ADINA CAMPBELL:'Staying on top of debt and spending 'is one way to make the most of your money. 'but if you really want to be in charge, 'the best thing you can do is save.
ADINA CAMPBELL:'But who thinks about saving when they're young.
ADINA CAMPBELL:'Less than one third of 16-24 year olds in the U.K. 'have a savings account.
ADINA CAMPBELL:'I wonder if my colleagues at Radio 1 and 1Xtra have any good tips 'about how they've managed to save.'
TREVOR NELSON:Try not to touch your money. If you don't physically have it, you can't spend it.
DEV GRIFFIN:I've got a little bit of money saved. I've had to stop the impulse buys, stuff like that. So the start of the new year I'll be able to buy a house.
CHARLIE SLOTH:If you are saving there should always be a reason why, even if it's like, you're saving for the future or for a rainy day, as long as you've got a goal and a motive it always makes things a lot easier.
ADINA CAMPBELL:There are loads of ways to save, but how do you go from small amounts, to stacks of cash?
NICK:'My name is Nick, I'm aged 16 and I do a paper round every Sunday. 'With the money I earn from it I hope to buy a new bike.
NICK:'My old bike's alright at the moment 'but I guess I could do with another one just to help me get back uphill. 'Make it more fun, to go a bit faster.
ADINA CAMPBELL:'Nick is at an ideal age to start saving, 'with a clear goal and money coming in 'there are plenty of options open to him. So let's get down to business.'
ADINA CAMPBELL:Nick, you're 16.
NICK:Yep.
ADINA CAMPBELL:Are you any good at saving?
NICK:I've put money aside every now and then, so I guess you could say so.
ADINA CAMPBELL:Let's talk about your savings then, okay so鈥 You get 拢10 a week from your paper round.
NICK:Yep.
ADINA CAMPBELL:Okay shall we write that down?
NICK:拢10 and 拢3 from my aunt as well, so.
ADINA CAMPBELL:Okay.
NICK:13. But I'd put aside-- maybe keep 拢5 just to spend during the week as well, so. End up with 8.
ADINA CAMPBELL:'So 拢8 a week rose to savings of 拢416 over a year. 'Nick could keep that safe under his mattress and it would stay the same. 'He'd still have 拢416, 'but if he put his money in a bank account, 'he could make his savings grow.
ADINA CAMPBELL:'That's because the bank will pay him an extra percentage 'on his cash, called interest.
ADINA CAMPBELL:'With a bank account earning 2% interest after a year, 'Nick's 拢416 will earn an extra 拢8.32. 'That's like an extra weeks savings, 'without having to do an extra weeks paper round.
ADINA CAMPBELL:'So Nick's money has started working for him, 'and every year it works a bit harder 'because of something called compound interest.'
LONA BAIN:Compound interest is where you earn interest on top of interest in a savings account.
LONA BAIN:So if you have 拢1000 in year one, and that's earning 10%, then you'll earn 拢100.
LONA BAIN:So in year two, not only will you earn 10% on 拢1000, but that 拢100 that you earned in interest last year will also earn 10% interest.
3400:03:21:13 00:03:32:19LONA BAIN:So you'll get another 拢10 on top, because 10% of 拢100 is 拢10. And in year three of the savings account, you'll earn interest on the interest in year two, and so forth.
ADINA CAMPBELL:'So how will Nick's money look after 10 years at 2% compound interest?' How much do you think you'd probably make?
Not too sure.
ADINA CAMPBELL:Well I can tell you, it would be more than 拢4500.
NICK:Wow.
ADINA CAMPBELL:'If Nick keeps up his weekly savings over 10 years, 'that 2% adds an extra 拢360 to his bank account. 'That's the equivalent of 45 weeks savings 'without having to do 45 extra paper rounds.
ADINA CAMPBELL:'And he could earn even more money 'if he took out an account with higher interest, 'like a notice account. 'With this, you agree to give your bank 60 or 90 days' notice 'if you want to take money out.'
LONA BAIN:The advantage of this, is that you'll actually get a slightly better rate of interest, i.e. you'll get more money from the bank, if you can lock it up for longer.
ADINA CAMPBELL:'If Nick keeps saving 拢8 a-week into a higher interest account 'that pays 4% and doesn't touch it, 'it could add up to well over 拢6500 by the time he's 30.
ADINA CAMPBELL:'That's nearly 拢1300 in interest for doing nothing.' So Nick we've done all of the figures, all the maths. Any idea what plan of action you're going to take next?
NICK:Think I might just go and open a notice account.
ADINA CAMPBELL:'With a notice account, and compound interest building up, 'Nick could soon be well on his way to that new bike.'
MARTIN LEWIS:If you've got cash, make it work for you. Don't just put it under the mattress or in the piggy bank when it's sitting there. Get it in a high interest savings account.
MARTIN LEWIS:You're effectively lending the bank the money. Make the money work for you. It will grow more quickly. You lend it to them and they pay you interest on top.
Radio 1 Newsbeat journalist Adina Campbell meets Nick, a 16 year old with a clear goal encouraging him to save.
Nick鈥檚 example shows how even a relatively small amount of money can add up over a year, and they investigate how banks can add to this through interest and compound interest.
Financial experts Iona Bain and Martin Lewis explain what these terms mean, and how they all add up to help you make your money work harder for you.
This clip is from the series Made of Money.
Teacher Notes
Students could be given a variety of fictional savings goals, and have to calculate how much they could save over time, based on the calculations in the film.
They should consider how much they would need to deposit each month, and which interest rate could let them reach their goal on time.
Use spreadsheets and online calculators to illustrate the effects of saving and the impact of compound interest.
Curriculum Notes
Suitable for teaching Maths at KS3 and GCSE in England, Wales and Northern Ireland and National 4 and 5 in Scotland.