goal is to promote a rational planning of family finances. The 'intermediaries' for the Nibud include schools, teachers and other consultants in the fields of mortgage, insurance, saving and loaning. Teaching Financial Education is a must according to Wendy van den Hende, Chief Executive of pfeg (Personal Finance Education Group UK):“Some things are too important to be left to chance. Financial education is one. It's clear from the difficulties that so many people are experiencing that we can't rely on families to teach children how to manage money, as many of them do not know how to do it themselves.” Money Matters may be the first step in creating awareness about the importance of teaching money management to the student population in Malta.