Creating a Budget

Overview

This lesson explains what a budget is and familiarizes students with the process of creating a budget.

Grade Levels

5 – 8

Objectives

Students will:

• Define the term budget.
• Create a monthly budget.
• Evaluate a budget and prioritize spending based on what is important.

Estimated Time

60 minutes

Materials Needed

• E-Learning Module: Federal Budget Allocation
• Chalk and chalkboard or an overhead projector
• Internet connection
• Store catalogs
• Pencil and paper
• 8½" x 11" white, multi-purpose paper
• Markers

Procedure

1. Write the term budget on a chalkboard, whiteboard, or overhead projection device. Ask student volunteers to define the term. Make sure students understand that a budget is a plan for spending available money during a certain period of time.
2. Ask students to name some decisions that people must make before they decide to purchase something. Explain that most people make purchase decisions based on what they can afford. Sometimes an individual wants to purchase an item that costs more than he or she can afford. This person must then purchase something that is cheaper or save money or borrow some money to purchase the item.
3. Remind students that budgets give people guidelines of what to spend. Explain to students that people often create a budget to help them save money.
4. Ask a few student volunteers to tell the class what their monthly allowance is. As a class, calculate the average of the allowances.
5. Have students name some of the things they spend their allowance on. For example, students may say school lunches, bus fare, or entertainment. Generate a list of expenses. Write this list on a chalkboard, whiteboard, or overhead projection device.
6. Ask students to create a monthly budget based on the average of the allowances. This budget should include at least six items listed on the board. Emphasize that an important part of creating a budget is prioritizing. People must prioritize spending, according to what is most important based on what is available to spend.
7. Distribute white, multi-purpose paper or poster board and markers. Have students draw a pie chart that shows the monthly budget they created.
8. Have students view the Family Budgets portion of the Federal Budget Allocation Activity. Answer any questions that may arise.
9. Discuss what individuals and families can do if they want to purchase an item that is not in their budget or if an unexpected expense, such as a medical bill or car repair, arises. Tell students that when people want to purchase an item that is not in their budget or an unexpected expense arises, individuals and families must re-evaluate their budget. Explain that individuals and families must often make compromises and get some things but not everything.
10. Distribute copies of a store catalog to students. Ask students to choose an expensive item they would like to purchase.
11. Have students look at the budget they created and determine how they can spend less of their allowance and save more money so they can eventually purchase the item.
12. Ask students to revise their budget and create a new pie chart that shows their revised budget and includes how much money they will be saving each month.

Extension and Adaptation Activities

Cross-Curricular Connections

Have students read Not for a Billion, Gazillion Dollars (New York: Delacort, 1992) by Paula Danziger. As students are reading the book, have them create a budget that will help Mathew Martin pay off his debts and save money to buy the computer program he wants.

Using Technology

Have students use spreadsheet software to create a monthly budget for their families. Students can enter the monthly expenses in the spreadsheet and generate graphs that illustrate the budget.

Assessment

Basic Concepts and Processes

Ask your students the following questions and assess their knowledge of key concepts taught in this lesson.

1. What is a budget?
2. What can individuals and families can do if they want to purchase an item that is not in their budget or if an unexpected expense arises?

Scoring Guide for Monthly Budget

Elements	Possible Score	Assigned Score	Notes
The budget includes at least six items.	15
The total amount of money allotted for expenses does not exceed the money available.	15
The monetary sum listed for each expense is reasonable. (For example, do not allot $0.25 for bus fare when a one-way bus ticket to school costs $0.50.)	20
The revised budget reflects prioritization of spending based on what is most important.	25
The revised budget sets aside more money for savings than the previous budget.	25

Lesson Plan Feedback

If you have suggestions for improving this lesson plan, or if you have ideas for others using the module, please let us know. We value your input. Thank you!

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