Skip to 0 minutes and 0 secondsMARTIN UPTON: Hello, and welcome to "Finance Fundamentals-- Managing the Household Balance Sheet." To understand the household balance sheet, we need to explore its component assets, like housing, investments, and pension funds-- and liabilities, like mortgages and other forms of debt. This week, we look at how people can use debt to finance their expenditure and the costs associated with it. Debt arises when we borrow money. And borrowing can take many forms, from credit cards and bank overdrafts to student loans and mortgages. It can be used to finance everything from day to day spending.
Skip to 0 minutes and 38 secondsYou're no doubt be aware the growth in recent years of payday loans to holidays and items we use over a number of years like furniture, cars, and, of course, our homes. The huge growth in the value of personal debt in recent decades has fueled arguments about whether UK households are over indebted and even about the morality of the lenders and the banks, the building societies, and the finance houses who've enabled this build up of debt. As personal debt in the UK has nearly quadrupled over the last 20 years to over 1.5 trillion pounds, it's important to identify the sources of debt and whether those debts are good or bad.
Skip to 1 minute and 21 secondsAs you work through this week, you examine the cost of debt, the interest we pay in our borrowings, and what determines the level of interest rates we pay. Getting to grips with these factors is an essential aspect of financial planning. The country has an array of financial advice agencies. And most of their work is tied up with people who have got into problems with their debts with sometimes dreadful consequences for their lives. Don't be one of those folks. Have a great week.
Debt and borrowing
Martin Upton welcomes you to the course and explains the background to the first week where personal borrowing and debt are explored.
Martin is your Lead Educator and guide through the course. He is Director of the True Potential Centre for the Public Understanding of Finance, based at The Open University Business School. He’ll meet you at the start of each week to tip you off about highlights and challenges, to remind you of what you’ve learned and to help you make the most of these four weeks of learning more about managing your money.
As the course progresses you’ll also meet personal finance expert Jonquil Lowe from The Open University, as well as a team of facilitators who will respond to your comments and questions.
This course is one of eight available in the Business and Finance Fundamentals program. Successful completion of all eight (as evidenced by the purchase of Certificates of Achievement for each course) can lead to academic credit at Level 1 of The Open University’s Business Management BA degree, subject to registration and separate fee for a linked Open University assessment module.
Your financial profile
Some of the most engaging features of the course are the financial challenges, planners and calculators you get to explore throughout the course. You can continue to build up your own ‘fact find’ that was first introduced in ‘Finance fundamentals: Personal financial planning and budgeting’ and you can take this away at the end of the course. Your fact find is available to use throughout the course as a record of your goals and financial circumstances. You can download it now, if you have not already done so when studying ‘Finance Fundamentals: Personal Financial Planning and Budgeting’. Record your own details and, if you wish, those of your partner.
This fact find is different to the documents you complete when acquiring financial products like investments and mortgages. The fact find for ‘Finance fundamentals: Managing the household balance sheet’ is intended to provide a full summary our personal financial circumstances. When acquiring specific financial products, your financial adviser or financial product provider (e.g. your bank) will only require details about your financial circumstances that are relevant to the financial product you are intending to acquire.
A note about financial advice
This course provides the information, frameworks and financial planning guidance needed to manage your finances and to assist in making financial decisions.
However, course contents do not constitute ‘advice’ with regard to which specific financial products you should use or which financial services providers you should do business with. Consequently the course educators and facilitators cannot answer questions about matters relating to such financial advice.
If you need specific individual financial advice you should contact an authorised financial firm or financial adviser.
This course has been adapted from original material created by The Open University’s True Potential Centre for the Public Understanding of Finance, and was made possible thanks to the generous support of True Potential LLP.
© The Open University