Lesson video

Hello, and welcome to today's citizenship lesson.

I'm Mrs. Barry, and I will be your teacher.

We are looking at a series of lessons about how we can manage money well.

And today's lesson is lesson two of six and we're looking at how can we pay for things? So before we start, we need to make sure that we're in a quiet area, that you've got all your apps notifications turned off so that you can be free from distraction and concentrate on today's learning.

Hopefully, you have got with you your brain and something to write with such as a pen or a pencil, something to write on such as some paper.

And when you're ready to begin and you've got all those bits together, then we can make a stop.

To be able to look at this question of how can we pay for things, we're going to look at a variety of different aspects.

Thinking about historical payments, so how payments were made with money in history.

And we're going to look at modern payments, so how that's changed over time really and what modern payment options there are.

And we're going to look at budgeting and having that financial responsibility for managing money well, and being able to think about how we spend with those different methods of payment.

And then we'll do some activities to check you've understood, and that will be our lesson.

So let's make a stop.

We're starting our lesson looking at financial responsibility, and we will do this with all of our lessons on how we manage money well, because it's important to remember that we are responsible for our own finances.

And it also means that we need to be able to make good decisions and plan for the unexpected.

Now, this implies that we need to be really careful and really think about what we're doing with our money, how, when, and why.

And financial responsibility expands outwards from ourselves to our local and global communities and back again.

We also have an impact on and are impacted by the financial responsibilities others have.

For example, the government choices make a difference to us as individuals, but also to businesses too.

Is key to remember that we not only need to know about different payment methods, but also how we manage our money to be able to pay for things.

Businesses and government have to do this as well, balancing their needs with what they can afford and what they may need to borrow.

And another important dimension of financial responsibility is thinking about the types of borrowing that we're doing and looking at that type of borrowing and the situation we're in to make sure that what we do reflects what we need.

Historically, payments have been made by trade.

And if you did lesson one with me, within this unit of work, then we had a look at different ways that money has developed over time, but we're going to start with our first task, looking at these different things.

And I want you to think about which ones are more valuable than others? And also think about why, remembering that justification in citizenship is really important, making sure that you make informed choices and can give a reason as to why you've made that choice.

So here on the screen, we've got a chicken, we've got eggs, a bowl, some grain, work in terms of your employment, so you might make clothes for example and then that's the example I've got here and then bread.

So have a think about those six items and put them in a list order, one to six.

Which one do you think is more valuable and then go down from that.

So pause the video here and when you've completed that task in about three or four minutes I'm sure, press play and we can have a look.

Welcome back, we will have a think about this and you can see on the screen, I have put in my own list order.

So I started off with a bowl, chicken, eggs, grain, bread, and then work.

And there's a few reasons why I did this.

It is not necessarily a correct list.

It's just, I'm going to justify to you now and show you that justification that I was talking about why I've put some of these in these places.

Now, a bowl is a high value item.

You have to purchase a bowl.

You don't need loads of them because you reuse it.

And so in terms of value, it might be classed as a high value item.

The chicken has come before the eggs and that is because the chicken produces the eggs.

So in that sense, the chicken can produce lots of eggs, whereas eggs cannot produce that many without other chickens.

So the chicken here would be a higher value item.

You can also use the chicken for meat if you wanted to but obviously then it wouldn't produce eggs.

Similarly, with the grain and the bread, I've put the grain first because you need the grain to be able to make the bread.

And work is an interesting one because you don't need anything as you labour, is your person.

So in terms of value, that might be considered less valuable than the other items. As I say, though, there isn't a great answer here.

It's just thinking about which ones are more valuable.

What would you trade what for? To think about the concept of payment.

So you might trade lots of chickens for your bowl, 'cause you'll need one of them, so you're not going to have to worry about in the future but that does mean it's a high value item.

So for those of you haven't done lesson one with me, we're going to have a quick look at why we have money in the history of money and the history of payments just to make sure that you are aware of it.

And money in the sense of cash and cards that we have today haven't always been around and the very first type of payment or money was trade.

So we've just spoken about that in that activity, thinking about trading items and assessing their value.

So some would say some items have more value than others and you swap or trade them according to the value that the people involved believe they have.

Cowry shells was the first real form of money in terms of using a currency to give for goods or services and things have developed since then with us now having coins, cash and more recently credit cards and even today using your phone as a card in itself.

So you've got of course a link to the phone, that's phone wallets.

But in that history, we've gone from nothing to cowry shells, to coins, to these more modern payment types.

And there are three main types of payment you can use.

So you have cash, credit, and debit.

And I wonder if you know what these mean and which definition here matches which type of payment.

So what I'd like you to do is pause the video and make a quick note of what you think the definition of those types of payment are.

So take your about four or five minutes to note those down, decide which ones they are and when you're ready, press play and we can continue with our lesson.

So well done for giving that a go and you can see here I have changed the colours of the words or the types of payment to match the definitions.

So cash is coins or notes used to pay for goods.

Credit is borrowed money from a lender and interest is charged to you on the amount borrowed and debit is money taken directly from your bank account.

And we're going to have a look, there is a bit more detail and some more about these different types.

We're starting with debit.

And this is the money that's taken directly from your bank account.

And you use this for payment.

The difference between debit and cash, so cash you might have in a wallet or a purse or in your pocket, is that debit is electronic.

So there's no physical money being exchanged like you would with cash but it's electronic.

And so it directly comes off your balance from your bank account electronically and you might use a debit card to withdraw cash from a cash machine and therefore a cash amount would come automatically from your bank account.

And there were three newer types of debit you may or may not have heard of in addition to debit cards and they are Apple or Android Pay, PayPal, and Phone Wallet.

So Apple or Android Pay simply means that your phone is connected to your account and you've authorised that and you can use your phone to make a payment.

PayPal is slightly different, that is linked up to your bank account and you might use PayPal to pay for goods.

And quite often there's like a PayPal link.

You can see the PayPal logo here and that would direct you to being able to pay with PayPal.

And a phone Wallet is essentially your card in an electronic format on your phone.

So you could use those when paying for goods online.

So your phone essentially remembers your details for your debit or credit cards and you can directly use those using your phone.

You also have credit and credit is borrowed money.

And occasionally you might be given no percent credit, which means you're not having to pay for that borrowed money but it's usually only for a short period of time and then it moves to a higher interest rate.

Then interest rate essentially means that you're being charged, you're going to have to pay more or the amount that you were borrowing.

The money you borrow is paid back with extra on top.

And this extra money is how the person who is lending you the money gains a profit.

And that works in all sorts of different situations where money is borrowed.

In this case, we're talking about the payment method of credit cards and that's how they work.

I need to have a look a bit further on the issue of credit.

And I want us to think about some different options.

Here's the important thing to remember when we look at the types of payment we can use, cash, debit and credit is the way credit works on the fact that you often end up paying more for your purchase than you would have done if you just bought it outright.

But there are some things that are more expensive that we can't necessarily afford without credit.

In this scenario, we're going to look at three options.

And if you want to buy something such as a mountain bike in this instance, I want you to think about the fact that you're only getting in this scenario 15 pounds a month.

So which option would be best and why? And I want you to think about the fact that this is going to cost 150 pounds.

And so one of your options is simply to say, I'm going to save.

So option one here, savings, you wait.

You put 15 pounds a month into a savings account with a 3% interest rate.

That would mean that it would take you 10 months to buy that bike.

And so you'd have to wait that 10 months if you chose to save.

And then we've got two borrowing options.

So option two is borrowing option number one and you could borrow the money using your credit card and the interest rate is a very attractive no percent for six months meaning you pay nothing the first six months, whatever you borrow, they're not going to charge you for it.

But after that six months ends, it's 39.

99%.

And so with that particular option at 15 pounds a month, it takes nine months to pay off and you would pay 155 pounds in total.

That's an extra five pounds on top of the value of that bike.

And then option three is borrowing number two.

You could borrow the money using another credit card.

This time the interest rate is lower but you have to pay the interest from the beginning and it is 19.

9%.

And at 15 pounds a month, it would take you 11 months to pay it off and you would pay 164 pounds in total, so that's an extra 14 pounds on top of the original bike cost.

So have a think and just very quickly, which one would you choose? Now, I'm sure as I was reading those, you thought, that's the one that I would do.

And there is no right answer here because the concept of credit is that in some circumstances, you may need to be able to purchase something.

And it's that idea of need versus want.

So do you that bike or not? And I want us to consider some of these questions that you might consider when you're evaluating, whether you should use credit or not.

So I've got five key considerations that you might make.

Number one, do you really need it? So is it just something you want because your friend has got one or you like the look of it, you don't really like your old bike or is this something you really need? And if you need it, do you need it now? Or could it wait, could you save up and go with option one and save up the money for it.

Or actually might it enables you to do something.

So what will this purchase enable you to do? Perhaps you've got a job, it could be a newspaper round and actually that bike's going to help you earn money.

That would actually mean you could pay it back quicker.

Can you afford it? So in the scenarios, I don't know if you noticed but we used your entire allowance.

That meant that all your money that you were getting had to go towards that bike.

So you couldn't go out and buy anything else unless you went with a credit option.

And when you're looking at larger cost items, that's a big consideration because you've got to make sure you can afford it.

And circumstances might change.

So, oh, you're guaranteed your 15 pounds a month or is that dependent on you doing your chores? If you don't do your chores, then does that mean you only get 10 pounds? So you have to really consider a range of things when you take credit.

And it's the same for governments and businesses.

They have to be able to work out the affordability of that credit and whether it's necessary for what they're doing.

And this leads us to the idea of budgeting.

And when we consider how we pay for things, we have to budget.

And that simply means we work out what we've got coming in and what we've got going out.

And essentially it's working our affordability when we pay for things.

So can you actually afford it or are you going to end up in debt? And if you have more going out than coming in, so more outgoings than income, then that can get you into trouble and you could end up in debt.

And there's lots of key terms on the screen.

So we're going to spend a little bit of time making sure you understand them because that's really useful for looking at how we can pay things and also the overarching question of this unit which is how we manage our money well.

So there are five key terms that you need to really understand within this unit.

And I want you to spend some time matching the key term with the definition.

Then look at the wording to help you, but pause the video when you're ready and spend five or six minutes just matching those definitions with the key terms and we will check them when you're ready.

So press play when you're ready and we can have a look.

Well done for giving that a go, we will see how many of those you got correct.

So I've colour coordinated them to the key term.

We have income, which is money received, usually as a result of work or services provided.

We have outgoings, which is money paid out for goods or services.

Debt, which is money that is owed, that you owe someone or a business or organisation perhaps.

You've got affordability and that is calculating if you have enough to be able to pay for goods or services.

And then budget which is calculating what money you have coming in and what payments need to be made, and even then, what's left over for you to spend on other things.

Well done if you've got those all right.

Then if you didn't, don't worry because hopefully you've learned a few different key terms when we're talking about budgeting.

And I've spoken through this lesson about the application of this to businesses and the government as well as individuals because we've looked at that concept of financial responsibility and the fact that you are responsible for yourselves, you might be responsible for a business or certainly the government is responsible for money across the country.

So this is an example of a budget and the government has to budget every year.

If you don't know the reason why there's a red suitcase over there is because it's quite famous in the fact that the Chancellor of the Exchequer who's in charge of the treasury and all the money in the United Kingdom, he comes out with the red suitcase, which holds the budget papers.

So it becomes quite an iconic picture.

And if ever you are watching the news and you see someone coming out of number 10 with a red suitcase, you now know what to that suitcase holds.

With the government, they look at splitting up a large amount of money and this is part of the way in which the country works.

So the Chancellor of the Exchequer oversees the treasury and the budget is an annual decision of the government on how to spend in each government department.

So you can see there are different areas where money is being given to such as health, transport, education, and so on.

And it has to be a balance between what goes in.

So for example, the UK citizens pay tax, which contributes to the amount of money the government has available to them.

And what comes out, and that is the amounts that are budgeted to those different departments.

And to ensure that all those amounts can be met, sometimes there has to be borrowing.

So essentially there is debt.

And as I said, there are some other lessons in citizenship which covers this but just so you're aware that the application of budgeting isn't just the individual, isn't just the businesses, but it's applicable to the whole country.

So well done for completing today's lesson.

We have looked at a whole range of ways we can pay for things.

And we started the lesson in here about financial responsibility and the responsibility we have to ensure that we can pay for things even when the unexpected happens.

We have looked at historical payments.

So we've gone from cowry shells through to cards and we've looked at those modern payment methods that you might have been familiar with before but hopefully definitely are familiar with now.

We have had a good look at the concept of budgeting, the importance of budgeting when we look at how we can pay.

And we've done that by looking at the government, remembering that it's not just individuals who pay for things but businesses and countries have to manage their money well as well.

We've done some activities to check your understanding and hopefully you have a good idea about how you can pay for things in the future.

So well done for completing all of that.

And then one last thing I need you to do now and that is to complete your exit quiz.

So I hope everyone do that now, well done and it was lovely teaching you today, I look forward to seeing you in another citizenship lesson soon.