A blog written with educators in mind
How you spend money reflects your values
To achieve a financial goal and purchase something you value, it is important to be disciplined about how you spend money. Students should learn the basics of how to budget for a financial goal to help them see if they are buying items they really value.
Ask your students how they would spend $20 to find out what they value in their lives today. They might spend it on a video game or an action figure or they might surprise you and say they want to save it for college.
Though seemingly straightforward, budgeting effectively is not an easy task. If financial goals are not specific, or actionable, it is unlikely that a proper budget would be created. Accounting for a variety of expenses might be difficult for students who have not had the necessary practice in spending money to reflect their goals and what they value.
To help your students determine how they think about longer-term goals, have them write down, or draw a picture of, all the items they might value having in their adult life (a house, a dog, a car, a family, etc.). It is important that students understand the answers to these questions in order to set a direction for their financial life.
The next step is to figure out how much money they would need to achieve these goals and what trade-offs they might need to make. Ask your students to do some online research to find a house, dog, car, or other item they like. Instruct them to add up the costs of all these items and chart how much money they would need to purchase them.
Next, ask them to work with their parents to create a list of all the expenses they would have if they owned all of these items (food, gas, taking care of a yard, saving for college, insurance, etc.). The students can then work with their parents to list expenses that allow them to enjoy items or activities that they desire—but might not need. Examples might include going out to dinner, all the cable channels, movie tickets or new golf clubs.
The students could also research online to find jobs that they want. Have them list the salaries and chart out their potential income and expenses. Ask them if, based on their chart, they feel they would be able to live the life they would like. If their income will not cover their expenses, ask them to write down, or draw, what they might give up to have the life they want (e.g., going out to dinner only once a month, not having cable).
Tell them to then add six months of salary to the expenses column to help cover emergency costs—are they still able to cover all of their expenses?
It is important for students to understand the need to save and invest some of their income to support future needs or expenses that will cost far more than they will earn in a single paycheck. Over time, savings and investments will allow students to afford vacations, school, and retirement.
Hopefully, through these activities your students will learn that how people spend, save, invest, and share their money reflects their personal values.