Principles of Finance

The setting

A customer at NORTHBANK has gone overdrawn several times in the last few months, each time in the days before they are paid and each time by a small amount. They believe the bank is taking advantage of them.

Your role

You are to assume the role of a personal banking associate at NORTHBANK.

Your task

The customer is a young adult who works part time at a supermarket and is paid every two weeks. Rent comes out of their account by automatic payment on the first of each month, and their phone bill a few days later. In between, they pay for most things by debit card.

Several times in recent months, a card purchase has gone through in the days before payday when the balance was already low, and the account has gone overdrawn by a small amount, triggering a fee each time. The customer believes the bank should have declined the purchase instead of charging them.

The customer (judge) wants you to explain what is happening and what can be done about it. Explain the forms of financial exchange available and how the timing of each differs, explain the purposes and importance of credit and where it might fit here, develop a personal budget that matches the customer's pay cycle, and describe the sources of income and compensation that shape it.

Performance indicators

• Explain forms of financial exchange (cash, credit, debit, electronic funds transfer, etc.).
• Explain the purposes and importance of credit.
• Develop personal budget.
• Describe sources of income and compensation.

The judge will ask

1. 1.Why do I keep going overdrawn if I earn enough?
2. 2.What would you set up for me today?

The setting

A young customer at MERIDIAN CREDIT UNION has been pre-approved for their first credit card. They want it mainly for buying things online, they work part time, and nobody has ever explained to them what a card actually is.

Your role

You are to assume the role of a personal banking associate at MERIDIAN CREDIT UNION.

Your task

The customer is eighteen, works part time at a cinema, and has just opened their first account with the credit union. They have been pre-approved for a credit card and are excited, mainly because it would let them buy things online without borrowing a parent's card.

Nobody in their family has ever explained how credit works. They assume the card is a way to spend money they have not earned yet, and they have asked you whether they should accept the full limit the credit union has offered.

The customer (judge) wants you to explain the card before they decide. Explain the purposes and importance of credit and what building it is worth, explain the legal responsibilities associated with consumer credit, explain how a credit card differs from the other forms of financial exchange they already use, and develop a budget for using the card without carrying a balance.

Performance indicators

• Explain the purposes and importance of credit.
• Explain legal responsibilities associated with consumer financial products and services.
• Explain forms of financial exchange (cash, credit, debit, electronic funds transfer, etc.).
• Develop personal budget.

The judge will ask

1. 1.What happens if I only pay the minimum each month?
2. 2.Should I take the full limit they have offered me?

The setting

A client has two job offers. One pays a salary and includes health cover and a retirement contribution; the other pays more on paper as a contractor, with none of that and no paid leave. The larger number is the one they keep looking at.

Your role

You are to assume the role of a financial associate at HARBOUR FINANCIAL.

Your task

The client has just finished a professional qualification and has received two job offers in the same field. The first is a salaried position with a large company, including health coverage, a contribution toward retirement savings and paid holidays. The second is a contract role with a smaller firm that pays noticeably more per month but includes none of those benefits and no paid leave.

The client is leaning toward the contract role because the headline figure is higher, but a friend warned them that the two offers are not as far apart as they look. They want help comparing them properly.

The client (judge) wants you to help them compare the offers. Describe the sources of income and compensation each offer represents, develop the personal budget each one actually supports, explain how you would set financial goals that either path has to serve, and explain the nature of the tax liabilities that differ between an employee and a contractor.

Performance indicators

• Describe sources of income and compensation.
• Develop personal budget.
• Set financial goals.
• Explain the nature of tax liabilities.

The judge will ask

1. 1.Which offer is worth more? Take me through how you got there.
2. 2.What would change your answer?

The setting

A client wants to buy a vehicle in about two years and has been keeping everything in a current account that pays nothing. They have never worked out whether what they set aside each month will actually get them there.

Your role

You are to assume the role of a financial associate at CEDAR TRUST.

Your task

The client works full time and wants to buy a reliable used vehicle in about two years, when their current car is likely to need replacing. They have been setting aside money each month, and everything sits in the same current account they use for their bills.

They have never worked out whether what they are saving will be enough, and they have been told by a colleague that keeping savings in a current account means they are losing money. They are not sure what that means or what they should do instead.

The client (judge) wants you to build them a plan. Explain how you would set the financial goal in terms they can hold themselves to, develop the personal budget that supports it, explain the need to save and invest rather than leave money in a current account, and explain the time value of money as it applies over the next two years.

Performance indicators

• Set financial goals.
• Develop personal budget.
• Explain the need to save and invest.
• Explain the time value of money.

The judge will ask

1. 1.Where should this money actually sit for two years?
2. 2.What do I do if I am not going to get there in time?