PLANNING A BUDGET

TD Bank Financial Education 1 Grades 6-8/Lesson 3

PLANNING A BUDGET

Key Concepts

Income, needs vs. wants, budgets, simple interest, savings accounts, paying yourself first

Summary

This lesson reviews trade-offs and priorities in order to prepare a budget. Students learn sources of

income and then make a budget. Savings is introduced with the concept of earning simple interest.

Overview & Lesson Objectives

This lesson is intended for middle school students in sixth, seventh and eighth grades. The lesson

teaches students the concept of budgeting and calculating simple interest on a savings account.

Students will be able to:

 Identify sources of income

 Identify monthly expenses

 Calculate simple interest

 Plan a monthly budget

Time Allocation:

15 - 20 Minute Prep

35 - 40 Minutes Engagement

Materials:

 Copies of Sample Budget (one per student)

 Copies of Blank Budget Worksheet (one per student)

 Copies of Simple Interest Worksheet (one per student)

 Copies of Sample Lunch menu (one per student)

TD Bank Financial Education 2 Grades 6-8/Lesson 3

Lesson Begins: Setting the Stage

Background Builder #1: Instruct students to make a t-chart on the back of the Interest Worksheet. Or

you can make a t-chart on the board (see below)

Needs Wants

1. 1.

2. 2.

3. 3.

4. 4.

5. 5.

Ask students to define needs and define wants. Select several students. Remind them that a need is

something that we must have to survive, and a want is something we would like to have. Ask the students

to name needs and wants and write them down on the board. Discuss the results with the class. Ask

students to think of ways that they can get what they need and want (i.e. working and saving). Finally, tell

students that saving is a good thing, and a plan or budget will help them achieve their goal and guarantee

financial success.

State the Objective: tell the students what they will be able to do upon conclusion of the lesson.

“At the end of this lesson, you will understand the purpose of budgeting and be able to create your own.

You will also be able to calculate simple interest.”

Lesson Procedure

Budgeting is the process of making your needs and wants fit. It can be difficult at times, but it is the key to

making sure you have your money under control.

Review attached sample budget with students to demonstrate and clarify concepts. Allow students to work

in pairs with a calculator and pencil to complete the attached budget worksheet.

Provide the following scenario:

You expect to receive $100 each month as an allowance. Use your calculator and sample school lunch

menu to determine how much money you would need to buy lunch at school every day. (Answer $12.00)

Allow students to use the sample budget worksheet.

TD Bank Financial Education 3 Grades 6-8/Lesson 3

It is difficult to go to school without pencils, paper and other supplies. Even if your school or teacher gives

you most of your supplies, there are items you will need or want to buy. Maybe you buy gel pens,

highlighters, and glue sticks. Gel pens cost on average $5.95, highlighters cost $3.50, and glue sticks

cost $2.50. How much will you need for school supplies this month? (Answer: $11.95)

Allow students to work and write the correct answer on the budget sheet. Below are some sample

purchases to say out loud?

 Is this a week when you are going to a birthday party? You will need to buy a gift.

 Is there a new movie that you want to see?

 Is there a video game that you really want?

 Add the following amounts together to see how much your other expenses will be. Let's say you

buy a birthday gift for $20.

 You went to the movies twice this month, and each time you bought a ticket you spent $10.00.

You bought popcorn one time and it cost $4.50.

 There is a new video game you want that costs $21.99.

 What is your expense total for these categories?

You may have to write these amounts on the board in order to help the students record them correctly.

(Answer: $66.49 - $41.99 for Entertainment, $20.00 for Gifts, $4.50 Snacks). Allow students to copy the

correct answer onto the budget sheet.

How much did you spend of your allowance? How can we figure that out?

Allow students to add the totals for each category. Allow students to add the totals together and then call

on someone to give an answer.

If we want to know how much is left over from our original $100 a month allowance, what do we need to

do? Subtract expenses from income. Your savings for this month would be what is left. When you look at

how you spend your money, you should recognize that you have control over meeting your expenses. If

you want to start saving more money, what spending habit could you change from this budget?

Allow students to offer suggestions such as packing a lunch a few days a month, going to the movies only

once, foregoing the video game, etc.

A bank is the safest place to keep your money, and because people let us protect their money, banks give

you back what is called interest. Interest is money that you earn just by having money in a savings

account. It is a percent of the total amount of money that you keep in a bank. The interest rate, the

length of time and the amount of money in your account determines the amount of interest you will receive

from the bank.

For example, if you save $100 for one year in an account with a 1% interest rate you would have earned

$1.00 from the bank.

TD Bank Financial Education 4 Grades 6-8/Lesson 3

Write 0.01 on the board. Model how you arrived at this answer via the chalkboard and by using the

calculator for computation.

Distribute worksheets (included in this file) and allow students to work on them independently. Circulate

and help students as needed. When students have finished, review the answers and discuss how saving

more money can earn more interest.

Lesson Closes

Ask students to clarify between needs and wants and how a budget can help them achieve their goals.

Elicit from students that saving money in the bank is not only safe but also profitable because they will

earn interest. See the suggestion page for “Additional Engagement Opportunities/Resources”, for

additional ideas.

TD Bank Financial Education 5 Grades 6-8/Lesson 3

Additional Engagement Opportunities / Resources

Pair and Share: Group students into pairs and ask each pair to exchange two or three new things

learned during the day’s lesson. Call on select pairs to share with the whole class what has been learned.

Sample questions:

 What are some expenses you may have currently?

 What types of earnings do you gather?

 Define interest.

 What item would you be willing to save money for in order to make the purchase?

o Where do you expect to get the money you’ll save?

o How much spending money will be available?

o Are there items you’ll need to forego in order to save enough money?

o How long will it take you to save enough money for the item you want to buy?

Misinformation: Quote information from the day’s lesson purposely erroneous. Call on various students

to restate the information correctly.

Samples:

 A budget is not necessary to stay on track with expenses

 Wants and Needs are the same thing.

What’s left out? Supply students with statements that have some information missing. This can be done

verbally or it can be done on a board. Ask students to provide the missing information.

Samples:

 _______is money that you earn just by having money in a savings account.

o Answer is " interest"

 A _______is something that we must have to survive, and a _____ is something we would like to

have

o 1

Answers is "need", and 2

answer is " want"

TD Bank Financial Education 6 Grades 6-8/Lesson 3

INTEREST WORKSHEET ANSWER KEY

Use the formula I=PRT to solve the following problems.

1. John received $100 as a gift from his grandparents for his middle school graduation. He decided to

save it in the bank until he decided what he would do with the money. The interest rate on his savings

account is 1.5%. How much interest will he earn the first year?

$1.50

2. Nicole received a check for $50 when she won a local essay contest. Her mother told her to save it for

college. If it earns interest at a rate of 1%, how much money will Nicole have after one year?

$50.50

3. When Mary’s new baby sister was born, her relatives gave her $25 to start a savings account. How

much will Mary’s sister have when she turns 1 if her money is kept in the bank earning 1% interest?

$25.25

4. Eduardo earned $520 over the year for doing chores around the house. He decided to take $200 to

the bank where it will earn 1.5% interest. How much interest will he earn if he leaves it there for 1 year?

$3.00

5. When Lori and Jeff got married, they put $1,000 of their gifts into a savings account in the hopes of

purchasing a bigger home sometime in the future. If they get a rate of 2%, how much will they have

toward their home in 1 year?

$1,020.00

TD Bank Financial Education 7 Grades 6-8/Lesson 3

Educational Standards

National Council of Teachers of Mathematics Principles and Standards for School Mathematics,

2000.

Number and Operations – (Students will) Understand meanings of operations and how they relate to one

another.

Number and Operations – (Students will) Compute fluently and make reasonable estimates.

Algebra – (Students will) Understand patterns, relations, and functions.

Problem Solving – (Students will) Build new mathematical knowledge through problem solving.

Communication – (Students will) Use the language of mathematics to express mathematical ideas

precisely.

Connections – (Students will) Recognize and use connections among mathematical ideas.

Representation – (Students will) Create and use representations to organize, record, and communicate

mathematical ideas.

NJ Core Curriculum Content Standards for Personal Financial Literacy 2014:

Standard 9.1: 21

Century Life and Careers

9.1.A. Income and Careers: 9.2.8.A.6

9.1 B. Money Management: 9.2.8.B.3, 9.2.8.B.7

9.1 D. Planning, Saving, and Investing: 9.2.8.D.1

9.1 E. Becoming a Critical Consumer: 9.2.8.E.4

National Standards in K – 12 Personal Finance Education (from Jump$tart Coalition) 2017:

Financial Decision Making:

Standard 4, “Make criterion-based financial decisions by systematically considering alternatives and

consequences.”

Employment and Income:

Standard 2, “Compare sources of personal income and compensation.”

Spending and Saving:

Standard 1, “Develop a plan for spending and saving.”

Investing:

Standard 1, “Explain how investing may build wealth and help meet financial goals.”

National Content Standards in Economics (from Council for Economic Education) 2010:

Standard 1, Scarcity:

TD Bank Financial Education 8 Grades 6-8/Lesson 3

INTEREST WORKSHEET

Name: Date: