Hi, I'm Mrs. Wheelhouse and welcome to today's lesson, which is from our unit of lessons on financial maths education.

I'm really looking forward to exploring some of the ways that we use maths in order to help out with our personal finances.

So let's get started.

By the end of today's lesson, you'll be able to understand how your financial choices may provide for your future needs.

Now, a new phrase that we'll be looking at today is a Junior Individual Savings Account or a Junior ISA.

Now, a Junior ISA is a long-term, tax-free savings account that children can have.

We're gonna look at what that means and how it can be used today.

Our lesson's broken into two parts.

We're going to begin by looking at long-term saving.

Lucas and Sam are discussing learning to drive.

Lucas says, "I can't wait until I'm old enough to drive! Journeys are going to be so much quicker." Sam says, "Well, you better start saving then.

I've heard that driving lessons are very expensive." Now, fortunately, Lucas has been saving money since he was much younger.

"I always save half of my birthday and holiday money," says Lucas.

"Will that be enough though?" says Sam.

Let's do a quick check and see.

Driving lessons in Lucas's area are 25 pounds per hour.

When Lucas turns 17, he'll be old enough to start taking driving lessons, and Lucas is currently 14 years old.

Now, Lucas does some research online and concludes that, on average, it takes 45 hours of driving lessons in order to pass the driving test.

Now, assuming costs do not change over those three years, what will driving lessons cost Lucas? So remember, we're just estimating here, but we're estimating with some fairly sensible figures.

Pause the video now while you have a go at working out what driving lessons may well cost Lucas.

Welcome back.

Now, remember, we are just estimating 'cause Lucas may not take all 45 hours of driving lessons.

Might need more, might need less, but let's say it is 45.

Well, 25 pounds per hour multiplied by the 45 hours means the driving lessons are going cost Lucas 1,125 pounds in total.

Now, Lucas calculates that driving lessons will cost him 1,125 pounds at most.

"Well, I've already got 329 pounds in my account.

How much more do I need?" says Lucas.

What do you think Sam is going to say? Pause the video and have a discussion now.

Welcome back.

What do you reckon Sam's gonna say? Well, Sam says, "It's going to cost 796 pounds at least." Why do you think Sam said "at least?" Do you think it's because Sam thinks Lucas has overestimated the cost? In which case choose A.

If you think Sam said at least because Sam thinks Lucas has the exact cost and it will not change, then pick B.

And if you think Sam said at least because Sam thinks Lucas has underestimated the cost, you should choose C.

Pause the video and make your choice now.

Welcome back.

You should, of course, have chosen C.

So whilst Lucas waits to turn 17, the cost of driving lessons may increase.

"Oh, that's a good point," says Lucas.

"I should also consider what happens if I need more lessons." It's a good point.

Sam says, "Well, you should try to save a bit more just in case that happens." So true or false? Lucas decides to save for 50 driving lessons and assumes the cost rises to 30 pounds per lesson.

This means it will cost him 1,500 pounds to prepare for his test.

Is that true or false? And don't forget to justify your selection.

Pause the video and do this now.

Welcome back.

You should, of course, have chosen false.

Now, to justify this, you might have said something like this, Lucas is assuming the cost rises to 30 pounds, but what if it's more or less? What if he needs more or fewer lessons? And what if there are deals for booking lessons in blocks? In other words, we don't know the exact amount it's going to cost him.

Now, Lucas decides to budget 1,500 pounds for driving lessons.

He says, "Well, I've already got 329 pounds so I need to save another 1,171 pounds." Now, there are 33 months between now and Lucas's 17th birthday.

How much does he need to save per month? Pause the video and have a quick go at this now.

Welcome back.

He needs to save at least £35.

49 per month.

Now, you might also have rounded it up a little bit and said, "Well, £35.

50, or you might have rounded up a bit further and said 36 pounds per month.

All of those options are good.

Well, Lucas decides he's gonna do more chores at home.

"My family has said that they will increase my pocket money to 40 pounds a month if I do more." "Oh, that's great," says Sam.

"You'll be able to save up for sure." Do you agree with Sam? Pause the video and have a quick discussion now.

Welcome back.

Now, it's impossible to plan for every possible future event.

Did you say something like that? Lucas could receive more money in the month that it is his birthday.

Conversely, Lucas may need to spend more money than he budgeted for if there's an event he wants to attend.

Making these decisions in an informed way helps Lucas to stay on track with his financial goals.

It's time now for our first task.

Lucas is trying to save his driving lessons and we're going to run a simulation to see whether Lucas can save for the lessons, despite some unexpected events.

So here's your starting information.

In our savings, we currently have 329 pounds and we've estimated the cost of driving lessons to be 1,500 pounds.

The only income Lucas has at the moment that's reliable is 40 pounds a month pocket money, assuming that all chores are complete each week.

So for part A, in the first 12 months, the following events occur.

There are four close friends who are having their birthdays.

There are three family birthdays.

There are six trips with friends and a concert by Lucas's favourite band.

Birthday and holidays means Lucas will receive 200 pounds in addition to his pocket money.

What I'd like you to do, please is work out how much Lucas is going to spend, if anything, for each of the events.

And once you've decided, work out what Lucas's current total savings amount is.

In other words, at the end of those 12 months, how much money will Lucas now have in his savings? Pause the video and make your choices now.

Welcome back.

Let's now look at the next 12 months.

So in the next 12 months, the following events occur.

Five close friends are having birthdays.

There are three family birthdays, three trips with friends, and the year 11 leavers party.

Now, this year, birthday and holidays means Lucas receives 250 pounds in addition to his pocket money.

Again, work out how much Lucas will spend, if anything, on each event.

And once you've decided, work out what Lucas's current total savings amount is at the end of these 12 months.

Pause and make your choices now.

Welcome back.

Part C, it's the final nine months and the following events occur.

Three close friends have birthdays.

There's one family birthday and one trip out with friends.

Now, birthday and holidays mean Lucas receives 270 pounds in addition to his pocket money.

What I'd like you to do, please, is work out how much Lucas will spend, if anything, for each event.

And then once you've decided, work out Lucas's current total savings amount at the end of those nine months.

Pause the video and do this now.

Welcome back.

Part D, can Lucas afford his driving lessons? If he cannot, explain when he will be able to afford them? Now, remember, this is gonna be very specific for you because it's gonna depend on what values you chose.

And it's absolutely fine if you have a different answer to what I get.

Pause the video now while you write down what you saw when you ran your simulation.

Welcome back.

Let's go through this.

So what you're gonna see here is just some examples.

You've likely chosen different values to me, but I've said that Lucas on his friends will spend 80 pounds in total, 60 pound on the birthdays for family, 180 pounds on his trips and 200 pounds on the concert.

So using those values, and bear in mind what Lucas earns, this means he's going to save a total of 160 pounds.

So his new total in his savings is 489 pounds.

Then for B, you can see I've updated the values.

So this time round, I didn't spend quite as much on those birthdays for friends and for the trips, I said we'll spend 60 pounds, we're gonna skip one.

So 30 pounds per trip and skip one.

And I spent 100 pounds on the leavers party.

Remember, these are just examples.

You could have chosen different values.

Again, when I subtract that from what my income is, I've saved 460 pounds over the year.

So my new total is 949 pounds.

Then in the final months, I wrote down what we spent on our different events and again, just examples.

I then wrote down what I saved.

Remember, I changed the number of months I received my pocket money for for doing household chores because it was only for nine months and that meant I saved 410 pounds.

Now, can Lucas afford his driving lessons? Well, for my scenario, if we assume the cost is 1,500, then Lucas cannot afford all of his lessons at the start because he's only got 1,359 pounds saved up.

If he continues to earn 40 pounds a month in pocket money, it will take another four months to save up.

And that's assuming he doesn't spend the money on anything else.

However, he could start his driving lessons straight away.

'cause by the time he needs that remaining money, he'll have had enough time to save for it.

Now, remember, you may have a different solution to me.

That's absolutely fine because you've likely chosen different values.

Well done for working through this.

It's now time for the second part of the lesson where we're gonna look at saving versus investing.

Why might someone choose to save money? Pause the video and have a quick discussion now.

Well, you might've said so they can pay for an expensive holiday or trip 'cause they're gonna get married, they're gonna rent somewhere.

They could buy somewhere to live.

They might be looking after dependents.

They could be buying a car, furnishing a house, carrying out repairs.

There's lots of different reasons that someone could choose to save money.

Izzy says, "If I don't want to get married, does this mean I don't have to save money?" As she points out, you can choose to save money without a specific goal in mind.

Your family may have set up a savings account for you when you were younger.

Account they might have set up could be a Junior ISA.

This is a long-term, tax-free savings account for children.

Anyone with parental responsibility for a child can set one up for them.

The child can take control of the account when they turn 16, but they cannot withdraw any money until they turn 18.

At that point, the Junior ISA converts to a standard ISA, one which any adult can have.

Izzy says, "So my family might have been saving on my behalf?" Aisha says, "Yes, but they could also have been investing money as well." And there are two types of Junior ISA.

A Junior cash ISA is where you pay money in and the interest earned is tax free.

The money is completely safe, provided it's in a UK-regulated provider, like a bank.

And the only risk is that the money may not grow as quickly as inflation does.

A Junior stocks and shares ISA is where the money you pay in is used to invest in the stock market.

Depending on the level of risk you choose, the return could be much higher or much lower than the cash ISA.

However, the money paid in is at risk.

All the money could be lost.

Quick check now.

True or false? One type of Junior ISA is strictly better than the other.

Do you think that's true or false? And don't forget to justify your answer.

Pause the video and do this now.

Welcome back.

You should, of course, have said it's false.

Investing may be better or it may be worse.

It depends on the stock market, and this can be affected by many factors.

It's now time for our final task.

Below are three graphs showing different ways of saving and investing.

Part A, Jun thinks there is something wrong with this image.

Identify why you might think this.

Pause the video and do this now.

Welcome back.

The labels are now updated.

Part B, why do you think the graphs start at 1,000 pounds? Pause the video and work this out now.

Part C, why does each graph stop at 18 years? Pause the video and work this out now.

Part D, what are the approximate three final projected values for each type of account? Pause and write this down now.

Part E, are these final values guaranteed? Pause the video and write down your answer now.

It's now time to go through our answers.

Part A, Jun thought there was something wrong with this image.

Why might he think this? Well, there are two graphs labelled Junior stocks and shares ISA.

We can see that there.

Now, the reason for that is that one is a high-risk account, which means bigger risk but equally, there's better reward if it pays off.

And there's a low risk ISA too.

Now, why do you think the graph starts at 1,000 pounds? Well, you might say something like this.

It's the amount of money initially put into the account.

As long as you've got something that means that, you are correct.

For part C, why does each graph stop at 18 years? Remember, that's because the Junior ISAs convert to standard ISAs when the child turns 18.

For D, what are the approximate three final projected values? So as long as you're close to what I've got here, you'll be right.

So for the high risk ISA, it's approximately 5,500 pounds.

For the cash ISA, it's approximately 4,000 pounds.

And for the low-risk stocks and shares ISA, it's approximately 2,000 pounds.

So are these final values guaranteed? Absolutely not.

None of these are guaranteed to reach their projected values.

The graph just shows what might happen.

It's time to sum up what we've learned today.

By saving or investing money, future needs could be met.

A Junior Individual Savings Account, or Junior ISA, is a long-term, tax-free savings account for children.

It is impossible to plan for every possible future event.

By considering the level of personal risk versus financial gain, planning can be done for the future.

Well done.

You've worked really well today.

I look forward to seeing you for more lessons in the future.

Goodbye for now.