The Martin Lewis Money Show (2012) Season 16 Episode 10

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The Martin Lewis Money Show  The Martin Lewis Money Show (2012) S16E10 The Martin Lewis Money Show (2012) Season 16 Episode 10

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00:00welcome money we all need it many struggle to get it right especially when young so whether

00:19you're a teen with your first Saturday job a student panic staring at your loan statement

00:24or parents and grandparents trying to help them out this is a special for you after all the

00:31financial choices you make early can shape you for a lifetime and as it's a special I'm breaking

00:38the format today you set the agenda young people there we go those at a school in Coventry who are

00:44going to be joining us too and they're waving the voice already I love it they get to ask the

00:50questions I've stripped it all back less set pieces than usual a little bit nerve-wracking I don't

00:55know where it's going to be going today though I do know I will be doing student finance in detail

01:01as that is the most misunderstood area in the entire money world then towards the end of the

01:07show safer territory for me back to the news you can use the energy price cap that dictates the bills

01:12two-thirds of the country pay will rise two percent tomorrow but many can beat it and cut costs by

01:18300 pounds a year I've ways to beat the disney plus price hike that's just happened if you pay the

01:24higher income child benefit charge finally you may be able to avoid doing self-assessment and the

01:29longest zero percent card for shifting debt that I've seen on the market since 2022 is out now onto a

01:37woman who swore she'd never download tiktok and then spent three hours learning one dance move I thought you were a

01:44sprinter not a marathon runner Jeanette Kawachi everybody

01:46thank you very much and it's a dance I still can't do if you want to know and it's very nice to be back

01:55please do send us your questions on x or on blue sky you can use the hashtag martin lewis or you can

02:00email the team martin lewis at itv.com if we don't use your question tonight we may use it in a future

02:06show now you've already spotted our wonderful students there at west coventry academy year 12 and year 13 and

02:12we've got our studio audience as well you've got wallets too give them a wave

02:15thank you very very much tell you what the fitbit steps they'll be getting or the tracker steps

02:22the way the ones in there is fantastic yeah brilliant stuff right so let's open it up what's on your mind

02:27what do you want to know we can go straight to our school there there's our interactive producer

02:31grace grace who have you got alongside you this evening

02:34hi jana i have hamad he's got a question for martin hello mate um hi martin i just wanted to know

02:42whether or not you think the government are likely to reintroduce their house buying isa

02:45well so it's interesting you ask that question because there is a house buying isa i think you

02:52may be thinking about the help to buy isa that was available for from the age of 16 we now have the

02:58lifetime isa which is available from the age of 18 how old are you

03:01i'm 17. 17 so you can't do this yet but this is something i genuinely want you to do on your 18th

03:09birthday now with the lifetime isa if you save in it towards your first home the state will add a 25

03:16bonus you can put up to four thousand pounds a year in it so you put four grand in it the state

03:21will add a thousand pounds on top that has to be used towards a home that costs under 450 000 pounds

03:26you're in coventry probably shouldn't be too much of an issue there but if in the southeast of

03:30england it can be a problem and if you're going to buy there and it's going to be above 450 000

03:34you take a penalty to pay your money out something i'm campaigning to change but that's the situation

03:39so you need to be aware but this is the big reason i say on your 18th birthday and for everybody in

03:43here too to use the lifetime isa to get the bonus on your first property it has to have been open

03:50one year so even if you're not ready to save when you're 18 put a pound in money box is the best

03:57pair at 4.6 interest put a pound in and then tick tock tick tock tick tock the clock is ticking and

04:03then when you're ready to put money in it'll be over a year and you can get the bonus straight away

04:07so everybody 18th birthday pound in a lifetime isa even if you're not ready to use it even if you won't

04:14use it later hey it's a savings account it's tax-free savings account it's not a big problem

04:17and then when you're ready to use it it will work for you does that all make sense

04:21uh yeah definitely had you heard of the lyser or were you thinking of the help to buy

04:26um i was thinking of the health helper side more so help to buy yeah it's nice to know about this

04:32now thank you so the lifetime isa go i haven't done it i've dotted all the i's crossed all the t do some

04:35more reading on it but that's the way to go forward on it brilliant staff thank you very much for your

04:39question now this is coming from kelly now the world is changing and i know it's not necessarily

04:43your subject but she is asking how are kids expected to financially plan ahead when all the jobs

04:49are being overtaken by ai it's a very interesting question

04:53so look i have great concerns about ai i think especially for people in the professions the world

05:00is going to be very different in 10 years time it should we'll benefit from it in some ways but

05:04they'll also and i don't think politicians have really tackled the problem that's coming from ai in

05:09that direction so what would i do if i'm advising young people first of all focus on human skills

05:14creativity empathy leadership communication because ai is going to struggle to take those away

05:23second become a digital native if all jobs are going to involve ai you need to understand ai you need

05:30to understand the digital process you need to make sure if your parents that your children's do

05:34because they're going to have to embrace it because the world is moving in that direction

05:38third and i go back to when i was at university i was lucky enough to be president general secretary

05:44of the lse students union and i spoke when i was coming to the end worried about what i was going to

05:48do next to the boss there the vice chancellor and i said what do i do and he gave me advice i will pass on

05:53in this he said focus on acquiring skills not on acquiring jobs the more skills you have the more capability

06:02you have to do everything and i think adaptability and flexibility is crucial in the world of ai

06:08and the final tip i'd give that's more generic than ai but i think it's important

06:12in my first professional job i was put in a research department i was meant to be there for two weeks

06:17but i was still there after six weeks i asked them why and they said they brought me to a wall and on

06:22the wall it was in financial pr there were newspapers that i had to put up every day that everyone could

06:27look and they said that one's not straight and that one's got a rip in the corner

06:31and that's why you're still in research we know you're clever but the truth is and this is the

06:35message whatever job you do do it to the best of your ability nobody's going to give you the big job

06:41if you can't do the small job right so i think i know it's not my subject but hopefully that's

06:45somewhat of an answer what was your first job what was your what was your first job uh it was in

06:53financial public relations i soon learned i was on the wrong side and became a journalist instead

06:57and we've got mariam in the studio you've got a question for martin um i'm a year 12 girl with

07:03a part-time job and i save 250 pounds per month what is what's the single move future me will thank

07:14me for to save invest or build credit save invest or build credit that's a choice i think that's a

07:19false choice if you forgive me save or invest is a direct choice you can either put your money in one

07:24funnel or you can put your money in another funnel building credit the ability that you're going to

07:29need to borrow if you want to buy a house and get a mortgage later uh that's a different route so

07:33let's deal with that because that's the easier one first to build credit when you do apply for credit

07:40what they do is they credit score you on your past history to try and predict how you'll behave in

07:45future if you don't have a past history even though you're not a bad risk they've got nothing to go on

07:50so they're unlikely to lend to you so what you have to do is build a history as a good credit citizen

07:55so what you're going to do is you get a credit card you probably have a hideous rate but that's not

07:59going to matter because you're going to pay the card off well done in full at the end of every month so

08:05that there's no interest and that's very important if you do that and you do whatever you'd be spending

08:10normally 50 100 pounds a month put that on the credit card pay it off in full after a year you've got a

08:17history of being a good credit citizen it'll start to build your credit rating so we'll we'll

08:21throw that one aside now you're asking me save or invest saving is where you put money away

08:27somewhere safe the money you've put in the capital what you put in is guaranteed and it'll grow at

08:31a set rate three or four percent of interest investing is where you take a risk of with the money

08:36hoping it will grow much faster but at the potential that you could lose some of it over the long run

08:42if you're investing for more than say five years and you've got a wide spread of assets a global

08:48portfolio there are lots of funds out there that will do that automatically for you investing will

08:52generally outperform savings so you want to invest especially if you're doing it for 10 or 20 years

08:56so here's what i do you always want a pot of savings i call it an emergency fund you want to have

09:00some money put aside in case something happens to you so you won't need to borrow so you've got that

09:05money to deal with emergency so you save first you get that saving emergency fund up if you were working

09:10i'd say three to six months worth of bills and you put that aside after that then it's money for

09:15your long-term future then you start investing and you could even look at a pension too but i'm not

09:19going to go into pensions quite at this moment so credit score one side first savings then investing

09:24make sense yeah perfect all right um now it's time for your view

09:35what is your question this evening it's a really simple one

09:38do you feel that school tooled you up with a basic level just a basic level not a high bar

09:44of financial education to cope with our competitive consumer economy you can vote now live on x and i'd

09:50also love to know how you feel about the financial education you had or you didn't have do use the

09:55hashtag martin lewis awesome well fantastic lots more of your questions to come and in the next part

10:01we're going to focus on many parents biggest concern the worry about getting into debt when you go to

10:06university we'll see you after this

10:23hello welcome back this is our young person's money special janette what's going on out there

10:28loads coming in on socials the polls doing very well as well but we're gonna head back

10:33to west coventry academy grace is there grace who you got hey i have paisley here he's got a

10:39question for martin hi paisley hi martin uh how does student finance work and is university debt

10:45something i should be worried about big question and probably a really important question my funny

10:50answer is no you should not be worried about university debt but you should be worried about

10:56the cost of going to university and that may sound like a strange distinction but we're going to come

11:02back to you later and you'll see if you understand it at the end of this part i'm actually going to

11:05move you onto that screen over there because this is my big briefing

11:12okay so let's do this the first thing to understand is the university price tag that can be 60 000

11:18isn't what you pay the basics no first time uk undergraduate so that's doing your first degree

11:25needs to pay for tuition up front the tuition fees are paid for you by the student loan company

11:30automatically now english and wealth students your tuition fees are up to 9 535 pounds a year

11:37wherever in the uk you study study in scotland northern ireland it's still the same

11:41scottish students in scotland you don't pay tuition fees you go anywhere else in the uk

11:47you'll pay the 9535 northern irish students in northern ireland your tuition fees are maxed at

11:534855 go anywhere else in the uk you'll pay the 9535 now it's an up to figure but most universities

12:00charge up to that max so you can see three times 9 500 we're getting on for nearly 30 grand your

12:06maintenance loan the living loan this combined together with it over a three-year course the

12:10combined total can be 60 000 pounds what counts though is how much you repay so let's talk about

12:19repayments now in england since 2023 on the new plan 5 loans you repay nine percent of everything

12:27earned above 25 000 pounds a year if you earn less than that you do not repay in the year so when

12:3524 000 pounds you repay nothing you repay it via the payroll so for the young people in here when you

12:41go to work you normally tax is taken off before you receive it but the student loan is also taken off

12:48before you receive it so you don't have to pay a student loan it's paid for you you get your money

12:51after tax on the student loan and the student loan debt does not go on your credit file now that's in

12:57england you can see the different thresholds in the other uk nations which are on different plans

13:01you'll see they're all higher than england which means you pay less each year because because that

13:06figure is lower you start repaying you earn 26 grand you'd be repaying in england you wouldn't be

13:10repaying in any of the other uk nations the next most important thing to understand

13:16is whatever whether you've paid it off if you've not paid it off after 40 years in england

13:22it's gone you do not have to pay anymore and that's 40 years after the april after you leave university

13:27scotland it's 30 years for welsh students it's 30 years northern irish students it's 25 years now what

13:34we have to do now is twist our brains you've got the basic facts but we have to start to understand

13:39how this really impacts the practical pound in your pocket and there's only way one way to do that when

13:44we've got a group of people who are still at school here it's martin's pop quiz so here we go now i

13:56thought who's gonna play this and there's a bright young man here called raf who is my friend phil's

14:01son who i know very well and you still haven't beat me at connect four so i thought i'd invite you

14:05here tonight to play my pop quiz are you happy to play let's do it he's gonna get this right i'm

14:09absolutely sure so here we go well done and just to check you're 17 aren't you and you're studying

14:18maths and economics at a level maths and physics maths and physics yeah no setting up you should be

14:22able to do this so here's the simple question your total student loan debt is 30 000 pounds your annual

14:28salary is 35 000 pounds how much would you repay a year do you remember what dictates repayments

14:34nine percent of everything you earn over 25 000 pounds so i believe that it would be at 900 pounds

14:43because 35 000 at deliberate easy numbers is 10 000 above 25 000 pounds 10 9 of 10 000 pounds is 900

14:51correct question number two here we go now your total student loan debt is 60 000 pounds

15:05the debt is doubled your annual salary is 35 000 pounds what is your yearly repayment

15:12i think it would still be 900 pounds martha oh he's swift

15:15so look you repay nine percent of everything you earn above 25 000 pounds you're still earning 35 000

15:21pounds your total repayment is nine thousand he's too clever he's got the point already but we'll go

15:30on oh no they've just increased tuition fees to a million pounds a year everybody ah that means

15:35question three your total student loan debt is three million pounds your annual salary is 35 000

15:39what's your yearly repayment 900 pounds 900 pounds well done well done look

15:52that's an incredibly important point it doesn't matter the amount you borrow that does not affect

15:59what you repay in your each year it's all on what you earn and that's the first thing to understand what

16:05you borrow though does dictate whether you will repay or not within the in england 40 years before it

16:14wipes that's what the level of borrowing now the more you borrow you borrow three million pounds you're

16:19never paying it off you're just paying for 40 years right the more you borrow and the more the interest

16:23the less likely you are to repay in full before it wipes so you're just going to keep paying the more

16:29you earn and the less you borrowed the more likely you are to clear what you borrowed within the 40

16:36years now the actual current numbers are 56 of people who go to university are predicted to pay off

16:43the loan before the 40 years so just over half but many won't under the old system before 2023 it was

16:51only 32 less than a third of people so more people are now clearing it let's go on just before you do

16:57that you know when we were talking about this earlier yeah i was texting my sister i was going

17:00to show her this and you stopped me because you said this might not necessarily apply to her so

17:04it's really important because your sister went started you about 10 years ago yeah yeah right so

17:08this is just just a quick note it's very useful that's the english system plan five loans there are

17:15many people if you started uni before 2022 your loan wipes after 30 years you start repaying at a higher

17:22threshold your interest rate is higher be quite careful listening to older siblings because their

17:28experience and their financial loan setup could be totally different to yours that's why people get

17:33the facts wrong on this all the time it's not with me though my sister still listens to me no your sister

17:37been listening she would have got it absolutely right yeah and you've been listening to me so it's um

17:41right let's move on this is this is the really important point so we've talked about raf got it right

17:48it's 900 pounds because it's what you're earning for most people this is going to work like a

17:52lifelong graduate tax what you repay each year depends solely on what you earn so it's like a

17:57nine percent additional tax let's look at it this is how tax works right also quite an important lesson

18:03it's so right for young people out there for most people you can earn up to twelve thousand five

18:08hundred and seventy pounds a year and you don't pay any tax on it very important once you earn above

18:15that you start to pay tax but tax is marginal so if you earn a hundred pounds above twelve five seventy

18:23you pay twenty percent tax but only on the hundred pounds you are above so you'd pay twenty quid in

18:28tax there are people out there who get in touch with me and saying i'm about to get a pay rise should

18:32i turn it down because it'll take me above the tax threshold and i'll have to pay so much more tax

18:36no you're only paying tax on the amount above the threshold i'm looking at the young people do you

18:40get that you understand what i'm saying really important that you get that locked in

18:44taxes and marginal rates so this is the tax rates uh standard tax rates but in practice this is what's

18:50going to happen to a graduate so no tax up to twelve five seventy up to twenty five thousand pounds you're

18:58the same as someone who hasn't gone to university above twenty five thousand pounds this is england

19:02remember they're paying twenty percent tax you're paying twenty nine percent tax above fifty grand they're

19:08paying forty percent tax you're paying forty nine percent tax effectively above 150 grand

19:13forty five to fifty four nine percent extra tax is not cheap it's not cheap in any way that is a

19:19what more i hope that you'll go to university and it will enhance your earning power but you really need

19:24to think about whether it's worth it so paisley you're still over there that was the point i was

19:29making to you you asked me should i be worried about the debt it doesn't really work like a debt in

19:34practice it's not like a traditional loan it's actually is it going to be worth me paying an

19:40additional nine percent extra amount of tax for me to go to university the answer is if we talk

19:46purely financially and university is about so many other things as well the cultural life your exposure

19:50to many other things the answer is if you're going to earn very substantially more yes it will be

19:55if you're not going to earn much more and there won't be a graduate premium in the job that you want

19:58to take then it will probably cost you more than it should do and that's why with university out

20:03effectively costing each student more than it used to do since they did the changes in 2023 in england

20:08it is really important to consider if it's worth it if it is great go for it enjoy it i hope have a

20:13wonderful life if it isn't we're talking about more apprenticeships we're talking about more

20:17options for young people there are different things that you can do brilliant we've got this

20:20question that's coming from alex on twitter it says martin i'm still struggling whether to take out

20:25a student loan for our child due to the seven percent interest rate how much should this worry us

20:30unless you're in wales that's not correct i think this is one of those issues of the previous system

20:36is seven percent if you start before 2023 wales is still on plan two there's seven percent interest

20:41but the loans are smaller and they you only repay for 30 years i'm going to assume it's in england

20:45because i get a lot of questions like that with that mistaken thing let me tell you how the interest

20:48works lots of people worry about this the interest rate on student loans is 3.2 percent currently

20:55because it's based at the rate of inflation which means in economic terms there's no real cost to

21:00the interest i need to explain so you look young with strong legs can i borrow your chair for a

21:04second sorry i wasn't going to do this but let's do it okay you stand there for me okay this is not a

21:09chair this is a shopping trolley right i am borrowing enough money on my student loan to buy 100 shopping

21:18trolleys worth of goods that's how much it's costing me now while the interest is at 3.2 percent over the

21:24years prices are also going up by 3.2 percent so everything costs more and earnings we hope are

21:30going up by potentially even more so in 20 years time while i will pay more in money terms in terms

21:38of purchasing power i'm still only going to repay 100 shopping trolleys worth of goods so there's no

21:43actual impact on the cost to me of having borrowed the money because it's set at the rate of inflation

21:48take the chair back thank you very much there we go you got the answers right he just he just took a

21:54chair and he got a clap anyway so that's the first point to understand about interest but now we get

22:00even more complex the interest that is added to your student loan account and this applies to old

22:06loans too is not the interest you repay let's make this really simple do you know if somebody earned 24

22:12000 pounds how much would they repay for zero because it's under 25 so how much interest would they

22:18repay so if they aren't below the threshold for their life they wouldn't pay any interest that's don't

22:23want anyone to do that i just want you to understand it someone who weren't just above the threshold

22:29may repay some of what they borrowed initially but they wouldn't have cleared all they borrowed

22:34initially so they wouldn't pay any interest you can add 3.2 percent interest if you like no they're

22:38not paying it then there's people who earn enough to pay back what they borrow but not to clear the loan

22:44in full within the 40 years by definition they won't have repaid all the interest added or they would

22:50have cleared it so they're not paying the full 3.2 percent rate the only people who are paying the

22:54full interest rate are those who clear the debt in full within the 40 years or in earlier years in

23:01different countries which tends to be either those with this who took a smaller loan or who are higher

23:06earners the interest rate interestingly in the in the current english loans the interest rate is lower

23:12and everybody went whoop whoop at the same time you repay for 10 years longer than you used to do

23:18and you repair to an earlier level and that effectively meant even though the interest rate

23:22is lower which is what everybody asked me about it's a bit of a red herring they increase the cost

23:26by 60 percent typically in 2023 even with a lower interest rate that's not what you need to worry

23:31about the interest rate brilliant um shush meter in the studio good evening you've got a question

23:38okay hi martin as a parent should i be trying to help my child pay their tuition fees

23:44as when they're required or should i rely on the loan it's a very big question i'm going to deal

23:51with it in two ways the first thing we need to understand is there's something more important

23:56than the tuition fees that you need to focus on let me move on to that and then i'm going to come

24:00on to the tuition fees let's go to my this graph please this is and all our students in coventry there

24:08if you're going to university this is a conversation you need to have with your parents

24:12it's absolutely crucial it is not discussed it's not talked about but it absolutely has to be overt

24:18this is the english system the full loan is just over ten thousand pounds now frankly that is not

24:23enough for many people to go to university it hasn't gone up with inflation it is a real problem

24:27it's not you're probably going to have to work as well to be able to survive at university that's

24:30not such a bad thing but that loan is means tested based on household income which for most

24:37under 25 is a proxy for parental income and you start to lose the loan at just 25 000 pounds that

24:46has not changed since 2008 we've had 64 inflation in that time it has been eroded that's household

24:53income but 25 grand is basically full-time minimum wage now and that's for one parent if you're a two

24:57parent family very few homes apart from the poorest are going to get the full loan let's see the proper

25:03pattern here we go there you are starts to drop at 25 000 pounds by the time you get to 62 000

25:10household income you're getting the minimum loan now of course as this is assessed based on parental

25:16income it's not official there's no way to mandate it but they're effectively saying

25:20you and this is what i call it a parental contribution you need to pay the difference

25:25this is the living away from home parental contribution it's about five and a half grand

25:31a year so over three years that's 16 and a half grand if they're living in london it's bigger if

25:35they're living at home it's slightly less so the first priority and if you've got young kids think

25:40about this if they're going to uni that's a lot of money you're going to have to put away and save

25:43for them first priority she's got to live while she's at university it's your daughter i presume she's

25:48got to live while she's at university that's what you need to sort out did you know about that

25:54yes because i've got an elder one who's just started and you suddenly realize the gap their loan

25:58isn't enough to pay the rent so you've got to pay that so that's our first element right

26:06parental contribution first now we'll move on to the tuition fee question the big one should i take

26:11the loan first thing to say there is no better form of finance than student loans not necessarily

26:18no cheaper this is a loan that if you earn under 25 000 pounds you don't repay this is a loan which

26:25doesn't go on your credit file this is a loan that's paid automatically for you so you can't

26:29effectively default on it unless you're self-employed arguably and then you'd be defaulting on tax too

26:33and this is a loan that wipes after 40 years and it's set at the rate of inflation it's unbeatable

26:38in her life i hope she will have bigger financial challenges than student finance the most important

26:46life stage for young people the most difficult one is building a deposit to get a house and to get a

26:51mortgage and mortgage rates are more are higher than the student loan rate under this current student

26:55loan and they're a worse form of debt so if you pay off her tuition fees now that's money gone that

27:01you can't give her towards a mortgage deposit later and more so if you put that money in a four percent

27:06savings account when the interest is 3.2 you're arguably slightly up on the back of it so the first

27:11thing i'd say unless you're rich enough that you could buy her a house outright anyway as well and you

27:15could pay for everything i would argue this isn't your priority to pay off the tuition fees she also

27:21might want a car loan at some point that's going to be nine ten percent interest with much more

27:25difficult repayment terms so parents if you've got the money to help your children i'm not saying this

27:31is wrong to do i'm saying it wouldn't be my priority i'd be saving for a mortgage first or to

27:36make sure they don't get other types of debt first and only if you've got that gone then i'd look at

27:41this in the final thought you probably wanted to go on and be a high flyer you sorry to say this to you

27:46might go and be a beat poet traveling the world earning ten thousand pounds a year you've paid

27:50the tuition fees for us she'd never earn over 25 000 pounds it would have been a total waste of

27:54money there's that risk too so my answer is no i'd probably put the money in a bank leave it there

27:59so in a high interest savings account and save it for later does that make sense yeah thank you

28:02that's on the new system different rules on other systems i hope that works just on that martin

28:06it's hard today this is complicated stuff i've got more questions as well yeah i know that's in

28:11england what about the rest of the uk okay in scotland and wales you get a mix of a non-repairable

28:17grant and a loan and the amount of household income depends how much on each but there is

28:21still a gap for people on higher incomes compared to the full loan so a small parental contribution

28:25wales get ready for this english folks in wales all the household income does is dictate how much of

28:31your support is a grant and how much is a loan but everybody gets the full amount just those who've got

28:36more income it's more of a loan and those who've got less income it's more of a grant so wales has

28:41the system everybody would like wow well next more young people's questions and still to come the

28:46latest news on energy and how you could save 300 pounds on your bill we'll see you soon

29:00welcome back to our young person's finance special i feel i need a little bit of a lie down after the

29:09student finance was just we'll make a couple of technical points i said that the maintenance loan

29:13hasn't gone up with inflation it hasn't it's been massively be eroded by inflation over the last decade

29:18although last year this current year it has gone up with inflation but it hasn't come close to

29:22catching up where it'd gone before one other tiny thing i noticed this as i was doing it and i went to

29:26check afterwards going surely that i must have got it wrong our graphic is wrong it's over 125 000

29:32pounds that you pay 45 tax but it's not really relevant for the explanation jeanette what's coming

29:36in there's lots coming in we're going to take some questions on a particular topic i'm going to pick

29:41this one it's the most simple one because it's a popular question what's the best way to get car

29:45insurance for a 19 year old it's a simple question the answer isn't that easy okay so when you're

29:51getting car insurance you do the obvious things that everybody does first of all you make sure

29:56you're getting your quotes 26 days before renewal that's the perfect time because then you're deemed

30:03as a relatively low risk because the fact that you're doing it early 26 days is a sweet spot few

30:07days either side not a problem then you combine comparison sites different comparison sites have

30:11different insurers and they have different brokers on them too so you need to do two or three different

30:15comparison sites then if you're a young person you look for a black box that's the thing that may

30:20may measure in your car how you're driving that may be able to bring your prices down then we get

30:24to the slightly more wee ones right first thing to understand about car insurance it's about risk

30:30averages so you as a 19 year old are a high risk if you were to put a second driver who's more

30:38responsible let's say your parents your auntie your uncle somebody could legitimately drive your car

30:42in some circumstances they price you on the average risk which is lower than you by yourself

30:48just a note never put them if it's your car as first driver that's called fronting it's illegal

30:52it's fraud and you may invalidate your insurance but second driver if they could drive it is fine

30:56maybe your mum's better than your dad your bad dad better than your mum maybe both not it's trial and

31:00error to find out it can bring your risk average down next who here who said what's cheaper third

31:06party or comprehensive third party third party is lesser cover so you would think it would be cheaper

31:13but bizarrely some insurers factor that when people choose comprehensive they're actually a lower risk

31:19and the fact they're a lower risk can outweigh the fact that you're getting more cover so don't assume

31:24third party is cheaper try third party and comprehensive if you want the cheapest i know it's bizarre

31:29it just works that way sometimes and finally even what job you do can make a difference so always be

31:34honest but are you a secretary or a pa for example you may find one is cheaper than the other it's

31:39worth trying a few different things there are lots more tricks but that's an idea of where i'd go about

31:43starting for a 19 year old okay i think we can head back to west coventry academy grace is there

31:48grace who do you have next to you hey i have ashley and she has a pension question wow okay hi martin

31:56i was just wondering um what is a pension and should i start thinking about them now wow yes i love

32:03it yes well done i love that question so a pension is a tax wrapper that enables you to save for your

32:13older age once you hit age 57 and beyond in a tax advantageous way so you get more money to go through

32:19it and it is well worth looking at the big reason why is it's an investment and when you put money in

32:25investments as they grow they compound so the longer you have them in the more time they have

32:29them to grow slightly made up figure but it gives you an idea for every pound you put in now you'd

32:34probably have to put 50 quid in when you're in your 50s to get the same returns because of compounding

32:38so young is really important what how old are you uh i'm 17. so we halve your age which is eight and

32:46a half and you'd want to put eight and a half percent of what you earn in for the rest of your life

32:50if i asked you when you were 30 it'd be 15 starting early is important so let's get on to the pension

32:56when you put money in a pension the first thing you need to understand is you put money in from

32:59tax-free income so normally when you work if you earn 100 quid as a basic rate taxpayer on a full-time

33:07job you only get 80 quid in your pay packet because 20 comes off in tax so you only take home 80 pounds

33:12make sense look at the young people that they get me but you could put the whole hundred pounds in your

33:17pension so you invest 100 pounds in your pension it only costs you 80 pounds more so if you work

33:24for someone if you have an employer then in certain circumstances they have to match your contributions

33:31so for every five percent of your salary they you put in they have to put in three percent so let's

33:36do the maths on that you put in 100 quid it's only costing you 80 pounds but they have to put in 60 quid

33:42so you're getting 160 pounds worth of investment because your employer has to chip in

33:46like extra money from them it only costs you 80 pounds unbeatable absolute winner now here's a

33:51really interesting thing for young people to know if you go into work as opposed to going to university

33:55when you're 18. the rules say if you're aged 22 and earn over 10 grand a year they have to

34:00automatically opt you into a pension and they have to match your contributions if you're younger they

34:06don't but if you are aged over 16 and you earn over about 6 300 pounds a year you can ask to be put in

34:15those pension schemes and your employer must match your contributions they cannot legally say no so if

34:23you're going to go to work next year you work you're at home so you've got relatively limited costs you're

34:27earning 15 grand a year which is more than enough for everything you need go and ask your employer to opt you

34:32into the pension put some money away in the pension you're getting extra money from them and you're

34:37saving for your old age and let me tell you when you're in your 40s and 50s and you've got kids to

34:41play for and a mortgage and everything else you'll go i love younger me thank you does that make sense

34:50well done for a brilliant question i love that the fact of thinking about pensions at your age is

34:54brilliant we need to start thinking about our lifetime finances at every point and start understanding it

34:59that's what this whole show is about do you know brilliant stuff thank you for your question ashley

35:03but next after the break the latest energy update and the longest naught percent card martin has seen

35:08for some time so don't go anywhere

35:26welcome back we're in the final stretch of our young person's money program i hope it's been useful for

35:30you janet what are people saying well people have been tweeting in have a look at this here this is so

35:34kind for neil to send this in to me the legend returns with such a topical subject in program and

35:39i was on as well oh thank you that's very kind of you so let's head back to west coventry academy

35:46gracie who have you got alongside you there hi jenelle we have millie with a question for martin

35:52hi millie hi martin what's the difference between a current account and a savings account and which

35:57one is the best for me brilliant for asking the question because we need to do basic finance okay

36:02a current account is your day-to-day bank account you get your card you can pay your bills from it

36:08it's a transactional account for doing what you need to do you don't normally get interest though

36:12these days there are currently five bank accounts paying you not yet you because you're not quite

36:16old enough uh once you're 18 paying you to switch to them 200 quid but it's your day-to-day bank

36:21account a savings account is where you store money that you don't need immediately and you get paid

36:28higher interest on it so you want both you have your current account for the money you're going

36:33to be spending that month or the next month that you can pay in and to pay your bills and then if

36:37you ever get too much building up in your current account hopefully that'd be lovely then you put it

36:42into a savings account where you go at the moment should be earning four four and a half percent

36:46interest do you know what interest is um it's not a trick question do you understand interest

36:50interest no not completely all right interest is the price of money right so if i borrow money from

36:58a bank i have to pay it to borrow and interest is the cost so if it cost me 10 interest and i borrow

37:04a thousand pounds over a year i'd have to give it eleven hundred pounds back because it's cost me to

37:10borrow so the higher interest rate if you're borrowing bad if you're saving effectively you're loaning

37:17your money to the bank and it's going to use your money so it has to pay you to keep hold of it

37:22so you want the highest interest rate possible five percent savings means you put a thousand pounds

37:27in savings and at the end of the year you have a thousand and fifty pounds in your thousand pounds

37:31plus the fifty pounds it's given you that's what interest is in a savings account you get interest

37:36in the current account you generally don't so any spare money goes in the savings account

37:39any usable money goes in the current account does that make sense

37:42yes wonderful thank you so much cheers thank you okay now howard has been in touch howard is asking

37:53on a fix but it ends today should i take out a new fix martin do you want the short answer or the long

37:57answer uh give us a long one why not all right short answer yes long answer news you can use

38:03okay let's do this briefly the energy price cap is going up two percent tomorrow are you on a price

38:11cap tariff if you're not sure the answer is probably because two-thirds of homes in uk are

38:17the price cap applies to all standard tariffs the bog standard tariff you're on if you've never switched

38:21or if you didn't switch after a fix ended so that's what howard will be on tomorrow if he doesn't do

38:27anything he'll be on a price cap tariff those are the names of the big price cap tariffs i'm not going to

38:32read through them have a look yourself the graphics let's keep it hold on that frame so people can see

38:36here are the new rates of the price cap as you'll note standing charge is going up quite a lot especially

38:42on gas the unit rate that's the amount you pay for each unit of gas and electricity you use going up

38:46for electricity going down for gas so if you're a low user where the standing charge is horrible

38:51standing charge is a big part of your bill your rise is going to be way more than two percent if you're

38:56a high user especially with gas your rise will be less than two percent it varies by region

39:01it varies by your payment method so that's the basics now drum roll please

39:10it's time for the famous price cap graph

39:14yeah it wasn't that exciting okay

39:18so this is my explainer of what's happening this is what has happened to the price cap as you'll see

39:22it's going up two percent tomorrow it was higher two quarters ago but far lower before people ask me

39:30why has it gone up well for that we need to look at the wholesale rates those are the rates the gas

39:35electricity companies retailers pay for energy this is a map of the wholesale rates now the weird thing is

39:41the price cap is going up tomorrow but not because wholesale rates are up now it's time lagged the price

39:47cap moves on wholesale rates from the middle of march the current price cap because it moves every three months

39:51from the middle of may to the middle of august that's this period now during that period they were

39:55roughly flat but that was when trump announced tariffs so uh and across the world and that put

40:01energy prices up across the world and that's probably about one percent of the reason it's

40:05going up the other one percent is paying for the warm home discount so we know what is going to happen

40:10this is quite interesting here you'll see would you say that's higher or lower than the average

40:14over that period what would you say lower just so let's bring back the whole the price cap and let's

40:23look at the predictions there you go it's predicted to be down half a percent now the important thing to

40:28understand is we are already nearly halfway through the assessment period for the january price cap

40:35so the predictions now are they're not solid but they're pretty close an easy way for me to frame it

40:41so you understand what's going to happen it's going to go up two percent and then it's roughly going

40:45to stay there until the end of march the end of the high use winter period where we spend most on energy

40:50it's going to go up and stay there after that this is much more crystal ball gazing because we're not

40:54in the assessment period it's predicted to go up more so you ask me should i fix let's have a look

40:59where today's cheapest fix is it is 15 percent nearly below the october price cap that's because

41:12rates have gone down a little bit and fixes move with the current price whereas the price cap is

41:17based on a timeline that's around just under 300 pounds a year cheaper for somebody on typical bills

41:24so we know now you're almost certain to be saving until the end of march after that the probability

41:30is you'll still be saving substantially you might be saving less but you're going to be saving over

41:34the next year the cheapest fixes are an absolute no-brainer the price cap is a pants cap get off it

41:42your cheapest fix depends on where you live and how much you use go into a whole of market that's one

41:46that shows you all the tariffs by default price comparison site find your cheapest fix get off the price cap

41:51i know there are more sophisticated tariffs time of use tariff cv tariffs but basically if you're on

41:55the price gap no-brainer howard go and sort your fix out get your fix done because prices are going up

42:01they're staying there but you can save 15 with a guarantee that your price won't move over the next

42:07year if you were to get a fix now go get it sorted perfect right sabrina has been in touch as well

42:13are there changes coming for the standing charge if so will it mean cheaper bills and if i fix for a year

42:19will i lose out on this change there are changes off gem has announced a final consultation that

42:24from january firms will have to offer a switchable tariff with lower standing charges that's the

42:28daily charge you pay just for having the facility of gas and electricity it's come from something i

42:34suggested though i'll be honest i'm not happy with the way that they put it in place you can go and read

42:38why on social media it's because they've not done it within the price cap mechanism that doesn't matter

42:42i'll let me answer your question that'll be in from january but these are only switchable tariffs

42:48so you would need to switch to get it so if you want enough fix now and wanted to leave your fix in

42:53january to go onto these tariffs you would have to pay an exit penalty to leave your fix so you ask me

43:00will it be cheaper bills be cheaper no what's going to happen is the standing charge the daily charge will

43:06get cheaper but the amount you pay for each energy unit you use will go up that means if you're a low

43:11user say under a thousand pounds a year you will benefit if you're a high user you won't benefit

43:18so only lower users should go for it um if you do want to lower standing charges now there's the edf

43:23tracker tariff that's basically the price cap with 50 pounds a year lower standing charge is only good

43:28if you're paying under 80 pounds a month but no if you're fixed now you won't be able to get it but

43:32i think for most people you'd be better off fixing than waiting for that okay right some quickies i think

43:37how long have i got left someone tell me my ear two minutes two minutes thank you that wasn't my

43:41ear but that'll do right time for three quickies first of all there are many people out there with

43:46child benefit who are on the higher income child benefit charge that's where you claw back through

43:51the tax system the amount you've got in child benefit it's still worth getting it until income of 80

43:56000 pounds the big problem is administratively you've had to fill in a self-assessment tax form

44:01if you wouldn't otherwise be doing self-assessment they've now put a new system in what that means

44:07is call hmrc and you arrange to pay via your tax code that's the code that tells your employer how

44:13much tax to take from what you earn so you pay a little bit more tax from your employer won't save

44:19you any money but it will save you the administrative burden of doing self-assessment but it's only for

44:24those people who wouldn't be doing self-assessment otherwise so basically you've got to be on piye pay as you

44:28earn paying through your employer with relatively simply simple affairs now disney plus has hiked

44:34prices today another one of its subtle price hikes the ad free standard plan rose by a tenner today

44:39and the other plans have gone up too some tricks for you to try to cut the cost first of all if

44:44you're an existing customer try the cancellation trick can't guarantee it worked but basically what

44:49we're finding is lots of people who cancel get this this was one of my team got this there you are

44:53they suddenly get an offer saying you can get it for three quid a month or five pounds a month because

44:57you're cancelled and they want to retain you i can't guarantee it would happen but you might

45:00want to try it otherwise the club lloyd's bank account that's currently giving switches 200 pounds

45:05to switch to it includes an option to get a year's free disney plus including adverts that one to check

45:11the eligibility criteria it's only really for people who earn over 29 000 pounds a year if you're on o2

45:16contract mobile phone you may be able to add disney plus as an extra to the contract and get two pounds

45:20a month off and let me see if and get through all of these and there's a new longest zero percent balance

45:24transfer the longest since 2022 this is where you get a new card pays off debts on your old card for

45:29you so you owe the new card but at a cheaper interest rate barker card 35 months zero percent

45:34with a 3.45 fee this isn't for the young people by the way all accepted get full time they're at the

45:38whole length at zero percent but there are five other cards at 34 months zero percent which means

45:43there's more chance of being accepted go into an eligibility calculator which shows you which of the

45:47top cards you're most likely to be accepted for uh but don't spend on these cards make sure you clear

45:53the debt before the zero percent or it will jump to 25 percent and i think that's it that's it

46:01frankly none of you got financial education but we're working on that thanks for that thanks

46:05thanks to school thanks to jadette bye-bye see you in november

46:19thanks for listening to jadette ndry

46:25and i'll see you next time

46:27next time

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