A Self-help Guide for SINGLE PARENTS

There are many different routes into becoming a lone parent – having a baby on your own, splitting up with a partner, husband or wife, becoming a widow or widower – but the one thing you are likely to have in common is having to care for your family on a very limited amount of money.

Whether your income has suddenly dropped or you are used to struggling to make ends meet, this booklet is for you. We have lots of information and advice about dealing with debt and other money worries as well as ideas and tips about how you can manage your money better and plan for the future. As a lone parent, it’s hard to cope with everything on your own and in some situations you should definitely get specialist advice.

At the end of this guide you will find a list of useful organisations – most importantly those that give free, independent and expert advice about dealing with money problems and emergencies. If you don’t know your AER from APR don’t worry!

To help make this guide easier to use we’ve added a financial jargon buster so that you don’t need to be an expert to know you’re way around money.

You are not alone in feeling the pressure of trying to make ends meet on a low income. 42 per cent of lone parent families live on an income of less than £200 a week and it is estimated that the average cost of raising a child until they are 21 is now equivalent to £164.50 a week!

Coping with your emotions

Money worries can really stress us out and we can often feel a failure or guilty for letting others down. We shouldn’t be too hard on ourselves; often debt is caused by things happening to us over which we have little or no control.

Most people have never been taught to handle money and it can be particularly hard to live within your means if you are on a low income. However you became a lone parent you’ll have had to make a lot of adjustments both emotionally and practically.

It’s a lot to cope with anyway and in the midst of this your financial situation may have changed dramatically – unfortunately the bills probably didn’t! It may well be that you have drifted into debt or that with less income or more spending you simply cannot balance the figures.

When you are caring for children on your own, dealing with your own emotions and finding that you just don’t have enough money, it’s hard to think about the future let alone plan for it! But we should try to make some long-term plans.

Acknowledge the problem and ask for help

It is really difficult to face up to money problems that can seem impossible to solve, especially when you have other problems to worry about. Caring for your children alone also means you have limited time and energy. None of us likes to admit that we’re struggling. Adverts are always telling us that success, sex appeal and popularity come from wearing the right clothes, right perfume, having a nicely decorated home and being able to get out and enjoy life.

So we all take pride in saying, ‘Yeah, I’m coping fine thanks’, even when the exact opposite may be true.

Not dealing with money and debt problems will make things worse. Missed payment charges, other bank charges and interest on debt are all expensive and at some point you may find yourself in an emergency situation which will be more difficult to sort out.

The stress of worrying about money problems can also affect your health and your relationships with other people, including the way you are with your children. If you feel you can’t face up to dealing with your money worries – this means you need help to do it. And there is help out there – see useful organisations for where to get free, independent and expert advice.

Getting help or advice will not resolve all your problems straightaway, but it is the way to get started. If you know how you plan to resolve the problem, this will make you feel more in control and less worried and stressed.

It may also help to talk to friends and family about how you are feeling. If you’re struggling it’s easy to have very negative feelings – to be afraid, to feel guilty and generally have a low opinion of yourself.

You’ll be amazed at how much better you can feel just by talking.

If you’ve got friends in similar situations, you may find that they are as worried as you are and the mutual support that you can give each other is invaluable. Other lone parents are likely to have experienced the same or similar problems, see useful organisations for details of lone parent organisations. 

Dealing with the pressure of consumer advertising

Those little voices in our head telling us to, ‘spend, spend, spend!’, don’t appear from nowhere. Companies pour billions of pounds into advertising to persuade us to part with our precious cash.

You know the pressures because they affect us all, whatever our age – the latest fashions, a new games console, flat screen TV etc. If you can’t follow the fashion and your TV’s on the blink, again you end up feeling down on yourself.

Try not to be taken in by adverts. Your self-image is about who you are and not about what you wear. Prioritise what you need (see Managing your spending), shop around, and just be aware of what adverts are trying to do to you – encouraging you to spend, trying to convince you that a ‘want’ is really a ‘need’.

Dealing with pressure from your children

Kids are especially targeted by the advertisers. You only have to watch children’s TV to see that. Kids can be taught about adverts as well and although you don’t want a sixyear- old cynic, you can teach them very early on that adverts are designed purely for us to say at the end, ‘I want that!’

Try explaining that just thirty seconds of advertising costs a fortune and how all the money has to be recouped by lots of kids nagging until their parents go out and buy the product they’re pushing.

Your children will learn more from your example than from your words so this may be a good point to stop and do a little self-examination.

Below are some questions that you may like to answer to see how ready you are to begin teaching your children responsible money management.

• Do you have a financial plan to get you through the week or month?
  
• Do you plan for infrequent bills, change of circumstances, etc?
  
• Do you attempt to save, however little?
  
• Do you buy now, think later and live to regret it?
  
• How much has advertising influenced your purchases over the last month?
  
• Do you have a shopping list and do you stick to it?
  
• Have you made a will? 

 

Obviously some of the questions are very hard and you may want to think about them for a while. For example, it may be difficult to think about making a will – this is not only about money, but may also be about who will care for your child if you die and you are the only person with parental responsibility for the child.

Call the Lone Parent Helpline for more information about Parental Responsibility and appointing a guardian as part of your will and whether you may be able to get help with the costs of doing this.

How to teach your child about responsibility and needs

Learning that money doesn’t grow on trees can be quite devastating – kids tend to assume that there is an endless supply of money and it can be difficult for them to understand that there is a limit to the amount of money available.

It isn’t impossible to teach them though and pocket money is a useful way to do this. Setting an amount can be difficult when their friends may get more, but having a limited sum will teach them early on to shop around and be careful spenders.

As they grow up, clothes and toys are like what cars and nice houses are to us – status symbols. The ‘right’ trainers get you respect, the ‘wrong’ ones might mean being teased or even bullied.

Children who can feel confident in who they are, regardless of what they wear and what toys they have, will cope a lot better if this happens to them. Confidence building is largely down to you and if you talk about these things with your children they can grow up feeling safe and have a view of life and people that doesn’t revolve around money and possessions.

Later on when we look at budgeting, talking things over with your kids will be essential, because budgeting must be a team exercise. When they are teenagers you may like to offer them a clothes allowance (for nonschool clothes) so that they can begin to handle more money.

If they spend it all on one pair of trainers and have nothing left for a pair of jeans, they have only themselves to blame and next time they’ll think twice before they make a decision. They’ll also learn about waiting and saving up to get what they really want. Some parents choose to give their kids money for an extra job, like cleaning the car or mowing the lawn.

There is nothing wrong with this, and it can be very helpful in teaching a child motivation, but there are hidden dangers! Kids may then come to expect payment for helping with routine jobs like washing up and tidying their room and not do them out of a sense of responsibility or simple enjoyment in helping you.

See Chapter 4 for ideas about how to save money on toys and treats so that you are one step ahead of your kids.

Remember kids are creatures of habit – if you give in once about chocolate when you are in the supermarket they won’t forget next time. Make the first move – surprise them with your own treats when they haven’t nagged. You’ll enjoy giving to them more when it’s your idea not theirs.

It’s all too easy to feel stingy when kids always want, want, want. So talking to your kids is vital, even when it’s about something as routine as money. Try and find time to have regular chats with your family and answer their questions honestly.

As a lone parent you may have to deal with extra challenges if your child’s other parent behaves differently about money to the way you do, for example, always buying the things your child asks for.

If possible, talk to them in a non-confrontational way about how you deal with money and spending when the child is with you and your reasons for this. The ideal situation is for both parents to be consistent and agree on priorities.

If this is not possible, all you can do is be consistent about the way you deal with things and explain to your child the reasons for this.

It may be tempting to try and compete with the other parent, but this could get you into debt and your child will not have the opportunity to learn about the value of money and how to manage it.

Do not criticise the other parent in front of your child and keep any disputes about money between you away from the child. 

If you are in an emergency for example, you have been told you will be evicted or you are about to have your fuel supply disconnected call one of the organisations on page 49 for advice about your rights and what you can do.

Drifting into debt?

Having to meet all your family’s expenses when you have a low income can mean you are likely to drift into debt. 31 per cent of lone parents have at least one debt and it is mainly household bills that cause the problem.

However disciplined we are, it can be hard not to end up living just up to, or just beyond our means.

This can seem OK until something unexpected happens. It may be that you haven’t been affected by financial difficulties, and this is good news, but look at the following questions and ask yourself how your family would cope if faced with a major financial challenge.

• Do you always pay your credit card bill or catalogue payments on time?
  
• Do you know the total amount that you pay when you buy through a catalogue with weekly instalments?
  
• Do you know, without looking it up, the total of all your financial commitments?
  
• Do you have fewer than two credit and store cards?
  
• Does your bank account pay interest when in credit?
  
• Do you save any money?
  
• If you had a windfall of £3,000, would you be able to save it?

 

Every ‘no’ is a potential problem. If you answered ‘no’ to several questions, you could be drifting into debt without realising it.

Managing your debt

1. Acknowledge the problem

If you are afraid to open letters, answer the phone or open the door, it is time to get help.

Ignoring the debt will make you feel the situation is out of control and may also make you dread what tomorrow might bring.

Facing up to the problem can be a frightening thought but it is the first step towards doing something about it.

2. Get advice

You will need to contact your creditors, but you should speak to a specialist money adviser first. Contact one of the organisations for free expert advice. They will not judge you and can help and support you through the following steps. Whatever you do, don’t go to any organisation that charges you for its advice.

3. Check that you are liable to pay the debt

A specialist money adviser (see above) can do this. You should especially get advice if a debt is not in your name or is a joint debt with an ex or deceased partner or if you have not paid the debt or contacted the creditor within the last six years.

4. Maximise your income

See Chapter 5 to check that you have claimed all the benefits and tax credits your family may be entitled to. You may wish to start work or increase the hours you work or perhaps rent a spare room to increase your family’s income.

Always get advice first about whether this will make you better off overall and how it may affect the amount of your debt repayments.

The organisations mentioned above can advise you about benefits and tax credits including whether you are likely to be better off in work or by increasing the hours you work.

5. Draw up a budget

See Chapter 3 for how to do this. This is a crucial step to help you manage your debt and plan for the future. It will also show you and your creditors how much money you are able to pay them.

6. Make savings on your spending

This may seem impossible when you are already on a tight budget but look at the section on managing your spending and money-saving ideas. Go back and look at your budget sheet again.

Can any of your expenses be reduced?

7. Prioritise your debts

Some debts are more important to pay than others.

The debts that are most urgent are those where non-payment could lead to imprisonment, you losing your home, or the disconnection of an essential utility. A specialist adviser will help you identify which debts you need to deal with first.

8. Negotiate repayment of your priority debts

After you have taken advice, you should contact all your creditors and make an offer of repayment. Your completed budget will show you how much money you have left and you will now have to decide how this will be divided.

A specialist money adviser will be able to help you work this out and can negotiate with creditors on your behalf, providing them with your budget or financial statement to show that the amount you are offering is reasonable.

Creditors may also send you their own budget form to complete.

9. Negotiate repayment of your non-priority debts

As with your priority debts, you may be able to negotiate a repayment plan that is suitable to your needs – a specialist money adviser can help you with this. It may be possible to have interest and other charges frozen for a certain period of time. 

 

Deciding the difference between wants and needs

After dealing with any emergencies and getting advice about debt we need to think about our attitude to spending. Spending on something we want can give us a short-term buzz but it can also bring long-term worry.

It is essential that we identify the difference between our wants and needs. We all have dreams about what we want but we have to first cover the things we need like rent, food, clothes, heat, etc. Wants tend to be immediate – we see something and we want it straightaway.

The problem is that we may have £15 left at the end of the month and think ‘well, I can buy the skirt now’, but next week when an unexpected bill comes we go into a blind panic.

To plan ahead for all essential expenses can be difficult, particularly when your kids may be nagging you to buy something they want. Once we recognise that every spending decision affects another spending decision it all becomes easier.

For example, spending £15 on a skirt may mean living in the cold and dark for a week because there’s no other money left for electricity.

In other words, always know your priorities! And if you don’t know them now, reading the rest of this book (especially about budgeting) will help you find out.

There are many things we have to spend money on – food, housing costs, fuel bills, essential clothes, bus fare etc so when it comes to the unexpected extras, the leftover (if there is any!) has gone.

‘Maybe it went in the newsagent or perhaps in the supermarket. No I think it went on the catalogues – I’m not really sure, but I do know that Kate’s going to kill me if I don’t give her back the twenty quid I owe her.’

Money does go too quickly, but there are particular things that make us spend more.

We need to remember:

• The more we go shopping, the more we are likely to spend.
  
• The more we watch TV, the more we are likely to spend.
  
• The more we look at magazines, the more we are likely to spend.

 

If we have credit or store cards, we are more likely to spend (people who use credit cards are likely to spend 34 per cent more than people who don’t).

Of course credit cards can be useful but often we buy things that we’d never have bought if we had had to pay by cash or cheque.

Buying an item

You may think that this is all pretty simple stuff but if you’re on a low income you need to be sure that when you buy an expensive item you are actually getting your money’s worth.

Price

What are you getting for your money?

Discounts

Are there any discounts or special offers, for example, for paying by cash or for slightly damaged goods or seconds services?

Guarantees

Are there any guarantees with the item? If so, for how long and what exactly do they cover?

After sales service

Is there any and is it free? You need to know who is responsible for paying if something goes wrong.

Conditions for return

If the product is faulty you can get your money back as there is a legal entitlement to a refund if goods are faulty. You do not have to accept a voucher (credit note), but you do need to return the goods within a reasonable time.

VAT

Does the ticket price include VAT? If this is not included you will have to add on nearly a fifth (currently VAT is 17.5 percent).

Delivery charge

Are there any charges for delivery, alteration, fitting, etc?

Payment options

Have you looked at the different ways to pay – for example, cash, credit card, credit sale, debit card, hire purchase (HP)?

Comparisons

With so much choice around, you need to be sure that you are buying the product best suited to your needs at the best price, taking account of all the possible extras above. Shop around for the best deal. The internet is a great way of doing this.

Haggling

This is something to mention as a final note. It’s something we aren’t very good at in Britain! If you are spending a fair bit, ask the seller to throw in a few extras for free or to give a discount for cash. You can carefully suggest that you could go elsewhere.

Market traders are particularly open to a bit of haggling for clothes for example. When you’re buying several items, you may be able to persuade them to knock a bit off for a bulk purchase.

Bills

It’s not just spending money that is important.

Careful money management is also about when and how we pay bills. It can be difficult to budget over a long period of time for bills that come every three months such as electricity and gas or twice a year such as water rates.

To help you budget, particularly for fuel bills, you may be able to set up regular payments to the gas or electricity company so that huge winter bills don’t cripple you.

They will help you work out your annual bill and divide it into 12 months so that each payment from your bank account remains the same each month. You may even qualify for a discount by paying this way.

If you receive your income weekly, it may be tempting to use a key meter for your fuel bills, which effectively means that you pay as and when you use your gas and electricity and/or pay other bills weekly such as your TV licence – but beware, you may be paying a higher amount for what you use or amounts sooner than you would by paying monthly.

If you have a key meter (perhaps because you were in debt to a fuel company), contact the supplier about changing this. If they refuse to do so, get advice (see useful organisations). As with anything else you buy, shop around for the best deal.

Regularly check that you are not paying more than you should. Also check for any discounts and other extras. Visit internet comparison sites to find the best deals for utilities, loans and other services.

If you’re struggling with a bill, don’t wait until you receive the red bill (the final warning before disconnection) to contact the supplier. Utility suppliers can be very helpful if they know that you are trying to pay but you are a little behind this month.

If you don’t tell them and you are disconnected, the charge for reconnection can be high.

If you are in debt to a fuel or water company call the Lone Parent Helpline and ask for our factsheet Help with paying household bills for details of charitable trusts who may be able to help people in certain circumstances. 

Prioritising your spending

To manage your money well, it is important to prioritise your spending (decide which items are most important). This may vary from person to person but here is a general guide.

• First, pay your bills. Make sure your most important expenses are covered each month – for example, rent or mortgage, utility bills (gas, water and electricity) and your car payment.
  
• Then pay your day-to-day needs, like food and travel.
  
• Occasional costs can come up every three months or every year. Make sure you have put money aside to pay for these.
  
• Save some money for emergencies. Unexpected situations can occur and it is helpful to have an emergency fund.
  
• When you have covered all of these expenses and cleared any debt you have, the next step would be to save money for future plans such as buying a house, education and so on.

Using credit

Borrowing money through mortgages, loans, overdrafts, using credit and/or store cards can be a good way to help manage a budget, if done in an informed way. But when you are on a low income it can be tempting to use sources of credit that you had not planned to when money is tight. It can also be difficult to always pay off the amount you owe so you do not pay any or only a minimal amount of interest.

Borrowing money with no sure way to repay puts pressure on your family’s future. Overborrowing also prevents many families from achieving long-term financial stability.

Extract from a newspaper article

‘France’s first branch of Crazy George’s, the British-owned furniture and domestic appliance chain, has had to close after only two days of trading amidst a storm of political criticism over its sales methods.

The store, which targets customers on low incomes and offers easy but expensive credit, opened last Saturday. The repayment schedule may make the goods two or even three times more expensive than if bought outright. Examples included a washing machine for £5.50 a week, retail price £377, credit price £854!

In Britain, where there are already more than 50 such stores and hire purchase is common, this passed almost unremarked.’

-The Independent

If you can save-up and buy with cash you’ll always save money.

Different kinds of credit

Secured

This doesn’t mean that you have got a good secure loan! What it does mean is that when you borrowed from the creditor they insisted on having some form of security from you before they agreed to lend you the money.

So, if you fall behind on the repayments and all else fails, the creditor can claim the item you used to secure the loan. A good example of this type of credit is a mortgage, where the house itself is the security.

Be very wary of taking out any other loan that requires your home as security. If you are on a low income it can be hard to keep up with repayments and you will risk losing your home.

Unsecured

This generally means that the creditor has confidence in your ability to repay the loan and will, in any case, have built into the interest rate charge an allowance that you might default. For example, purchasing a fridge-freezer on a store card.

Fixed Term

This means that you pay back a sum of money each month for an agreed period of time. The amount of money may fluctuate as interest rates go up and down, but at the end of the period the debt will have been cleared. A bank loan is an example of this. 

Revolving

This means that you only have to repay a minimum amount per month. On this basis, if you make the occasional purchase and you don’t pay off the balance in full each month, you could be paying towards this type of credit forever.

Store cards and credit cards are examples here. This type of credit needs to be used sparingly and carefully, as you can end up paying interest on interest and a small debt can grow out of all proportion.

The costs of credit

As you can see, there are different risks involved with different forms of credit. There are also different interest rates and fees so, if you have to borrow, try to ensure that you are paying the cheapest rates possible.

You can compare the rates associated with similar types of loans by looking at the APR (annual percentage rate). Generally the lowest APR will be the best deal.

An easy way to compare a variety of loans is to visit internet comparison sites. Unfortunately, families on a low income have limited credit options – those that come with a higher risk (for example, a secured loan, see above) and/or those that are particularly expensive.

Examples of expensive credit:

• Doorstep lenders commonly charge 183 per cent APR each year.
  
• Store cards are tempting as they may offer discounts but the typical charge is 23-30 percent APR – higher than most credit cards.
  
• ‘Rent to own’ retailers (who rent items such as TVs and sofas) charge a total amount that is several times the normal retail price and also have a reputation for rapid repossession of the goods if you miss your weekly payments.

 

If at all possible try to avoid these types of credit. 

Consolidated Loans

In recent years these have become an increasingly popular way to try to get out of debt. They usually promise lower interest rates and lower monthly payments, but you need to be very careful.

A consolidated loan is a single loan that you can take out to pay off all your debts. So, instead of trying to pay off a number of debts, you would have just one consolidated loan to pay off.

However, firstly, consolidated loans often reschedule debts over a much longer period so that you pay a lot more interest and secondly, these loans are usually secured against your property. This means you could lose your home if you do not keep up with repayments.

You should always get advice before making a decision about a consolidated loan.

Am I creditworthy?

Lenders generally carry out credit checks to find out about your credit history and your current credit standing. In other words, to find out how risky you are as a borrower and whether you are a good person to lend to.

Other companies, like mobile phone or utility companies, will run a credit check on you before offering you an account to make sure you will be able to pay for their services.

If you miss payments and/or have a County Court Judgements (CCJs) your file with the credit reference agencies would be marked accordingly. In effect, this would mean that you would find it difficult and very expensive to get new credit for the next 6 years, which could be harmful for you and your family.

This would be especially true if you had a major expense during the period, such as moving home.

The Office of Fair Trading’s Consumer Direct website (www.consumerdirect.gov.uk) explains how to get a copy of your credit file. If by any chance your file is wrong, the site also explains how to have information corrected. Contact details for the main credit reference agencies are provided in the Useful organisations section.

Top 10 credit tips

If you’re going to use credit, these 10 tips from the Office of Fair Trading will help you to borrow safely.

1. Can you afford it? Before you commit yourself, make sure you can really afford the repayments by making a budget – don’t be talked into borrowing more than you want to.
   
2. Shop around for credit. The first thing you’re offered may not be the best deal. There are many types of credit and many different rates on bank loans, credit cards, hire-purchase agreements and so on. Don’t pay more than you need to.
   
3. Read the forms before you sign. If you don’t understand them get help from a trading standards office or a Citizens Advice Bureau. Once you sign, you can’t change your mind if you signed on the trader’s or lender’s premises. If you signed anywhere else, you will have a short ‘cooling off’ period to change your mind.
   
4. Check exactly how much you’ll pay back including interest and charges. Is it good value?
   
5. Compare APRs. This is the easiest way to compare similar credit products – so if you’re looking at credit cards for instance, go for the one with the lowest APR. Usually the lower the APR the less you pay in interest. Sometimes a low APR is only offered for a short period.
   
6. Watch out for other charges such as the lender’s fees or fees to arrange the loan.
   
7. Look at the length of the loan, not just the monthly payment. The longer the loan period, the more interest you’ll pay back.
   
8. Watch out for optional extras. Sometimes paymentprotection insurance is included when you haven’t asked for it. You don’t have to take this up and it may not cover your situation.
   
9. If you use your home as security for a loan and don’t keep up repayments, you could lose it.
   
10. If you act as guarantor for someone else’s loan, you will have to repay the debt if they don’t. 

 

Saving may seem like the last thing that you want to think about if you are on a tight budget. However, savings can give you real peace of mind so that when the unexpected does happen a drama doesn’t become a crisis.

In general it is a sensible aim to have put away about two months wages to cover unexpected emergencies. Putting a little amount away regularly is a good pattern to get into, even for very small amounts.

If you have a bank account, you can arrange for a little to be taken out each month and put into a separate account. That way you don’t have to remember to save and you can’t easily raid it!

As you save you’ll also receive interest – money will be working for you, not against you!

The Child Trust Fund

We all want to help our children have a solid start in life particularly at the point when they want to fly the nest and become independent adults in their own right. This can be an expensive process whether it’s going to university or buying a car and our children will often look to their parents for support.

To encourage saving for your children and help them learn about personal finance the government has set up the Child Trust Fund which is a long-term tax-free savings account.

The scheme is for children born after 2 September 2002 and to set up an account you need to be claiming Child Benefit.

The government will automatically put £250 (£500 if you qualify for the maximum amount of Child Tax Credit) into the account when it is opened.

An additional £250 (or £500 if you qualify for the maximum amount of Child Tax Credit) will be put into the account by the government when the child is aged 7. Each year up to £1,200 can be put into the account by parents, family or friends.

This money cannot be touched until the child turns 18, but then they are free to do whatever they want with the money that has built up.

If you want to find out more about the Child Trust Fund visit www.childtrustfund.gov.uk or phone 0845 302 1470.

If you are under 18 there are different rules for some of the benefits listed here. To find out what you might be entitled to, call the Lone Parent Helpline on 0800 018 5026 and ask for a copy of Money for Teenage Parents.

If you are studying, ask for our factsheets Money for further education students or Money for higher education students. Benefits and tax credits for day-to-day living expenses

• Make sure you are getting Child Benefit for any dependent children who live with you as this could affect whether you are entitled to other benefits and tax credits for your children.
  
  Dependent children are children you are responsible for, aged up to 16, or 20 if they are in ‘non-advanced’ full-time education (that is, at a school or a college of further education) or in approved training.
  
• If you do not work or work less than 16 hours a week, claim Income Support from your local Jobcentre Plus office. If you are pregnant with your first child you can claim from 11 weeks before your baby is due or earlier than that if you are incapable of work because of ill health.
  
  From October 2008, lone parents whose youngest child is 12 will have to claim Jobseeker’s Allowance (see below) unless there is another reason which means they should claim Income Support, for example, because they are ill or disabled or a carer.
  
• If you do not work or work less than 16 hours a week and your only or youngest child is aged 16 or over (from October 2008, when your youngest child is aged 12 or over), you will normally have to register at the Jobcentre Plus office as available for work and claim income-based Jobseeker’s Allowance, which is paid at the same rates as Income Support.
  
  You can continue to claim Income Support if, for example, you are unable to work because of sickness or disability or you are receiving Carer’s Allowance.
  
• If you do not work or work less than 16 hours a week and have paid National Insurance contributions you may qualify for contribution-based Jobseeker’s Allowance if you are available for and actively seeking work.
  
  This would make you better off only if you did not qualify for Income Support (for example, because your other income or savings were too high).
  
• Claim Child Tax Credit for each of your dependent children. You can get the form from a Jobcentre Plus Office, or by calling the Tax Credit Helpline on 0845 300 3900.
  
• If you work 16 or more hours a week also claim Working Tax Credit (paid with Child Tax Credit, see above) to top up your wages. Working Tax Credit can include an amount towards the costs of certain registered or approved childcare. The childcare element of Working Tax Credit helps with up to 80 per cent of your childcare costs, up to costs of £175 a week for one child or £300 for two or more children. This means that you could get up to £140 per week for one child and £240 per week for two or more children.
  
  You can get help with childcare costs up to the September following a child’s 15th birthday, or 16th birthday if the child receives Disabled Living Allowance or is registered blind.
  
• If your husband, wife or civil partner has died, check at your local Jobcentre Plus office if you are entitled to any bereavement benefits and/or the Funeral Expenses Payment.
  
• If you are pregnant or have had or adopted a baby recently, you may be entitled to maternity, paternity or adoption benefits and/or the Sure Start Maternity Grant. Call the Lone Parent Helpline and ask for the factsheet Financial help during maternity and adoption.
  
• If someone in the family is long-term sick, disabled or a carer you may be entitled to extra benefits and a higher amount of other benefits and tax credits, call the Lone Parent Helpline on 0800 018 5026 for more about this.

Benefits and other help for your housing costs

• Claim Housing Benefit (if you pay rent) and Council Tax Benefit. If you are claiming Income Support or income-based Jobseeker’s Allowance, fill in a Housing Benefit and Council Tax Benefit application form that is included in your claim pack.
  
  Otherwise, apply directly to your local authority’s Housing Benefit and Council Tax Benefit department. You can claim whether or not you work but you may not qualify unless you are on a fairly low income.
  
• If you are already receiving Housing Benefit or Council Tax Benefit and you need extra financial help so you can pay your housing costs, you can ask the Housing Benefit department for Discretionary Housing Payments.
  
  You do not have an automatic right to these payments, it is up to the local authority to decide, although there are some cases where they cannot make a payment, for example, if it is to cover arrears of rent or service charges that you owe. Get advice from a benefits adviser when you apply and also if you are refused these payments.
  
• If you do not work or work less than 16 hours a week and you are a homeowner, amounts can be added to your Income Support or income-based Jobseeker’s Allowance for mortgage interest and interest on loans to pay for certain repairs and improvements, service charges (although some may be excluded) and ground rent. There is a waiting period before these payments start.
  
  For more information call the Lone Parent Helpline on 0800 018 5026.
  
• You may be eligible for a housing grant or a home insulation grant. Contact your local authority for information about these.
  
• If you do not live with another adult, you will qualify for a 25 per cent discount on your Council Tax bill. Contact your local authority for information.

Help with the costs of your child’s education

• If you receive Income Support or incomebased Jobseeker’s Allowance, you do not work 16 hours a week or more, and are on a low income, you can get free school meals for your children.
  
• Contact your local education authority to ask if you will qualify for financial help towards the costs of school uniforms. In Wales, if your child is entering their first year of secondary school and qualifies for free school meals, you will receive a grant of £85.
  
• 16-19 year olds who are in full-time education may qualify for an Education Maintenance Allowance (EMA). For more information call the EMA Helpline on 0808 101 6219 (or, in Wales, 0845 602 8845) or see www.direct.gov.uk/ema (for England), www.emascotland.com (for Scotland), www.studentfinancewales.co.uk (for Wales).

Health benefits

• You may be entitled to Healthy Start vouchers, which you can exchange for fresh fruit and vegetables as well as milk and infant formula if you receive Income Support or income-based Jobseeker’s Allowance or you do not work 16 hours a week or more have a low income.
  
  Find out more from the Healthy Start website (www.healthystart.nhs.uk) or call 0870 155 5455.
  
• If you receive Income Support or income-based Jobseeker’s Allowance or are on a low income you are entitled to free prescriptions, dental treatment, sight tests and glasses, fares to hospital, free wigs and fabric supports.
  
  If you do not automatically qualify you may still be entitled to help towards these costs. Ask for form HC1 from Jobcentre Plus.

Grants and loans from the Social Fund

The Social Fund is part of Jobcentre Plus and is there to make payments to people in need.

• If you are entitled to Income Support or income-based Jobseeker’s Allowance, you may qualify for a Community Care Grant or an interest-free Budgeting Loan for items such as furniture, clothing or rent in advance. Always apply for a grant first and get advice if you are refused.
  
• If you are entitled to Income Support or income-based Jobseeker’s Allowance or if you receive Child Tax Credit of more than £545 a year (or £1,090 if your youngest child is under 1 year) or the disability element of Working Tax Credit, you can qualify for the Sure Start Maternity Grant (if you are pregnant or have just had a baby). This is a one-off payment of £500.
  
• If you are entitled to Income Support; income-based Jobseeker’s Allowance; Housing Benefit; Council Tax Benefit; the disability element of Working Tax Credit, or if you receive Child Tax Credit of more than £545 a year (or £1,090 if your youngest child is under 1 year), you can qualify for a Funeral Expenses Payment. You must be the person responsible for the costs of the funeral.
  
• In an emergency or disaster anyone (whatever their income) can apply for a Crisis Loan at the local Jobcentre Plus office if they do not have enough money for the family’s immediate needs, for example, for food or fuel.
  
• If you are entitled to Income Support or income-based Jobseeker’s Allowance and have a child under 5 years or you receive the disability or severe disability element of Child Tax Credit, you will automatically receive a Cold Weather Payment. It is only paid in periods of very cold weather (as defined by the government).

Maintenance/Child Support

Both parents are legally responsible for financially maintaining their children. If you do not have an arrangement for the other parent to pay child maintenance, consider applying to the Child Support Agency for them to calculate and collect maintenance on your behalf.

At the moment, if you claim Income Support the Child Support Agency will automatically process a claim for maintenance unless you stated you wish to opt out.

If Jobcentre Plus do not think you have a good cause for opting out (that is, because there is a risk of harm or undue distress to you or your child if the Child Support Agency contact the other parent), your benefit may be reduced.

The Government have proposed that at some time in 2008 it will be up to you whether you want to make your own arrangements or whether you want to use the Child Support Agency.

This means you will not have to give reasons if you choose not to use the Child Support Agency and your benefit will not be reduced. If you claim means-tested benefits some of the maintenance you receive will reduce your benefits.

Maintenance does not affect tax credits. For more information about maintenance, dealing with the Child Suport Agency and how maintenance affects benefits, call the Lone Parent Helpline on 0800 018 5026. 

Living on benefits and staying debt-free is very difficult. Getting a job as a single parent can also be difficult, and there are a lot of things to consider:

• If you have become a lone parent recently, you may feel that for a certain time work can not be fitted in around dealing with your and your children’s needs.
  
• Will the job fit in with school collection times and available childcare?
  
• Is there good quality childcare available for the times you need?
  
• Will you be better off in work? You can find out for sure by asking a New Deal for Lone Parents Adviser at your local Jobcentre Plus office or call the Lone Parent Helpline on 0800 018 2026 for advice.
  
• Would it be better in the long-term to take up training or go into education before starting work?

A New Deal for Lone Parents Adviser at your local Jobcentre Plus office may be able to help with vocational training. The flip-side of the coin is that as a single parent your life can be lonely.

Work can give us a sense of fulfilment and it’s an important way of getting out and about and meeting new friends. Obviously you need to think it through carefully.

There is a risk in taking work and you have to be sure that it’s a job that you really want and that you and your family will be better-off financially and emotionally.

Being out of the house all day and then having the kids all evening can be very tiring and you need to find out what they think, as well as seriously thinking through the issues for yourself.

You need to look after yourself just as much as you look after your children!

At a recent Church Action on Poverty – National Poverty Hearing, Moraene, a single parent from North London, expressed some of her views on work and life:

‘We need access to creative and cultural activities, we need to explore our abilities and find positive ways to express our feeling and ourselves…We don’t want to spend the rest of our lives judged by negative labels that are stuck on us by other people.

I am a lone parent. I’m not an irresponsible one. I’m disabled, I’m unemployed but not unemployable…We are undervalued and very much underestimated’.

Looking for work

The first step is to contact New Deal for Lone Parents Adviser at the Jobcentre Plus office. New Deal for Lone Parents is the main Government programme to help lone parents who want to return to work. It is a voluntary scheme.

You do not have to take up work or training or be available for work and you can leave the scheme at any time. Joining or leaving the scheme will not affect your benefits.

Who can join New Deal for Lone Parents?

You can join New Deal for Lone Parents if you:

• are a lone parent aged 16 or over;
• have a dependent child under 16;
• are not working or working less than 16 hours a week; and
• are not an asylum seeker (unless you have exceptional leave to stay or refugee status).

To find your nearest Jobcentre Plus office, ring the New Deal for Lone Parents information line on 0800 868 868 or see www.jobcentreplus.gov.uk.

How can New Deal for Lone Parents help me?

You will have a meeting with a Personal Adviser, who can offer the following:

• Help with preparing for and looking for work.
  
• A calculation to work out whether you will be better-off in work.
  
• Help with the costs of looking for work, including help with travel and/or childcare costs to attend meetings and/or job interviews.
  
• Help available, in certain circumstances, with other costs of looking for and/or starting work.
  
• Help with finding and paying for training, including help with any extra travel or childcare costs. If you are thinking of starting a further education or other course, always discuss with your Personal Adviser whether it can be funded by New Deal for Lone Parents.
  
  Jobcentre Plus budgets are currently quite tight. This means that less training is now being paid for but it should be available to you if you would not be able to start work without it. Training can also include work-placements.
  
• You can get an additional £15-a-week Training Premium on top of your normal benefits, if you are doing a course or other type of training that was arranged by your Personal Adviser.
  
• Help with finding childcare.
  
• Help to pay for childcare during the week immediately before you start work to enable you to help settle your child into their new childcare arrangements that you need in order to go to work.
  
• Help with childcare costs for up to 52 weeks if you receive a qualifying benefit and move into part-time work of up to 16 hours a week that your Personal Adviser has recommended.
  
• Support if you want to become self-employed. This includes a 26-week test period. During this time, you can carry on claiming benefits and be entitled to receive the £15-a-week Training Premium (if you receive a qualifying benefit) as well as help with childcare costs (see above).
  
  Any profits you make will not be available until after the end of your test trading.
  
• Support once you have found work and have started work. This can include help with making benefits and tax credit claims, applying for child maintenance from the Child Support Agency, help with resolving any problems with claims and help with any childcare problems.

Note: help with childcare costs is only available for registered or approved childcare. To find out more about this speak to your Personal Adviser.

In some areas of the country, there are differences to the help available to lone parents who want to start work or training.

This is because the Government is trying out different initiatives, which may become available in all areas in the future.

In some areas, called Employment Zones, this service is run by private companies, but you can still find out information about going to work from your local Jobcentre Plus.

In some areas you can get extra money on top of your benefits if you join New Deal for Lone Parents and are actively looking for work. Check at your local Jobcentre Plus office if there is any extra help in your area

Applying for jobs

You may need to draw up a Curriculum Vitae (or CV) to send to employers. Again your New Deal for Lone Parents Adviser at the Jobcentre Plus office can help you with this. This is an example of what a CV might look like. 

 

Personal Details	Julie Banks 12 Walter Crescent Birmingham B14 5HU 0121 494 0839 Nationality: British Date of Birth: 03/06/1976
Training/Education	1994-1995 North Clegley College of Further Education NVQ Level 1 in Craft and Design 1987-1994 Clegley Comprehensive School 4 GCSE: Maths; English; French; Art
Employment	1992-1994 Sales Assistant at Woolworths (Saturdays and some holidays) 2002-2006 Assistant at King's Arms (part-time) North Road, Clegley
Other skills/interests	Craft and design Reading Basic typing skills Volunteer helper at local playgroup Good organisational and people skills
References	Available on request

 

When applying for a job you will usually need to accompany your CV or the application form with a letter of application. In the letter of application try to show how suitable you are for the job.

Mention your other skills, which may include being organised, methodical, enjoying working with people, being hardworking, practical and often taking the initiative. Sell yourself!

Ensure that the CV fits the job. This may mean ‘tailoring it’ for different applications. For example, if you are applying for a job in a shop emphasise the previous times you may have worked in shops!

Another area to consider is voluntary work.

As well as meeting new people, you can build up skills which can later be transferred to paid work. Some organisations will offer child care facilities and obviously this will affect your decision the most.

They will often pay your expenses and some may offer you free training.

Expenses don’t affect your benefits, but remember to let the Job Centre know about your voluntary work if you are claiming Job Seekers Allowance. Voluntary work is a good way to build up confidence and plan for the future.

Financial help when you move from benefits into work

If you stop claiming Income Support, income-based Jobseeker’s Allowance, Severe Disablement Allowance or Incapacity Benefit because you start working 16 or more a hours a week, or because your earnings have increased, you may be entitled to some extra financial help.

In-work Credit from April 2008

This is available to lone parents who have been on benefit for 52 weeks before they start work. It is £40 a week (or £60 if you live in London) and is paid for 12 months.

Help with your housing costs

If you have been receiving benefits for 26 weeks before you start work, and the job you are starting is expected to last for 5 weeks or more, you can qualify for:

• An extra 4 weeks of Housing Benefit and/or Council Tax Benefit. You need to notify Jobcentre Plus or the benefits section at your local authority within 4 weeks of starting work.
  
• An extra 4 weeks of mortgage interest if you were receiving help with mortgage interest as part of your Income Support or income-based Jobseeker’s Allowance. It is paid at the same rate as the amount being paid with your benefit before you start work.
  
  Tell Jobcentre Plus when you will be starting work and the payments will be made to you automatically.

Note: If you were getting help with housing costs as part of your Income Support or income-based Jobseeker’s Allowance and you re-claim within 52 weeks, you will get help with your housing costs straightaway.

Job Grant

If you have been receiving benefits for 26 weeks before you start work, and the job you are starting is expected to last for 5 weeks or more, you can qualify for a Job Grant of £250.

The grant is paid automatically but you must give details of your job to your local Jobcentre Plus office before you start work or within 21 days of starting.

The Advisers Discretion Fund

A New Deal for Lone Parents Personal Adviser has the discretion (that is, you do not have a right to it, it is up to your adviser to decide whether you qualify for it) and limited funds to help you with the costs of finding work, for example, buying a new suit to attend an interview or paying upfront childcare costs when you first start work.

Spending from the fund is very limited, but talk to your adviser about any extra costs you have.

In-work Emergency Discretion Fund

You may be able to receive a payment from this fund (through your local Jobcentre Plus office) if, in an emergency, you need extra funds in order for you to stay in work. 

Child Maintenance Bonus

You may qualify for this bonus if you were receiving child maintenance calculated by the Child Support Agency under the ‘old rules’ (generally this means that the other parent had to start paying maintenance since before March 2003) while on Income Support or income-based Jobseeker’s Allowance.

For details of the amount of the bonus call the Lone Parent Helpline on 0800 018 5026 or ask Jobcentre Plus for an estimate of the amount of the bonus you have built up so far.

Tax when you start work

If this is your first job, or you haven’t worked since becoming a lone parent, it is very important that you notify your employer so that they can ensure you fill out the correct tax forms.

If you don’t have all the necessary paperwork done you could end up paying more tax than you should. If you have not worked for part of the tax year check with the tax office whether you are entitled to a tax rebate.

Childcare

Obviously, if you’re going to go out to work you’ll have to make arrangements for your kids if you can’t be there to pick them up from school or look after them at home.

Your local council’s Children’s Information Service will have details of local childcare providers.

When choosing what to do you’ll have to consider what would be best in the long run for your child. Will they get adequate educational support? Will they be safe and secure?

To find out more about your local Children’s Information Service visit www.childcarelink.gov.uk or call 08000 96 02 96. Also the Day Care Trust (www.daycaretrust.org.uk) provides information about childcare options.

Paying for childcare

You may be able to get help towards the costs of childcare while you are working through Working Tax Credit or through employer’s childcare vouchers. Always check which way you would be better off before accepting childcare vouchers.

The childcare must be either ‘registered’ or ‘approved’.

These are the main types of childcare that must be registered and inspected by law:

• childminders
• day nurseries
• private nursery schools
• out-of-school services (including after-school clubs and holiday play schemes if providing care for children under eight years of age, or for more than two hours a day)
• pre-schools/playgroups
• crèches open for six days or more a year
• nannies working for more than two families, in the family home of one of the children being cared for
• Childcare providers who join the voluntary part of the Ofsted Childcare Register in England or apply to the Welsh Assembly to be an approved childcare provider in Wales.

The type of childcare for children aged eight and over that could now qualify includes: – activity based childcare (for example, a playscheme); and – childcare provided in the child’s own home (for example, a nanny, but not a child carer who is a parent or relative of the child).

Ofsted or the Welsh Assembly will require the childcare provider to demonstrate that the service they provide is safe and of a suitable standard.

You can claim for help with the costs of the above types of childcare, see the chapter on Benefits and tax credits.

Friends and family as childcarers

Many parents feel more comfortable if friends or family look after their child and generally speaking this kind of arrangement can be very flexible and much cheaper.

Some children may find it less stressful to stay with someone they know while their parent is at work. However, it is worth bearing in mind that you may not be able to claim financial help with the costs of this type of childcare.

It can also be difficult to deal with any issues about care that may arise when you already have a personal relationship with the person who is providing the care. 

If you are living on a low income, you’ll have thought of any number of ways to save money simply to stay afloat. Here’s a list of our ideas – some of which, hopefully, should be helpful.

General

• Don’t confuse price with quality. It doesn’t necessarily follow that the more expensive something is the better it is, so shop around. Use the Which? guides in your local library to find the best kettle, or whatever you’re buying.
  
• Shop seasonally – for example you can always buy half-price Christmas cards in January. A child’s warm winter coat will be reduced in the summer.
  
• Try waiting thirty days (well at least seven!) before you buy something. This should test how much you really need it.
  
• Keep receipts and guarantees in case things go wrong. Often small problems can be easily fixed if you still have the appliance instructions. It will save the cost of an engineer. Beware their call-out charges.
  
• Ask your friends how they manage.
  
• Avoid gambling – it may seem like a good idea, but in the end you nearly always lose money. You have more chance of dying in the week that you buy a National Lottery ticket than of winning the jackpot! Now there’s a cheery thought for you!
  
• Visit internet comparison sites to find the best deals for utilities, loans and other services.

Heat and light

• The most expensive appliance in many homes is the immersion heater. If you have to have an immersion heater, keep the temperature at the lowest acceptable level and insulate the tank and all exposed pipes.
  
• Always switch lights off when leaving a room.
  
• Make sure that your home is adequately insulated. Draught excluders are very cheap and effective.
  
• You can get grants for some energy saving improvements. Contact the Energy Saving Trust on 0800 512 012 or visit www.energysavingtrust.org.uk.
  
• Take showers instead of baths if possible.
  
• Run your washing machine at night as often electricity rates are cheaper at this time.

Telephone

• Try to make as many calls as possible off-peak (after 6pm and at weekends) but do keep in touch with friends and try to meet with them regularly.
  
• Check if other providers can give you a better deal.
  
• Monitor the length of your teenagers' calls (or put a lock on the phone).
  
• If you use your mobile phone only occasionally investigate whether a pay-as-you-go contract rather than a monthly contract will save you money.

Car expenses

• Keep your car well maintained – check oil and water levels regularly as well as tyre pressure. If this all sounds daunting, get a friend to show you how.
  
• Buying cars when they are two years old and keeping them for three years is the most economical way of owning a car – but make sure you get the car checked over before buying.
  
• For major repairs, get a detailed written estimate as this restricts unexpected add-ons.

Recreation/entertainment

• Study your local newspaper for good cheap or free family recreation. Check the notice board in your local library too.
  
• Think of going to certain places out of season. Visit your local tourist information centre to find out about attractions that are free and possibly pick up special offers.
  
• Don’t forget snacks, drinks and packed lunches to keep you and your children going without having to spend a fortune on food while you’re out.
  
• Borrow books, videos and CDs from the local library. If you’re looking for jobs the local library should have a good selection of newspapers and trade magazines to look through.
  
• Join a baby-sitting circle – preferably for single mothers who are prepared to have your child stay over.
  
• Holidays can be cheaper if you book them either very early or at the last minute.

Grocery shopping

• Plan a weekly menu, make a shopping list and stick to it!
  
• Look out for special offers, reduced item shelves etc. Three for the price of two offers are good value for tinned food, for example, where the food won’t go off.
  
• Compare prices in different shops and supermarkets. The price of milk, for example, varies enormously.
  
• Take advantage of seasonal variations in the price of fresh fruit and vegetables. Or why not even grow your own?
  
• Never go shopping when you are hungry and try to avoid taking your children if you can.
  
• Avoid waste – put your leftovers into a soup or cook a large quantity of something and then freeze what’s leftover to have another day.
  
• Ready-meals and products from well known brands can be a rip off. You can get great bargains at markets or by buying own-brand goods in supermarkets.
  
• Make your own baby food by mashing-up or processing your food. You’ll save a fortune.

Clothes

• Repairing is much cheaper than buying new! Save buttons from old clothes for repairs.
  
• Kids grow out of clothes so fast – balance the quality and price of clothes with the length of time they will actually fit your children.
  
• Check out charity shops, jumble sales and car boot sales – you can get some great bargains.
  
• Try to have a base colour with which to mix and match – that way you can get a lot of outfits from mixing and matching a few items of clothing.

Toys and kids’ things

• Keep a bits-and-bobs box if you have young children. Keep old boxes, packaging, bottle tops, egg boxes, bits of wood, silver foil, containers, card etc. to make pictures, space stations and dolls’ houses.
  
  Kids love to be creative and however much we spend on toys, some kids still love the packaging more! Old clothes and jewellery are good for dressing up.
• Find out if there is a toy library in your area – you can borrow toys for a short time just as you would borrow books from the library (Social Services will have details or visit the National Association of Toy and Leisure Libraries at www.natll.org.uk)
  
• Make your own modelling dough. Combine 3 cups of flour, 1 cup of salt, 1 cup of water and a little food colouring. Knead the mixture well and store in a polythene bag.
  
• Look for toys in jumble sales or charity shops, but make sure that they are safe.

Around the house

• Re-use plastic bags as bin liners.
  
• Wash J-cloths and re-use for a while.
  
• White vinegar is a very cheap and effective cleaning agent.
  
• Save old Christmas cards to cut up and use as gift tags or even make your own cards if you or your kids are feeling creative. Similarly help your kids make birthday cards for their friends.
  
• Shredded newspaper makes great cat litter.
  
• Re-use old envelopes by buying labels – charities often sell these.
  
• You can apply for council grants for some home improvements. Ask at the Housing department for details.
  
• Use energy saving light bulbs. These are more expensive to buy, but running costs are low and they last for years.
  
• Try DIY if you can. You might find you actually enjoy it!

It is essential not to lock yourself away but to seek help and company whenever you can.

Are there Parent and Toddler, or other support groups in your area? Get in touch with One Parent Families/Gingerbread who have a network of self-help groups for lone parent families.

As a single parent you have got a lot to cope with on your own and money worries are sadly often one of them. Wise budgeting can save you and your kids a lot of heartache.

Feeling in control of your money can give you a purse with no holes and peace of mind.

Hopefully this booklet has helped in this area, but please do seek the help you need from the organisations listed here.

Annual Equivalent Rate (AER)
Used to compare interest rates on savings accounts. Usually the higher the rate, the better.

Annual Percentage Rate (APR)
The actual yearly cost of a loan, including interest and charges. Usually the lower the rate, the better.

Assets
Things that are owned such as cars, property and money.

Bankruptcy
A process of legally declaring that a person cannot repay their debts, and providing protection for the debtor (the person who owes money).

Budget
A financial plan drawn up for an individual, a family, a business or a government. It is usually for a period of a month or a year, but can be for longer.

Charge Card
Similar to a credit card, but the holder has to pay off the balance in full every month.

Collateral
Something owned by a borrower that a lender has a right to take possession of if the borrower defaults on payment (stops making repayments).

Compound interest
Interest paid or received on both the original amount of a loan or investment, and on any interest which is added to the loan or investment.

Cost of loan
The total cost of a loan which includes interest plus charges, fees and so on.

County Court Judgement (CCJ)
A court order which decides if you owe a creditor money and, if so, how you will pay the money back.

Credit
Money to buy goods or services that the lender will require to be paid back in the future.

Credit card
A card used to borrow money or to pay for purchases. The card allows the cardholder credit which they can repay monthly.

Credit history
A record of credit someone has had in the past.

Credit note
When returning a product rather than giving you cash a shop may give a voucher equivalent to the value of the returned product which you can use when you go back to the shop in the future.

Credit reference agency
An organisation that collects information on people’s credit history, and reports to prospective lenders.

Credit sale
This is where you pay for goods in installments, usually with interest. The supplier cannot repossess the goods if you fall behind in repayments but can take court action to recover money owed.

Creditor
A person or business money is owed to.

Curriculum Vitae (CV)
A document designed for potential employers which outlines your personal details, qualifications and work experience.

Debit card
A card issued by a bank. Used in a similar way to credit cards, but the amount is taken from the bank account immediately.

Debt
Money owed to another person or business.

Debtor
A person or business who owes money to another person or business.

Default
When an individual or company fails to meet loan repayments.

Earnings See Income.

Financial Planning
The process of setting financial goals, and producing plans (for example, budgets) to achieve those goals.

Gross income
The full amount of money earned (that is, before deductions such as tax).

Guarantor
A person who guarantees that they will make loan repayments if the person who is actually borrowing money fails to keep up with repayments.

Hire purchase (HP)
A form of credit involving a down payment followed by regular monthly payments. Until the payments are finished, the goods belong to the credit company, and the user is hiring them from that company.

Income
Amount of money received or earned over a period of time.

Income tax
A tax on personal income.

Individual voluntary arrangement (IVA)
An alternative to bankruptcy. It is an agreement between a debtor and their creditors to pay them off over a period of time.

Interest
Money that you earn on money you keep in a bank account, or money you pay for borrowing money. 

Interest rate
The amount of interest paid or charged (given as a percentage).

Liabilities
These are the same as Debts.

Loan
An agreement between a lender and a borrower. The borrower agrees to repay the money borrowed over a period of time – with or without interest.

Minimum payment
The smallest amount you can pay towards money you owe on a credit card. It is stated on your monthly statement.

Mortgage
A loan to finance buying a house, with the house given as security for the loan.

Mortgage provider
The financial company providing your mortgage. Generally a bank or building society.

National Insurance
A deduction made from your pay by the government to fund things like pensions and unemployment benefits.

Net income
The amount of income after all deductions (for example, tax and National Insurance). Also called take home pay.

Overdraft
An arrangement with a bank which allows customers to withdraw more funds from a current account than they have in the account. It is a form of lending.

Payment-protection insurance
Insurance to make repayments on a loan if for a specific reason you cannot make the repayments. In many instances this insurance is expensive and only pays out in a very small range of circumstances.

Repossession
A legal process which involves a lender taking possession of a property which has been pledged as security for a loan, or a hire-purchase company taking possession of the goods, when repayments haven’t been made.

Savings account
A bank account which pays interest. It is not designed as a day-today bank account.

Secured loan and credit
A loan with property or other assets as security.

Security See Collateral.

Store card
A store card works like a credit card, but only can be used in the store that issued it.

Take-home pay See Net income. 

Tenancy agreement
The legal document between you and your landlord covering rent payments and restrictions on what you can do in the property etc.

Term
The period over which a loan is scheduled to be repaid or an investment runs.

Unpaid balance
The amount still owed on an account.

Unsecured loan and credit
A loan not backed up by collateral or guarantee of any sort.

Utilities
Services such as gas, electricity and water.

VAT or Value Added Tax
A government tax added to the purchase price of products.

If you don’t have internet access at home remember that you can use the internet for free at your local library.