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Topic: Money and Finances F1.3 – Budgets

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Ontario Curriculum Expectation:

5.F1.3 design sample basic budgets to manage finances for various earning and spending scenarios.


Read the Following Selection

Read the following selection, or click on the play button below to listen aloud.

Budgets

You have probably heard people talk about budgets. Find out what a budget is and how to make one.

What Is a Budget?

A budget is a plan for how to use money. This plan covers how money will be spent. A budget may also include money to be saved so it can be used in the future.

Why Do People Make Budgets?

There are two main reasons why people make budgets:

• to make sure they have money to pay for things they need

• to make sure they don’t spend too much money on things they want but don’t really need.

Needs and Wants

food is an example of a need

Needs include things that people can’t live without or would find it very difficult to live without. Examples of these things include food, a place to live, heat, and electricity.

There are many things people want but don’t really need. These might include such things as a new cell phone (when the one they have works fine), meals in restaurants, and a plane ticket for a vacation in a faraway place.

Making and following a budget is a way for people to make sure they have enough money to pay for their needs. Then, if there is money left over, they can use this money to buy some of the things they want.

To make a good budget, it is important to be able to tell the difference between needs and wants. Remember that really, really wanting something is not the same as needing something.

Making a Budget

you can budget to have money left over for wants

Below are some of the basic steps people use to make a budget.

Step 1: Decide what space of time the budget will cover. Most people make a budget that covers one month, but some people make a budget that covers one week.

Step 2: Figure out how much money there is to spend. People who are working (or kids who receive an allowance) identify how much money they are paid in a week or a month, depending on how much time the budget covers.

Step 3: List all the needs and how much each one will cost during the time period of your budget. Then, add up the total cost of all the needs. Subtract this total from the amount of money received during the time period.

Step 4: List the things that are wanted but not really needed. Figure out which of these things there is money left to buy after paying for needs.

Saving Money

kids can use their allowance to save money

If possible, it is always wise to budget some money to go to savings. Money that is saved can be used to buy necessary things that were not included in the budget because they were unexpected purchases (for example, replacing eyeglasses that got lost). Savings can also be used for things people know they will need or want to buy in the future.

Kids and Budgets

Kids who get an allowance or who do odd jobs to earn money can make a budget. They can also make a budget to plan how they will use a specific amount of money, such as money they received for their birthday. If kids’ needs are paid for by their parents, then the budget will cover only things that are wanted—and perhaps money to be saved for future use.


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