Tackling debt

www.LTScotland.org.uk Learning and Teaching Scotland

Tackling DebtA Positive Approach

© Learning and Teaching Scotland 2009

First published by Learning and Teaching Scotland 2009 ISBN 978-184399-174-8

WWW.LTSCOTLAND.ORG.UK

ContentsIntroduction 02

Part1 AboutthisProject 04

Part2 AddressingtheCapacitiesin 05 CurriculumforExcellence

Part3 UsingtheCaseStudies 06

Wilma’sStory 08

Amanda’sStory 10

William’sStory 12

Helen’sStory 14

Dave’sStory 16

Acknowledgements 18

GlossaryofTerms 19

Appendix FinancialEducationandCurriculum 23 forExcellence:MakingConnections

About this resource

Research and personal experience has shown that many people have difficulty in managing their money. Although some try hard to control their spending to match what they can afford, others spend quite freely with little thought for the consequences and can easily get into serious debt. Tackling Debt aims to bring about discussion of debt in the classroom in an objective, non-personal way.

This resource for learning and teaching is made up of five case studies illustrating how people have drifted into financial difficulties.

• Wilma’s story (DVD)

• Amanda’s story (Text)

• William’s story (Text)

• Helen’s story (Text)

• Dave’s story (Text)

The website www.LTScotland.org.uk/financialeducation offers other information and resources that the project has generated. Learning and Teaching Scotland would welcome contributions from teachers and young people using the resource.

These support materials offer some suggestions on how teachers might make use of the case studies. We recognise that schools and teachers will use these materials in ways that meet the needs of young people and the local community.

Young people engaging with the resource will be addressing learning outcomes from the following areas of the curriculum:

• numeracy

• literacy

• health and wellbeing

• social studies

• expressive arts.

Introduction

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TACKLING DEBT – A POSITIVE APPROACH

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Teachers can use these stories in a flexible way across a number of subject areas. Some schools may wish to use them as part of:

• education for personal and social development

• English

• home economics

• drama.

Scottish Centre for Financial Education

The role of the SCFE, part of Learning and Teaching Scotland, is to help education authorities, schools and teachers to provide high quality financial education to meet the needs of all their learners. We are committed to working with all stakeholders to ensure young people receive their entitlement to financial education.

Many schools have now developed ‘Money Week’ as a ‘interdisciplinary task’ to develop

interdisciplinary elements of Curriculum for Excellence. Tackling Debt can make an important contribution to this. This resource may be used in conjunction with other resources distributed by the SCFE such as Adding up to a Lifetime, which has been developed for young people in S3 to S5.

Tackling Debt can also be built into programmes of study where schools have developed partnerships with high street banks (such as RBS), credit unions or organisations such as Stewart Ivory and the Finance Education Partnership. Teachers may also consider using this resource as a follow-up to Small Change, a drama resource produced in partnership with Glasgow City Council and Bannerman High School, which was produced for use with young people in S1 and S2.

These materials have been produced to support school managers, senior leadership teams, project leaders and classroom teachers to develop a planned, coherent programme of financial education.

INTRODUCTION

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Tackling Debt is the result of a partnership between Stirling Park, the Scottish Centre for Financial Education, Caley Youth Centre, Commotion Youth Theatre and Livewire Theatre Company. The case studies are fictitious but represent in broad terms some of the prob-lems that people encounter in real life and the positive approaches they take to solve them. Teachers have been consulted in the production of this resource and have made suggestions about format and content. We consider them to be partners in it.

The aim of the project was to build on the experience and business practice of Stirling Park to support the financial education of young people in Scotland’s secondary schools. The main focus of the resource is recognition that people do get into debt but with effort can address the situation. However, there is also a focus on needs, wants, attitudes and behaviours. The material is presented as case studies to give the information more context and relevance for young people.

Part 1: About this project

The aim of the project was to

build on the experience and

business practice of Stirling Park to

support the financial

education of young people in Scotland’s secondary schools.

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Part 2: Addressing the Capacities in Curriculum for Excellence

Education for personal and social development is essentially concerned with the development of a set of interrelated qualities and attitudes and the skills and understanding which are essential if they are to be realised. Though the focus may vary according to age and stage, the overarching aims remain constant and may be expressed as helping pupils to become:

• successful learners

• confident individuals

• responsible citizens

• effective contributors.

Effective education for personal and social development recognises that there are many contexts in which children and young people grow, develop and seek to make connections. Effective schools recognise their central role in what should be a lifelong process.

The ways in which teachers and pupils interact with each other impact on learning, on the development of pupils’ self-esteem, confidence and responsibility, and on the extent to which each young person feels valued and included.

Positive relationships are based on encouragement, support, consistent expectations, understanding and caring for all pupils. This is particularly important in the context of financial education, where young people from different cultural, economic and social backgrounds will have substantially different needs and previous experiences. Their views and perspectives must be regarded as important. This not only promotes a sense of belonging but also establishes a climate where young people are more motivated and learning is more effective.

All education for personal and social development programmes should be planned using the principles of curriculum design1.

1www.LTScotland.org.uk/Images/building_the_curriculum_3_jms2_tcm4-489454.pdf

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Part 3: Using the Case Studies

In this section you will find suggestions for using the case studies. However, it is worth stating that most of the ideas are transferable and flexible. Using the case studies will contribute to developing the four capacities in Curriculum for Excellence.

Some general points about using the case studies

It is advantageous for young people to be able to set into context the relevance of financial education to their personal development and their increasing independence and responsibility.

The information from this pack and the discussion which it stimulates can also support lessons which focus on family relationships and the roles and challenges of parenthood. It may be that the discussion which ensues will help young people reach a greater depth of understanding regarding what is financially possible for their parents and carers to achieve within the budget they have. Otherwise, parental financial restraint, and a lack of understanding on the part

of young people, can often lead to ‘pester power’ where parents and carers are driven, through emotional pressure from their children, to spend money they do not have.

It is important that young people understand the links between financial capability and health and wellbeing. Financial worries and uncertainty can lead to a physical decline in health and can have far-reaching consequences.

Suggested approaches to using this resource

With senior students, the teacher could show the DVD of Wilma’s story to the class, either all the way through or scene by scene. Students could discuss in groups, or as a class, the elements of the story, exploring the financial and personal problems of the characters. Suggestions on discussion points are given in the text. Class members could be invited to take on one or more of the roles in Wilma’s story and suggest alternative responses to those featured. Another possibility could be to ask separate groups within the class to represent each of the characters and to discuss and note the impact of Wilma’s possible redundancy on their character personally.

The four text stories could be used one at a time or simultaneously with four groups. Groups could be asked to feed back to the rest of the class about the/their character, his/her financial situation, the difficulties

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faced, likely consequences and suggested solutions. Listening groups could challenge the views or ask pertinent questions.

It is likely that any approach using the stories in this resource will provoke interesting discussion in class and in keeping with the principles of curriculum design2 there could be opportunities for further research via the internet or out-of-school visits. Speakers with a relevant financial background could be invited.

Financial education is about real-life situations and young people should be encouraged to use these scenarios as starting points from which to extend their knowledge and understanding.

2www.LTScotland.org.uk/Images/building_the_curriculum_3_jms2_tcm4-489454.pdf

USING THE CASE STUDIES

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Wilma is a single parent with two teenage children who unexpectedly faces the threat of redundancy. She has been in the habit of using credit cards to satisfy her own and her children’s material whims and living beyond her means. Realising that spending habits will have

to change radically, she breaks the news to her children. Initially they do not take kindly to the idea of the impending lifestyle changes, but eventually come round to the idea and take a more responsible attitude.

Wilma’s full story is on the DVD.

Wilma’s Story

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Redundancy

Redundancy occurs when the company you work for can no longer afford to employ you as they do not have enough business coming in. Redundant literally means ‘not needed’. The company that Wilma works for has lost the big ‘Kennedy’ order and does not have anything to replace it. If the business does not make enough money it sometimes cannot keep paying the people who work there.

Credit cards

Credit cards are a useful way of pay-ing for goods. You can use them in shops and also when buying online or over the phone. As they are loans, you have to pay an amount of inter-est depending on the APR of the card. Each month you must make a minimum payment but if you only pay this then the debt will increase as the interest charged is usually more than this. The credit card will have a limit but remember this is the limit of how much the company will lend you – you still have to pay it all back as well as the interest. You should only use cred-it if you know you have, or will have, the money to make the repayments.

Some financial education themes

Teachers highlighted the following themes that could be addressed with this case study:

• redundancy

• credit cards

• needs versus wants

• part-time work – possible effect on studies and future careers.

It was also suggested that the case study could focus on:

• making ends meet – buying goods or taking debt you can afford

• being aware of the changing world around us – making decisions based on up-to-date information.

Suggested student activities

1. Discuss:

a) the kind of things the family probably have at home which might have been bought using credit cards over the years

b) Amanda and Brian’s reaction to the news their mother gave them

c) some part-time jobs teenagers can get.

2. Things became difficult for Wilma. Discuss why this was the case.

3. Look for a job for Wilma on the internet – the job should use her office skills.

4. Students could develop role play and writing based on students’ views and the DVD.

WILMA’S STORY

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Amanda is 28 and lives with her partner Ian in a house they bought together with a 25-year mortgage. She has been the manager of a supermarket, earning £30,000 a year for the last two years. She joined the company four years ago after being a student at university and then going on a management training scheme.

Amanda did not have any savings when she became a student and built up debts during her studies. Instead of concentrating on paying them back when she started earning her current salary, she instead built up more debts by going on holiday, buying a new car and buying new things for the house. She now has debts of more than £20,000. This is made up of a personal loan for her car, store and credit cards and her student loan. Like a lot of people, Amanda kept her financial problems secret and didn’t even tell Ian about her debts. It was only when he saw a credit card bill by accident that he found out the true extent of her debts and urged her to get advice.

Amanda decided to see a money adviser, who advised her that the best course of action was through the Debt Arrangement Scheme (DAS). An approved DAS administrator sets up a debt payment programme so that one regular monthly payment is made to an approved payments distributor who then pays the creditors. Amanda set up a Debt Payment Programme over three years which her creditors agreed to.

Under the DAS, Amanda knew her home was secure as long as she kept up her mortgage payments. She is keeping to her budget and making her monthly payments. Amanda realises until she is debt clear she cannot afford luxuries and has pledged to save up for them in the future. Ian was amazed and disappointed that Amanda did not tell him how badly in debt she was, especially as if she had defaulted on the mortgage payments, he would have been liable for her share.

Amanda’s Story

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Creditor

The business/company that has given you credit. The people you owe money to.

Default on the mortgage

Stop making the repayments on the loan you have taken to pay for your flat/house.

DAS

The Debt Arrangement Scheme (DAS) was set up by the Scottish Government. This service is often free and it can help you organise your payments in a managed way. This can take away a lot of the stress of debt as long as you stick to your agreement.

Student loan

These are organised by the Scottish Government and repayment only starts when you are earning over £15,000 per year. You can borrow up to £4500 depending on your family income and circumstances. These loans are for the full year and should cover living costs during holidays as well as term time.



• student loans

• budgeting

• Debt Arrangement Scheme (DAS)

• personal loans.


• planning ahead – ensuring you can meet your commitments

• being aware of the changing world around us – making decisions based on up-to-date information.


1. Discuss:

a) why you might apply for a student loan

b) what you might spend your student loan on if you were away from home

c) why it’s a good idea to plan spending your loan.

2. Things became more difficult for Amanda. Discuss why this was the case.

3. Explore the MoneyScotland.org.uk website – budgeting advice.

AMANDA’S STORY

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William is 28 and single and has a mortgage on his flat. At present he is a manager of a shop and earns £1800 per month. After paying income tax, national insurance and pension contribution his take home pay is £1250. He used to earn a lot more through overtime, but when the overtime was stopped due to a change of company policy, he kept his previous lifestyle going by using credit cards and he ended up owing £14,000 spread over 10 different cards. He likes to eat out a lot with friends and has a couple of late nights a week. He always has to have the latest mobile phone and takes

whatever contract he is offered in the shop. His electricity bills were high because he always left things on or on standby but didn’t really think about it.

This situation was serious enough, but William decided to take out a secured consolidation loan of £15,000 after see-ing an advert on television. This paid off his credit cards and put all his debt into one place, but he had tied his flat to the loan as security. To keep the monthly payments as low as possible, he took out the loan over 20 years at a monthly repayment of £125.

However, William continued to spend as he used to and started to miss payments on his loan as well as using his credit cards again. Only when he looked at the small print of his loan did he realise that because he borrowed over 20 years at an APR of about 8 per cent that over the total time of his loan he would actually have to pay back over £30,000. With that and his new use of his credit cards he realised that he had built up a total debt of over £40,000 as well as having to pay his mortgage.

He could not afford to keep up his payments. He had left it too late and when he went to get money advice he was

William’s Story

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advised to go bankrupt. He lost his flat and had to start again, only this time he will not be able to get a mortgage or a loan, or use credit or store cards for one year.

Repossession

If you buy your house with the help of a loan then the lender will usually protect their interest by registering a ‘legal charge’ against your house. This means that when the house is sold you will first have to repay the lender any money you have outstanding. If you do not keep up the repayments on the loan the lender can repossess your property. This means they can take over the property and sell it in order to pay back the loan.

Secured loan

A secured loan is a loan where you will be required to use your property as security against the loan, so the lender is able to balance the risk of lending to you. If you default on the loan your home is at risk of being taken from you to pay the debt.



• types of accommodation – home ownership (mortgages) or renting

• food costs – takeaways, ready meals, cooking at home

• utility bills – electricity, gas, switching items off

• needs versus wants – technology, going out, clothes.


• keeping track of finances – sticking to a budget

• shopping around for the most appropriate financial products and services.


1. Discuss:

a) the furniture/electrical items you might buy if you had a flat

b) the regular bills you would have to pay

c) ways of cutting down on food and fuel bills.

2. Things gradually became more difficult for William. Discuss ways he could have avoided becoming bankrupt.

3. Explore the cost of a 25-year mortgage using bank/building society APRs for different property prices and the website Money Made Clear – useful tools – mortgage calculator.

4. Students could be asked to consider what could happen if a country became ‘bankrupt’. In this situation young people could investigate the negative effect this could have on other countries and the level of sup port rich countries give poor countries.

WILLIAM’S STORY

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Helen is single and lives with her parents.

She works in customer services and earns £1200 a month. Although she is only 23 years old, Helen has run up debts of nearly £5000 mainly with several store cards which she uses to buy the latest fashions.

Helen was only able to make the minimum payments on some of her debts and as her store cards charge a high rate of interest her debt was increasing every month. She felt that things, were getting out of control and, although she had enjoyed buying things, she now worried a lot about how she was ever going to pay it back. It had seemed so easy to get credit in shops – all you had to do was fill in a form and you didn’t have to pay for it all straight away. You even got a discount on what you were buying that day. She hadn’t realised that the interest rate (called the APR or Annual Percentage Rate) was high compared to banks and credit cards and she now owes much more than she has spent.

Helen’s cousin found out about how bad things were at a night out together. She told Helen it would be a good idea to get a money adviser. She could then work out how to pay off her debts although she real-ised that because of her rash spending it would take her a long time.

Helen gets on well with her parents and would like to keep staying with them for now. She took her cousin’s advice and actually got an approved money adviser for free. She has learnt how to budget her money and has taken on a second job so that she can try to clear her debts more quickly and start to save for the future. She knows that she does not have a good credit history so she realises that she may be refused credit and loans until she sorts things out.

Helen’s Story

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• store cards

• advertising

• negative aspects of debt on health and wellbeing

• money advisers – council can direct to free advisers.


• making ends meet – buying goods or taking debt you can afford

• getting a good deal – buying what is right for you.


1. Discuss:

a) the kind of shops that offer store cards

b) how quickly the value of gadgets falls

c) peer pressure to have the latest thing.

2. Things became difficult for Helen. Discuss why this was the case.

3. Find out the APR on some store cards using the internet.

4. Students could be given the task of writing a letter from the perspective of the ‘money adviser’ to Helen outlining the positive actions that she should take to improve her financial position.

APR

This is used to calculate the amount of interest you will pay each year for your loan. The higher the APR the more interest you will pay. You should always check the APR for any loan, credit card or store card. Some are about 10 per cent whereas others are 15 per cent or even 30 per cent. They usually have a decimal place, so 29.9 per cent is practically 30 per cent.

Store cards

Store cards are useful way of paying for goods if you shop a lot at the same store. However, a lot of people use them when they do not have enough money to pay for the goods. As they are loans, you have to pay interest and some of these cards have a high APR, which means you can pay back a lot more than the goods cost, especially if you need a long time to pay. The more store cards you have, the more of a problem this can be. You should only use store cards when you know you will be able to afford to pay the money back.

HELEN’S STORY

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Dave and Julie are both 24 and live in a rented flat. Dave earns £18,000 as a mechanic and spent most of his wages on rent and bills, clothes and going out and never kept to a budget. He bought the latest gadgets and technology, which he put on credit cards and always told Julie they were much cheaper than they were. Dave also took out two loans for holidays and a car. Julie is a hairdresser and also earns £18,000. She keeps to a budget every month and puts money into a high interest account so that they can afford holidays and save for a deposit for a house in the future. She

always looks fashionable but only ever buys clothes when she can afford them and looks for bargain buys and sales.

Dave managed to build up debts of £20,000 to a variety of creditors and couldn’t repay the monthly amounts he owed. Instead of addressing the issue, Dave continued to ignore his debts, hiding unopened letters and bills in a drawer, and ignoring the phone calls that he received about making his monthly repayments. Dave did not take action even when companies were offering to discuss repayment plans. Julie always thought Dave earned much more than her because he was always buying things and wanting to go on expensive holidays.

Dave bought a £4000 home entertainment system from a store on credit with an APR of 24.9 per cent over four years. The monthly payments were £132, meaning that in total over the four years he would have to pay back over £6300, £2300 more than the loan. When Dave stopped making the monthly payments the company tried to make contact with him but Dave did not respond. The company then decided to take court action and take out enforcement (known as diligence) for payment. Dave found his wages were arrested directly through his employer. Dave’s employer told him he was obliged to make regular payments direct from Dave’s wages until his

Dave’s Story

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debt was paid. When Dave found this out he was shocked and embarrassed and finally realised he had to seek proper debt advice.

Dave realised that by ignoring his debts he had made things worse so that when he finally did seek advice he was relieved. Dave was shown how to handle his money and make a budget so that he could work out how much he could make in repayments. Dave was set up in a Debt Payment Plan under the Debt Agreement Scheme (DAS). DAS has been set up by the Scottish Government to help people who are in serious debt.

He is now keeping up with his agreed payments so no more enforcement action can be taken against him. Julie was shocked to find out the true situation but helped Dave to work out his monthly budget and helped him sell many of his gadgets to raise money to pay his debts.

Diligence

Diligence against the person is a proc-ess where a balanced decision has been taken in law about the man-ner in which the repayment is to be enforced.

Repayment total

The amount finally paid back for a loan will depend on the amount borrowed, the APR and the length of time of repayment. The higher each of these is the more money will be paid in total to clear the debt.



• total repayment cost of a loan

• credit agreements/hire purchase

• diligence (debt repayment enforcement)

• credit unions in your area and their rates for savings and loans.


• keeping track of finances – sticking to a budget

• planning ahead – ensuring you can meet your commitments.


1. Discuss:

a) why credit companies charge you interest

b) why the law allows businesses to force people to pay their debts

c) why you should keep control of your spending.

2. Things became more difficult for Dave. Discuss why this was the case.

3. Explore the cost of some three and five-year loans using bank/building society APRs, different amounts and the website Money Made Clear – useful tools – loan calculator.

4. Role play the situation when Dave tells Julie about his financial situation.

DAVE’S STORY

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Acknowledgements

Stirling Parkwww.stirlingpark.co.uk/sp_home.asp

Learning and Teaching Scotlandwww.LTScotland.org.uk

Caley Youth Centrec/o Ardeer Neighbourhood Centre, Stevenston, North AyrshireContact Gordon Cowan on 01294 602027www.youngscot.org/signposting/?a=d&s=86&sr=185&ss=19&id=4840

Commotion Youth Theatrewww.nationaltheatrescotland.com/ content/default.asp?page=s344_1

Livewire Theatre Companywww.kilmarnockstandard.co.uk/lifestyle/lifestyle-newskilmarnock/2009/02/06/ stewarton-theatre-company-kids- starring-on-tv-81430-22845446/

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Annual Percentage Rate (APR)

The annual percentage rate is the cost of credit that consumers pay expressed as a simple annual percentage. The percentage is calculated from an equation considering the total amount financed, other finance charg-es such as fees and costs paid to acquire the loan, and the term of the loan. It is not the same as the interest rate and is usually higher. In mortgages, it is the interest rate of a mortgage when taking into account the interest, mortgage insurance, and other costs incurred. Every firm in the business of lending money or advancing credit is required by law to quote the APR. The APR is the best measure for comparing the cost of borrowing from one lender to another. You should always check out the true cost of a loan by finding out the APR, which is often likely to be higher than an advertised rate or a rate that is only valid for a short period of time.

Arrears

When you do not keep up the monthly repayments on a loan or mortgage you are considered to be in arrears.

Arrestment

This means that money or goods held by a third party are ‘frozen’. The most com-mon example is arrestment of funds in your

bank account. The third party (for example a bank) will be required to hand funds over to the creditor.

Attachment

Attachment puts a monetary value on goods held by the person in debt, for example a car. Anything that has been ‘attached’ can be sold at auction. The money raised is then handed over to the person who is owed the money. The courts must give permission first before a person can enter a house to ‘attach’ goods.

Benefits

These are benefits paid to you by the government and include income support, child benefit, job seeker’s allowance, disability benefit, housing benefit, and council tax benefit.

Budget

A budget is a list of all your income and all your expenditure.

Consolidation loan

A consolidated or consolidation loan is when a person takes out a loan or other credit agreement in order to pay off two or more existing debts.

Glossary of Terms

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Council tax

Council tax is a system of local taxation collected by local authorities. It is a tax on domestic property. Generally, the bigger the property is, the more tax will be charged. Some property will be exempt from council tax. Each local authority keeps a list of all the domestic property in its area. This is called the valuation list. Each property is valued at April 1991 prices and put into a valuation band. A different amount of council tax is then charged on each band.

Credit

Credit is a contractual agreement in which a borrower receives something of value now and agrees to repay the lender at some later date.

Creditors

Creditors are anyone you owe money to. These can be individuals or companies such as banks, credit card firms, or shops that have store cards or catalogues.

Credit management company

Credit management companies provide revenue management and enforcement services to organisations who have debt to collect. The credit management company is responsible for the collection and recovery of these debts on behalf of the organisation. These could be local authorities who have outstanding council tax or rent debt to collect or private companies who have outstanding debts from debtors who have defaulted on loans or credit agreements.

Debt

Debt means any money that is owed or due to someone else. This includes loans, mortgages, credit card payments or money you owe to another individual.

Debtor

A debtor is an individual who owes money to another person or company.

Debt Arrangement Scheme

The Debt Arrangement Scheme (DAS) gives people the help and the time to pay their debts as long as they have some income left after they have paid for essentials. For the purposes of DAS, you must have more than one debt that you want to pay off. Under DAS, you are helped by a DAS approved money adviser to work out your budget and what you can afford each month to pay and a single regular payment is made to someone called an approved payments distributor. If you keep to the agreed payments, your creditors cannot carry out enforcement action against you – such as wage arrestment.

Diligence (Enforcement)

In Scotland, there are a number of ways that people can be enforced to pay their debts by the courts. The most common forms of enforcement, known as diligence, are: arrestment; earnings arrestment; and attachment.

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Earnings arrestment

This means that if you are working, the money you owe can be taken from your wages directly from your employer, who makes regular payments until the sum due is paid.

Money/Debt adviser

A person specifically trained to offer advice both on debt and on increasing your income. A debt or money adviser can help you work out what your options are and, where needed, negotiate affordable payments and set up repayment plans with your creditors. Debt or money advisers work in the private, public and voluntary sectors so you may get advice from a debt or money adviser in a private company that specialises in dealing with debt, or through your council or a voluntary organisation or charity such as Consumers Counselling Scotland, Money Advice Scotland or Citizens Advice Bureau.

Impulse buying

This is where you see something that you want and decide to buy without giving any consideration to needs.

Net and gross

Net means after deductions so it is the amount of money you have after certain items have been deducted, for example the wage you are given after income tax, national insurance, and any other deductions such as payments towards a pension scheme have been paid. Usually, your employer makes these deductions when you get paid so the amount you

receive in your hand or bank account is your net income. Your gross income is how much you have earned before anything is deducted. For example if your salary is £13,000 that is your gross income. After tax and national insurance and other payments have been deducted your monthly net income might be around £800.

Overdraft

An overdraft is an agreed amount by which your bank account can be overdrawn – an amount more than you have in your account. If you have an overdraft facility of £200 you can spend up to £200 more than is in your account. Generally you will be charged a set fee for the overdraft and interest on the amount you are overdrawn. If you go over the agreed amount of your overdraft you will be subject to additional fees or charges.

Personal loan

See Unsecured loan.

Repossession

If you buy your house with the help of a loan then the lender will usually protect their interest by registering a ‘legal charge’ against your house. This means that when the house is sold you will first have to repay the lender any money you have outstanding. If you do not keep up the repayments on the loan the lender can repossess your property. This means they can take over the property and sell it in order to pay back the loan.

GLOSSARY OF TERMS

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Secured loan

A secured loan is a loan where you will be required to use your property as security against the loan, so the lender is able to balance the risk of lending to you. If you default on the loan your home is at risk of repossession.

Sequestration

Sequestration is the Scottish legal term for bankruptcy. You must owe at least £1500 in total to be made bankrupt and your creditors must have been through the courts to demand that you repay the debt and you must have failed to comply. Alternatively, a person can declare themselves bankrupt. Sequestration begins when someone is declared bankrupt in court. The person who has been declared bankrupt hands over the things they own and their financial assets to an appointed trustee, who then sells off whatever is not exempt to pay off the debts. The trustee can also arrange for money to come from wages and/or bank accounts to pay towards the debt. During sequestration you cannot get credit of more than £250 without telling the lender that you are an ‘undischarged bankrupt’. You cannot start up a limited company or take part in the day-to-day management of one. You can’t become an MP or MSP or take part in councils/school boards, etc. If you are a homeowner your house may be sold. At the end of three years (this is to be changed to one year under current proposals going through the Scottish Parliament3) you will be discharged and your debts will be cleared permanently. Your bankruptcy will stay on your credit files for one year.

Store cards

A ‘store card’ is simply a credit card issued by a retailer. Store cards are one of the most expensive ways of borrowing money. However, unlike a general credit card, a store card is a limited use card since it cannot be used for making purchases at other shops.

Unsecured loan

Sometimes known as a personal loan, an unsecured loan is a way of borrowing money from a financial service provider such as a bank, using your personal credit rating to determine the loan you will be offered. With a personal loan you can borrow up to £25,000 and will need to repay the amount borrowed plus interest within a period that can range from six months to 10 years.

3Information on the Accountant in Bankruptcy (AiB) website: www.aib.gov.uk/guidance/publications/debtbankruptcy/bankruptcypostapril08/poyo

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Appendix – Financial Education and Curriculum for Excellence: Making the Connections

Financial education and the resource Tackling Debt are closely linked with many of the draft experiences and outcomes of Curriculum for Excellence. These links are strongest within the areas of numeracy, expressive arts, English and literacy, and health and wellbeing.

Building the Curriculum 3 states:

‘The OECD noted that if a curriculum is operated as a rigid structure, the time available for learning will be for subjects and not students. The experiences and outcomes are grouped under the headings of the curriculum areas: expressive arts; health and wellbeing; languages; mathematics; religious and moral education; religious education in denominational schools; science; social studies; and technologies. They describe learning which has a clear purpose at levels from ‘early’ to ‘fourth’, as set out later in this document. They describe stages in the acquiring of knowledge and establishment of understanding and support the development of skills and attributes. They are written so that, across the experiences and outcomes, children and young people have opportunities to develop the attributes and capabilities for

the four capacities. They can be applied in a range of contexts which will be meaningful and relevant to the children and young people and so offer a degree of personalisation and choice which can give children and young people a sense of ownership of their learning. The curriculum areas are therefore the organisers for setting out the experiences and outcomes.’

‘Experiences set expectations for the kinds of activities which will promote learning and development.’

‘Outcomes set out what the child or young person will be able to explain, apply or demonstrate.’

‘All are designed to encourage a range of effective learning and teaching approaches.’

The overarching cover paper for the draft experiences and outcomes contains the following statement:

‘The draft experiences and outcomes provide for progression and seek to con-vey the values, principles and purposes of Curriculum for Excellence. They build on the best of existing guidance while introducing areas of change. They are designed to express an approach to learning that is clear to the teacher

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1Financial Education in Scottish Schools: A Statement of Position (1999)

experiences that will enhance learning, and outcomes that are meaningful to the young person.

Most importantly, the draft experiences and outcomes should have an impact on classroom practice and learning. As a result, practitioners should have the opportunity to engage with young people in purposeful and worthwhile tasks, activities and events that contribute to their personal development and learning.’

Financial capabilityFinancial capability1 is broken down into four main components:

Financial understanding

As a result of learning experiences, young people should be able to demonstrate an understanding and appreciation of:

• sources of income

• the nature and role of money in society, including foreign currency

• taxation, spending, saving and investment

• credit and debt

• financial services/products and advisory services

• consumer rights, responsibilities and protection

• the impact of advertising, ICT and the media.

Financial competence

As a result of learning experiences, young people should be able to:

• keep financial records

• analyse financial information

• assess value for money

• prepare and use budgets

• make informed financial decisions.

Financial responsibility


• take increasing responsibility for making decisions with respect to themselves

• analyse the potential impact of financial decisions made by others on society and the environment both locally and globally

• analyse the potential impact of their financial decisions on other people and the environment both locally and globally.

Financial enterprise


• evaluate potential risks and returns

• use financial and other resources in an innovative and confident manner

• apply knowledge and skills creatively in a range of situations.

Furthermore, in the Financial Services Authority’s Financial Capability: Establishing a Baseline (2006), John Tiner, Chief Executive, FSA (2003–7), writes in the Foreword:

‘In a world in which individuals are increasingly required to take responsibility for their financial affairs, people need to be able to manage their money well. This report, the product of a survey of over 5300 people, assesses the ability of the UK population to do so.

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The Financial Capability Survey’s main purpose is to establish a baseline measure of financial capability in terms of how well people:

• make ends meet

• keep track of their finances

• plan ahead

• choose financial products

• stay informed about financial matters.’

Young people can improve and develop their financial capability as defined above, while learning through using the resource Small Change, and teachers could give young people the opportunity to address the various experiences and outcomes for Curriculum for Excellence.

APPENDIx

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NOTES 27


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The pfeg Quality Mark shows that this resource meets the pfeg quality standards. At the time of isue the resource contains educational benefits and accurate financial information. For further information visit www.pfeg.org

Learning and Teaching ScotlandThe Optima, 58 Robertson Street,

Glasgow G2 8DUCustomer Services: 08700 100 297

[email protected]

Tackling Debt,acollectionofcasestudiesforuseinsecondaryschools,istheresultofpartnershipworkingbetweenStirlingPark,NorthAyrshireCouncilandtheScottishCentreforFinancialEducation,whichispartofLearningandTeachingScotland.Theaimoftheprojectistohelpdevelopthefinancialcapabilityofsecondaryschoolpupilsaspartoftheirgeneraleducation.Activitiessuchasthosedescribedinthisresourcegivepupilsopportunitiestocarryouttasks,todevelopproblemsolvingskills,andtodothisinaverycreativeandenjoyableway.Theideaofteachingchildrenaboutmoneythroughpracticalactivitieswaswelcomedbytheschoolsinvolvedindevelopingtheresource.

Developingeachindividual’sfinancialcapability,fromearlyyearsthroughto18,canenhancelifechancesandchoices.ItcanhelpallchildrenandyoungpeopleachievethefourcapacitiesofCurriculum for Excellence,particularlyinbecomingresponsible citizensandeffective contributorstosocietyandatwork,withaninformedsenseoftheirrolesintheworld.OneofthemainaimsindevelopingtheactivitiesinTackling Debtwastodoexactlythis.

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