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Every time you get money — like from an allowance, a job, or as a present — you have to decide: should I spend it now or save it for later? This lesson will explore how balancing your spending and saving helps you make smart choices with your money.

Catch-Up and Review

Here are a few recommended readings before getting started with this lesson.
Basic Money Concepts:

  • What is money?
  • How do people earn, receive, and use it?


Needs vs Wants
Simple Arithmetic with Money:

  • Adding, subtracting, and comparing dollar amounts


Decision-Making Basics:

  • Understanding trade-offs (If I buy X, I might not afford Y)
Challenge

Maya's Budget Challenge

Maya has a part-time babysitting job that pays per week.

Girl-babysitting.png

She has some regularly occurring expenses:

  • School lunch
  • Fun activities (like going to the movies or playing video games)
  • Miscellaneous things (like downloading songs or buying snacks)

Maya also has savings goals:

  • Buy a new laptop within the next year
  • Start growing her college fund
Can you help Maya create a budget that will help her achieve her goals?
Discussion

Understanding Wants and Needs

When it comes to money and making choices about how to spend it, it is helpful to understand the difference between wants and needs.

Wants-needs.png

Needs are essential things that we require to live and be healthy. They include:

  • Food and water
  • A place to live
  • Clothing and shoes
  • Basic school supplies

These are things that we cannot do without. We need them to survive and to participate in daily activities. Wants, on the other hand, are things that we would like to have, but we can live without them. They include:

  • Toys and games
  • Entertainment, such as movies or concerts
  • Treats, such as candy or snacks
  • Luxuries, such as a new phone or a vacation
Understanding the difference between wants and needs can help you make smart choices about how to spend your money. By prioritizing your needs and saving for your goals, you can make sure that you have what you need to be happy and healthy.
Theory

Wants vs. Needs: What's What?

Sort the items into wants or needs. Remember: needs are essential, wants are nice to have!

Discussion

Income vs. Expense

The money you earn or receive regularly, like from a part-time job, chores, or a weekly allowance, is your income. On the other hand, the money you spend on things like food, rent, gas, or phone bills goes towards your expenses.

Income-expense.png
Pop Quiz

Income or Expense?

Identify whether each situation describes an income or an expense.

Discussion

Understanding Savings and Spending

Savings is money that is put aside instead of being spent right away so that you can use it later for emergencies or big goals. On the other hand, spending refers to using your money to buy things you need or want. In particular, planned spending is when you decide to spend money on wants, like a new game or concert tickets, and make sure to include it in your budget.

Discussion

What is a Budget?

A budget is a plan for how to use your money wisely. It shows how much money you will get, how much you expect to spend on things you need and want, and how much you plan to save over a set time.

Example

Budgeting a Weekly Allowance

Emma gets a week for her allowance. She needs to use to pay for her school lunches. She also wants to spend renting movies and on snacks when she hangs out with her friends.

Emma-scene-1.png

a Which expenses are wants?
b How much money does Emma have left after paying for her needs?
c If Emma wants to save at least each week, what can she cut from her spending?

Hint

a A need is something necessary. A want is extra or fun.
b Subtract her needs from her total allowance.
c Focus on things she could live without.

Solution

a To determine which expenses are wants, we need to recall that a want is something that is extra or fun and is not necessary. Emma's expenses are:
School lunches are necessary, but movie rentals and snacks are not. The expenses that are wants are movie rentals and snacks.
b To find out how much money Emma has left after paying for her needs, we need to subtract her necessary expenses from her total allowance. We know that her necessary expense is for school lunches. Emma's total allowance is We will subtract her needs from this amount.
Emma has left after paying for her needs.
c To find out what Emma can cut from her spending, we need to focus on things she could live without, which are her wants. We know that she wants to save at least and she has left after paying for her needs. Emma's wants are movie rentals and snacks.
She can cut either snacks or movie rentals — or both — to free up at least for savings.
Example

Emma's New Backpack

Emma wants a new backpack that costs She plans to save each week.

Emma-Scene-2.png

a How many weeks will it take for Emma to save enough money?
b Emma decides that she would also like to buy a new pair of shoes that cost How many total weeks does she need to save now?
c Suppose the new semester starts in one month. How much money would she need to save each week in order to have her new backpack and shoes in time for classes to start?

Hint

a How many times does she need to save before it adds up to
b Add the prices together before dividing.
c Divide the total amount of money needed by the number of weeks in a month.

Solution

a The backpack costs and Emma saves per week. To find out how many weeks it will take Emma to save enough money for the backpack, we need to divide the cost of the backpack by her weekly savings.
It will take Emma weeks to save enough money for the backpack.
b The backpack costs the shoes cost and Emma saves per week. First, we add the prices together to find the total cost.
To find the total number of weeks Emma needs to save money to buy these things, we divide the total cost by her weekly savings.
Emma needs to save for weeks to buy both the backpack and the shoes.
c The backpack and shoes together cost and there are about weeks until the semester starts. To determine how much Emma needs to save each week, we divide the total cost by the number of weeks.
Emma needs to save each week in order to buy the backpack and shoes before school starts.
Example

Earning Extra to Save Faster

Emma wasn't going to be able to save enough money each week to buy all of the things she wanted for the new semester so she decided to help out her next door neighbor to earn the extra money. Now her weekly income includes:

  • savings from her allowance
  • for walking their dog
  • for mowing their lawn
a With her new income, how much can Emma save each week now?
b How many weeks will it take for Emma to save the she needs for her new backpack and shoes?
c Remember that the new semester starts in four weeks. How much extra money will Emma have at the beginning of the semester if she continues to help her neighbor after she has reached her savings goal?

Hint

a Add her savings from her allowance to her income.
b Divide the cost of her items by the amount saved each week.
c How many weeks are left until the new semester after she's met her savings goal?

Solution

a Emma's weekly income now includes from her allowance, for walking the dog, and for mowing the lawn. To find out how much Emma can save each week now, we need to add her savings from her allowance to her new income.
Emma can save each week now.
b Emma needs is in total to buy her backpack and shoes and she can now save each week. To find out how many weeks it will take her to save enough money, we divide the total cost by her new weekly savings.
It will take Emma weeks to save the she needs.
c Emma saves per week and has week left until the semester starts after reaching her goal. Emma will have extra at the beginning of the semester.
Example

Making Maya's Budget

Now that we've learned so much about what it means to make a budget, let's look back at Maya's situation. Remember that she has a part-time job that pays her per week. She wants to make sure she uses her money wisely so that she can afford her regular expenses and meet her savings goals.

Lunch-expenses.png

We need to know how much each of her expenses cost her on a weekly basis to help her make her budget. This is what she tells us.

Expense Weekly Cost
School lunch
Fun activities
Miscellaneous things

Now let's remember her savings goals!

  • Buy a new laptop within the next year
  • Start growing her college fund

If we want to decide how much money can be set aside for each of her goals, we need some more information about each one. Her goals need to be more specific. Let's see what she says when we ask her for some more details.

a How much money should Maya save each week for her new laptop in order to meet her goal?
b How much money will Maya have saved for college by the time she starts classes in years?

Hint

a There are weeks in a year.
b How much does she save each week before she purchases the laptop? And how much does she save each week after she purchases the laptop?

Solution

a Since we are setting a weekly savings goal for Maya, we need to remember that there are weeks in a year. Now we will divide the total cost of the laptop by the number of weeks.
She needs to save each week to reach her goal of in weeks.
b First, let's determine Maya's total weekly savings. She earns and has three expenses that total per week.
We can subtract this from her income to find the amount of money she saves.
Remember that for the first weeks, per week will go towards her new laptop. This means that per week can be put into her college fund.
Let's calculate how much money she will save for college during the first year.
During the second and third years, the entire will go into her college fund each week. Let's see how much she will save during those two years!
Next, let's add these numbers together to see how much money she will have saved after three years.
Maya will have saved for college.
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