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Financial Literacy View details

2. Savings and Spending JHS

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Financial Literacy /

Chapter 1

Savings and Spending JHS

This lesson will teach you the theory required to fully understand the topic and will present both exercises and selftests to gauge your understanding.

Lesson Settings & Tools

	12 Theory slides
	15 Exercises - Grade E - A
	Each lesson is meant to take 1-2 classroom sessions

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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 $100 per week.

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 are things that we would like to have, but we can live without. Needs, on the other hand, are essential things that we require to live and be healthy. These are things that we cannot do without. We need them to survive and to participate in daily activities. Here are some examples.

Wants	Needs
Toys and games	Food and water
Entertainment, such as movies or concerts	A place to live
Treats, such as candy or snacks	Clothing and shoes
Luxuries, such as a new phone or a vacation	Basic school supplies

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.

Explore

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.

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.

Expenses: $50
Savings: $10
Planned spending: $30

Example

Budgeting a Weekly Allowance

Emma gets $20 a week for her allowance. She needs to use $10 to pay for her school lunches. She also wants to spend $5 renting movies and $4 on snacks when she hangs out with her friends.

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 $5 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:&$10 &Movie Rentals:&$5 &Snacks:&$4 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 $10 for school lunches. Emma's total allowance is $20. We will subtract her needs from this amount.

$20 - $10 = $10 Emma has $10 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 $5 and she has $10 left after paying for her needs. Emma's wants are movie rentals and snacks.

Total Cost of Wants $5 + $4 = $9 She can cut either snacks or movie rentals — or both — to free up at least $5 for savings.

Example

Emma's New Backpack

Emma wants a new backpack that costs $40. She plans to save $5 each week.

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 $20. 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 $5 before it adds up to $40?

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 $40, and Emma saves $5 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.

40/5 = 8weeks It will take Emma 8 weeks to save enough money for the backpack.

b The backpack costs $40, the shoes cost $20, and Emma saves $5 per week. First, we add the prices together to find the total cost.

$40 + $20 = $60 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. $60/5 = 12weeks Emma needs to save for 12 weeks to buy both the backpack and the shoes.

c The backpack and shoes together cost $60 and there are about 4 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.

$60/4=$15 Emma needs to save $15 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:

$5 savings from her allowance
$5 for walking their dog
$10 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 $60 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 $5 from her allowance, $5 for walking the dog, and $10 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.

$5 + $5 + $10 = $20 Emma can save $20 each week now.

b Emma needs is $60 in total to buy her backpack and shoes and she can now save $20 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.

Time = Total cost/Weekly savings

SubstituteValues

Substitute values

Time = 60/20

CalcQuot

Calculate quotient

Time = 3weeks

It will take Emma 3 weeks to save the $60 she needs.

c Emma saves $20 per week and has 1 week left until the semester starts after reaching her goal. Emma will have $20 extra at the beginning of the semester. 1 week* $20 = $20

Challenge

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 $100 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.

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	$25
Fun activities	$20
Miscellaneous things	$10

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.

The laptop I like costs $780 and I would really like to say that I bought it within a year of starting to save. I just want to save as much as I can for college. I start in 3 years, and after I buy a laptop, the rest can go towards that.

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 3 years?

Hint

a There are 52 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 52 weeks in a year. Now we will divide the total cost of the laptop by the number of weeks.

$780 ÷ 52 = $15 She needs to save $15 each week to reach her goal of $780 in 52 weeks.

b First, let's determine Maya's total weekly savings. She earns $100 and has three expenses that total $55 per week.

Lunch+Fun+Miscellaneous=Total $25+$20+$10=$55 We can subtract this from her income to find the amount of money she saves. $100 - $55 = $45 per week Remember that for the first 52 weeks, $15 per week will go towards her new laptop. This means that $30 per week can be put into her college fund. $45 - $15 = $30 Let's calculate how much money she will save for college during the first year.

$30 * 52

Multiply

$1 560

During the second and third years, the entire $45 will go into her college fund each week. Let's see how much she will save during those two years!

$45 * 52 * 2

Multiply

$4 680

Next, let's add these numbers together to see how much money she will have saved after three years. $1 560 + $4 680 = $6 240 Maya will have saved $6 240 for college.

Level 1

Level 2

Level 3

Savings and Spending JHS

Exercise 3.1

Tiana has three sources of weekly income and plans to save all of it until she can afford to buy concert tickets for $72.

$10 for babysitting
$5 from chores
$3 from her allowance

How much does she save per week?

How many full weeks will it take to afford the ticket?

How much will she have left over if she saves for 6 weeks?

Let's start by calculating Tiana's weekly savings. She earns $10 for babysitting, $5 from chores, and $3 from her allowance. $10 + $5 + $3 = $18 Tiana saves $18 per week.

We want to know how many full weeks it will take Tiana to afford the concert ticket. The ticket costs $72 and she saves $18 per week. Let's divide the cost of the ticket by her weekly savings. $72/$18=4 It will take Tiana 4 full weeks to afford the ticket.

Now let's see how much Tiana will have left over if she saves for 6 weeks. We already know that she saves $18 per week. Let's multiply to find her total savings. $18 * 6 = $108 Next, we will subtract the cost of the ticket from her total savings. $108 - $72 = $36 Tiana will have $36 left over.

Luca wants to buy a $60 backpack. He wants it in 3 weeks.

How much does he need to save per week?

If he only saves $15/week, how much will he be short after 3 weeks?

What is one thing Luca could do to meet his goal?

Luca wants to buy a $60 backpack in 3 weeks. To find out how much he needs to save per week, let's divide the cost of the backpack by the number of weeks. $60/3 = $20 Luca needs to save $20 per week.

Let's consider the situation where Luca only saves $15 per week for 3 weeks. $15 * 3 = $45 He will have only saved $45. Let's compare this to the price of the backpack. $60 - $45 = $15 Luca will be $15 short.

All of the given options would help Luca meet his goal.

Earning extra money would help him make up for the missing $15.
If the backpack that he wants cost at least $15 less, buying the cheaper backpack would be an achievable goal.
Waiting longer to buy it gives Luca more opportunities to save enough money.

Ava wants new shoes that cost $40 and a new hoodie that costs $30. She earns $14 each week.

How much does she need to save in total?

How many weeks will it take to save enough money?

If she gets a one-time bonus of $10, how many weeks does it take to save enough money now?

Ava wants new shoes that cost $40 and a new hoodie that costs $30. To find out how much she needs to save in total, let's add the cost of the shoes and the hoodie. $40 + $30 = $70 Ava needs to save a total of $70.

Ava earns $14 each week. To find out how many weeks it will take her to save enough money, let's divide the total amount she needs to save by the amount she earns each week. $70/$14 = 5weeks It will take Ava 5 weeks to save enough money.

If Ava gets a one-time bonus of $10, she will already have that money and will not need to save as much. Let's subtract the bonus from the total amount she needs to save. $70 - $10 = $60 She still earns $14 each week. Let's divide the new amount she needs to save by the amount she earns each week. $60/$14≈ 4.29 Since we cannot save a fraction of a week, Ava will still need 5 weeks to save enough money.

Sort these from best to worst for saving money.

Let's analyze the options one at a time.

Buy things on impulse

When you buy things on impulse, you are not thinking carefully about your purchases. You might regret them later. This can lead to wasting money on things you do not really need.

Buy things on impulse * *

Don't track your spending

If you do not keep track of your spending, you might not know where your money is going. This can make it hard to save money and achieve your financial goals.

Don't track your spending *

Compare prices before you buy something

This is a smart way to shop. By comparing prices, you can find the best deals and save money.

Compare prices before you buy something ✓

Spend less money than you earn

This option is a good habit to have. When you spend less than you earn, you have money left over for saving and investing.

Spend less money than you earn ✓ ✓

Create a savings plan

A savings plan helps you set goals and prioritize your spending. It is like creating a roadmap to your financial goals.

Create a savings plan ✓ ✓ ✓

Ranking the Options

A savings plan is essential for saving money, making Create a savings plan the top choice. Spend less money than you earn and Compare prices before you buy something are both good habits. However, we should rank Spend less money than you earn higher because you can still spend over your budget even if you compared prices. On the other hand, Don't track your spending and Buy things on impulse can lead to financial problems.

Create a savings plan
Spend less money than you earn
Compare prices before you buy something
Don't track your spending
Buy things on impulse

Kayla wants to go to the movies for $15 and buy a book that costs $10. She has $20.

Can she afford both?

Which options would let her stay within her budget?

Let's calculate the total cost of the movie and the book. The movie costs $15 and the book costs $10. $15 + $10 = $25 Since Kayla only has $20, she cannot afford both.

Let's look at the given options for how she can adjust her wants and stay within her budget.

Option	Reasoning	Conclusion
A. Only buy the book	The book costs $10, which is less than $20.	This plan works! ✓
B. Go to the movies and skip the book	The movie costs $15, which is less than $20.	This plan works! ✓
C. Find a free movie screening and buy the book	If she finds a free movie screening, she only needs to pay for the book. The book costs $10, which is less than $20.	This plan works! ✓
D. Borrow money to do both	Borrowing money is not the same as not spending it — debt is its own expense.	This plan is not within her budget. *
E. She is already within her budget	We already calculated that Kayla does not have enough money to buy both, so this option is incorrect.	She is not within her budget. *

Savings and Spending JHS

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