http://www.moneysupermarket.com/savings/

Access •You have £1000 that you wish to save

•You need access to your money instantly•You would like to avoid paying tax on the interest

•We are going to look at a savings account comparison website

•Put your hand up if you spot a ‘good deal’ or you have any questions

•Let’s go shopping!

LESSON 16: Recommending savings accounts

• TO KNOW:– What is meant by interest rates and the difference between

gross and net interest

• TO UNDERSTAND:– the principle of Annual Equivalent Rate and its impact on

comparing savings accounts

• TO DO:– Compare savings accounts to find the most suitable savings

account for you

Interest rates

• Interest rate– The reward for saving and the

cost of borrowing (% of the sum)

• Rate of interest on savings account depends on1. Length of time money is ‘tied

up’ (term)2. The amount saved3. Notice period4. Whether it is internet-only

What was arguably the main benefit of saving money in an ISA?

• With many savings accounts, tax has to be paid on the interest

• ‘Gross’ p.a. – Interest rate BEFORE tax

is deducted

• ‘Net’ p.a.– Interest rate AFTER tax is

deducted

Annual Equivalent Rate

AER • AER of interest is given so that

the interest rate on different savings accounts can be accurately compared

AER removes– Effect of compounding interest

(interest earned on interest already received)

– Effect of promotional offers that may disappear after a few months

Tricky concept!

MAIN TASK – Page 18 and 19 of the GCSE text book

• Quickly read through the information on interest rates and AER (in silence!)

• On lined paper, complete activities – 4– 5– 6 – SOME STUDENTS complete

ACTIVITY 7

LEARNING OUTCOMES“You must/should now be able to...”

• ALL MUST:– Define interest rates, AER and outline the difference between

gross and net interest

• MOST MUST:– Explain the principle of Annual Equivalent Rate and its impact

on comparing savings accounts

• SOME SHOULD:– Begin to evaluate the rewards and risks of different savings

accounts.

HOMEWORK

• You will need to borrow the text book for this week’s homework (pages 17-19)

• Read through these pages and complete the worksheet issued to you