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Finance Fundamentals: Managing the Household Balance Sheet

Discover how to effectively manage household finance, looking at key assets and liabilities, to plan and prepare for the future, in this Open University course.

Duration

4 weeks

Weekly study

3 hours

100% online

How it works

Unlimited subscription

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Accreditation

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Established

1969

Location

Milton Keynes, UK

World ranking

Source: Times Higher Education World University Rankings 2020

Prepare for the future through the effective management of household finances

Each household is its own miniature financial world, with a balance sheet comprised of assets (property, investments, pensions) and liabilities (household debts). Prudent management is essential to ensure these finances deliver the best returns.

On this course, you will learn to effectively manage your household wealth. You’ll learn about different types of borrowing and the associated debts, different types of mortgage, and different ways to invest your money.

By gaining a stronger grasp of household finance, you can best prepare for the future, and ultimately for a comfortable retirement.

Week 1
Debt and borrowing
- Debt, interest and inflation
  The UK’s mountain of personal debt. Are there ‘good’ and ‘bad’ debts? How the Bank of England sets interest rates. Interest calculations – simple and compound. How does inflation affect the cost of borrowing?
- Credit scoring and the interest rates you pay
  More on interest – the choices for borrowers. Take the credit scoring test. Find what opens and closes the door to getting a loan. Explore the links between credit quality and interest rates on debt.
- Lenders and making good borrowing decisions
  Meet the lenders and their debt products. Use the financial planning model to guide your borrowing decisions for those ‘big ticket’ purchases. What are the best tips for making sure that the pitfalls of borrowing are side-stepped?
Week 2
Savings and investments
- Savings
  Why do people save? Link savings to events in the life course. Understand savings rates and savings products. The choice between fixed and variable rate savings. See how the internet has changed the savings market.
- Investing in shares
  How do savings and investments differ? The risk–return relationship. Understanding share investments and the returns they offer. Why are some shares riskier investments than others?
- Investing in bonds and funds
  Look at bonds – the risks and the returns. Explore investment funds – the most popular way to invest in shares and bonds. Which is the best long-term performer? See how the taxman takes a cut from your investment earnings.
Week 3
Housing and the household balance sheet
- Buying property
  Property as a home and as an investment. Buying a property – mortgage products. What are the total costs of buying? How do you repay your mortgage? Freehold and leasehold properties – what’s the difference?
- Selling property, the risks of home ownership and ‘buy-to-let’
  How do you sell your property? What are the risks of home ownership? Apply the financial planning model to property purchase. When should you take action to remortgage? Look at ‘buy-to-let’ – property as an investment.
- The household balance sheet
  Build the household balance sheet, calculate net worth, the current asset ratio and gearing – key measures of financial health. Then link the balance sheet to the household budget.
Week 4
Pensions
- State and occupational pensions
  Learn about the pensions crisis in the UK – state pensions (but at what age?), occupational pensions and now ‘workplace’ pensions. Calculate your pension income.
- Personal pensions and planning your pension
  Personal pensions and the pensions revolution unveiled by the government in 2014. The move from final to average salary pensions. How does spending in retirement change? Apply the financial planning model to pensions.
- Pension planning – can you afford to retire?
  Completing the plan for your pension. Deciding, acting and reviewing your plan. How well are you preparing for retirement? Are you sure you can afford to retire with your current pension plan?