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Grade 6-8

A Penny Saved Is a Penny Earned…With Interest

Time: 45 mins,
Updated: August 14 2023,


Students will be able to:

  • Compare spending and saving.
  • Explain opportunity cost.
  • Define interest earned.

In this economics and personal finance lesson plan, students will make decisions about saving and spending.



Ask students what they would do if they received $10, $20, or $30 for their birthday. Have them write down their answer in a notebook or on a piece of paper. Allow sufficient time for students to respond and explain their answers. Tell students what we do with the money we receive is important and that decision can have a big impact on their future.


Tell students that receiving money as a gift is fun – but most people rely on a job where they earn an income. Complete a think-pair-share activity. Have students think about ways they could work to earn money. Give students 30 seconds to 1 minute to think and set the timer. Then, have students work with the person next to them to discuss their answers. Give students 30 seconds to 1 minute to discuss using a timer. Then, have pairs share their answer with the class.

Remind students there are many ways to earn an income, and also many choices about what we do with that income. This lesson focuses on spending or saving the money we earn from jobs or gifts. Explain the following concepts and ask students to provide examples of each:

Spending money is the purchase of goods and services.
Savings money is setting money aside for future purchases of goods and services.

Ask students the following questions:

  • Have you ever saved your money to buy something you really want or need in the future?
  • Where did you put the money you were saving?
  • Why would people prefer to put money in a savings account at a bank instead of in a jar at home?

Explain that money placed in savings account will earn interest. Interest is what they receive for allowing the bank to use their money. The bank pays interest because it wants to encourage people to put money in its accounts. If the bank did not pay interest, people would just keep their money in their piggy banks. The amount of interest paid is based on the interest rate. Interest rates can vary from one account to another and from one bank to another. It is basically a percentage of earnings on the money you put in their account. The more income you save, the more interest you can receive. Tell students they can choose to keep their money at home, but will miss the opportunity to earn interest on their savings. In economic terms, this is called opportunity cost. Opportunity cost is defined as the value of the best alternative. All choices have an opportunity cost because you give up something when you make a choice. Explain that having a plan about spending and saving will help them make better choices with their money. This type of plan is called a budget. The purpose of a budget is to help them determine what to do with their income: how much should they spend and how much should they save. Tell students they will be working with two budgets (one with no savings and one with savings) to demonstrate the concepts discussed in this lesson.

Group Activity

Put students in small groups and distribute copies of the Group Activity – Budget #1 to each students. Review the instructions, reminding them they have only $5 to spend. Explain that this lesson will help them apply the concept of opportunity cost when making choices. Debrief the activity by reviewing the answers using Group Activity – Budget #1 Answer Key and responding the questions.

Individual Activity

Distribute copies of the Individual Activity – Budget #2. Tell students they will use the same process as with Budget #1, but this time the activity includes savings. Remind students that spending and saving is a choice they make and this activity will illustrate the costs and benefits of saving. Review student answers using the Individual Activity – Budget # 2 Answer Key [LINK DOC] and respond to any questions. Remind students that savings is like paying yourself, and it will help them meet future goals or purchase more expensive goods and services in the future.



Distribute copies of the Assessment. Give students sufficient time to complete and hand in their work. Use the Assessment Answer Key teacher guide.


Have students work in small groups to research a new phone or tablet they would like to purchase. Ask them how many months they would need to save to purchase it if they put $5 a month into savings and if they put $10 a month into savings. Have students individually identify something they would be willing to identify something they would be willing to give up in order to save the money needed to purchase what that phone or tablet. Ask students if they would be willing to find a less expensive phone or tablet to reduce their costs.