Syllabus: Cambridge - IGCSE Economics
Module: 3.2 Households
Lesson: 3.2.1 the Influences on Spending, Saving and Borrowing

Introduction

This topic is part of the Cambridge IGCSE Economics syllabus, section 3.2.1, focusing on the decisions made by households about how they use their income: spending, saving, and borrowing. Understanding these decisions builds foundational economic literacy and supports cross-curricular links to financial literacy, mathematics, and PSHE. For SLT and careers leads, this is also a clear opportunity to integrate commercial awareness and meet Gatsby Benchmark 4 through curriculum learning that links directly to real-life financial behaviours.

By exploring personal finance decision-making, students engage with concepts essential for both exams and future workplace readiness, including budgeting, interest rates, inflation, and opportunity cost. It supports Ofsted expectations for economic education and provides careers-relevant content suitable for all learners.

Key Concepts

The Cambridge IGCSE syllabus outlines the following learning outcomes under section 3.2.1:

• Factors influencing household spending:

  • Income levels

  • Age of individuals

  • Tastes and preferences

  • Advertising and peer pressure

  • Interest rates and inflation

  • Availability of credit

  • Cultural and regional influences

• Reasons for saving:

  • Precautionary motives (e.g. emergencies)

  • Future purchases (e.g. house deposit)

  • Retirement planning

  • Financial security

• Reasons for borrowing:

  • Short-term consumption needs (e.g. credit card use)

  • Long-term investments (e.g. mortgages or student loans)

  • The influence of interest rates and access to credit

Students should be able to analyse the trade-offs between spending, saving, and borrowing, and understand how these decisions impact both the individual and the wider economy.

Real-World Relevance

This topic provides rich opportunities to anchor learning in current economic conditions. For example:

• Cost of living crisis (UK 2022–2024): Many households had to adjust spending patterns, prioritise essentials, reduce discretionary spending, and in some cases, borrow more despite rising interest rates.

• Savings and Gen Z: According to the ONS and FCA, young people increasingly use mobile apps like Monzo and Revolut for saving and budgeting, demonstrating changing financial behaviours.

• Buy Now, Pay Later (BNPL): Services like Klarna and Clearpay are relevant case studies for borrowing behaviour among young consumers. Students can explore the ease of access to credit versus the risk of debt.

Embedding such examples in lessons builds commercial awareness and helps students grasp the real-world impact of economic decision-making.

How It’s Assessed

Assessment in IGCSE Economics typically focuses on knowledge recall, data interpretation, and application. Teachers should prepare students for a variety of question types:

• Define: “What is saving?” (1–2 marks)

• Explain: “Explain one reason why a person might borrow money.” (2–4 marks)

• Analyse: “Analyse how a rise in interest rates could influence borrowing and saving decisions.” (4–6 marks)

• Evaluate: “Discuss whether it is better for a household to save rather than borrow.” (6–8 marks)

Command words such as analyse, discuss, and evaluate indicate higher-order thinking and require structured answers with chains of reasoning and contextual examples. Using frameworks like PEEL (Point, Explain, Example, Link) or CAUSE-EFFECT-IMPACT supports stronger responses.

Enterprise Skills Integration

This topic strongly aligns with our core themes of decision-making, problem-solving, and financial literacy. It can be explored using simulation-style challenges such as:

• “The Household Budget Challenge”: Students are given a fixed income and changing external conditions (interest rate rises, inflation, unexpected expenses). They must decide how much to spend, save, or borrow, justifying each decision.

• Role-based scenarios: One group acts as a bank, another as a family, negotiating loans and savings plans.

These approaches develop:

• Budgeting and prioritisation skills

• Risk evaluation and contingency planning

• Data-led decisions in uncertain conditions

Our research shows that students in simulation environments achieve 73% better comprehension than with traditional methods.

Careers Links

This module has strong links to personal finance careers and is an ideal point to introduce students to financial roles and industries:

• Careers referenced:

  • Personal Financial Advisor

  • Credit Analyst

  • Mortgage Advisor

  • Economic Policy Officer

  • Consumer Finance Journalist

Mapped to Gatsby Benchmark 4, this lesson can be supported with:

• A recorded interview with a bank employee or financial advisor

• A virtual workplace tour of a retail bank or credit union

• Simulated finance roles within a classroom project

The Skills Hub Futures platform offers mapped content that connects these syllabus points to workplace competencies like financial literacy, customer focus, and data-driven decision-making.

Teaching Notes

Practical Tips:

• Begin with a relatable starter: “If you won £1,000 today, what would you do with it?”

• Use local examples: council tax rises, food bank usage, or inflation data from the ONS

• Integrate cross-curricular links with PSHE and Maths

Common Pitfalls:

• Students may struggle to distinguish between saving and investing, or misunderstand that borrowing can be strategic (e.g. student loans)

• Misconceptions around interest rates — especially the difference between APR and AER

Extension Ideas:

• Introduce compound interest through a maths crossover task

• Explore economic inequality and its impact on borrowing/saving trends

• Debate: “Should the government regulate BNPL providers more strictly?”

Tools and Support:

• Skills Hub Business and Skills Hub Futures offer ready-to-deliver tools aligned to this topic

• Use simulation tools to apply economic theory to real-world dilemmas

• Leverage employer engagement by inviting guest speakers or using our employer challenge library