In this lesson, students will be introduced to the six basic steps involved in building a budget or spending plan to meet their personal financial goals. In addition, this lesson will help them differentiate between fixed expenses, flexible expenses, planned expenses, and unplanned expenses.
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Identify the six steps for budgeting.
Distinguish between fixed, variable, planned and unplanned expenses.
Ask students to identify some of the items they spend money on each day. Distribute a copy of Handout 5.1 for students to record the types of items and approximate cost they spend on each during a typical day.
After completing Handout 5.1, ask students why it is important to know how much they spend every day. Explain that having a budget is similar to having a spending plan, and having a plan provides a way to better manage their money.
Distribute copies of Handout 5.2 to each student to use as a review for the video. Introduce the video by explaining that it will help them better understand the process used to create a budget or spending plan for their money. Tell students to write the budgeting steps shown in the video on their handout. Show the video.
After viewing the video, review their answers to ensure all students have completed the guide.
Ask students if they have discussed any of those steps with their parents. Remind students that a budget is simply a spending plan put in place to meet their personal or family financial goals.
Have students brainstorm different types of spending needs for their family, including saving for future wants and needs. Make a list of all expenses on the board.
Have students write down the expenses listed on the board on note cards or sticky pads. Place the four signs (Planned Expenses, Unplanned Expenses, Fixed Expenses and Variable Expenses) around the room while students are completing this task. Tell students to place their expenses in the appropriate category.
Once students have completed this activity, review the categories to see if any are misplaced. Be sure to discuss the reasons for any expenses that are placed incorrectly. Ask students which, if any, of the expenses were the most difficult to categorize.
To summarize the lesson, discuss the importance of budgeting. Remind students that the video said the average household spends 80 percent of its annual income on necessary expenses and almost 60 percent of it goes to pay for housing, food, gas, and insurance. Creating a budget or spending plan will help them get the most possible from their paychecks each month.