F1.3 Design sample basic budgets to manage finances for various earning and spending scenarios.
Skill: Designing a Basic Budget
When learning about financial management, the effectiveness of a budget should be explored.
A budget is a very effective planning tool that help us to visualize the cycle of money. It is important, however, not to overload the budgets that students will be working with. It can be easy as an adult to see things left out of a budget and want to make it as realistic as possible, but educators need to present budget scenarios that are relevant and realistic to students.
The Basic Budget
The basis of any budget is expenses and income over a period of time. Teachers should allow the student to explore the effect of expenses and income in isolation. In order to respect the social and cultural differences of the students, a fictional situation is preferable. The purchase of equipment for the school or a fundraiser for a trip or charity are scenarios that could be explored.
An example would be a fundraiser where items are purchased and resold at a higher price. A budget is in its simplest form might be as follows:
|
Item |
Expenses |
Income |
|
Purchase of ingredients to make pastries |
$150 |
|
|
Purchase of paper to create promotional posters |
$15 |
|
|
Bake sale (day 1) |
$300 |
|
|
Bake sale (day 2) |
$250 |
|
|
Bake sale (day 3) |
$100 |
|
|
TOTAL |
$165 |
$650 |
|
BALANCE |
$485 |
In this basic budget, the expenses and income are clearly shown, and it can be seen that this budget shows a profit of $485. This simulation uses numbers rounded to the nearest dollar, but during the activity there is no reason why you cannot add a level of complexity by having students search for the best priced ingredients.
The budget can also work in the opposite direction. By setting a financial goal, in this case the total amount to be raised during the fundraiser, students can determine the cost of ingredients and the number of baked goods sold, and then the cost per item needed to reach the goal. A discussion could then follow to determine if the proposed cost is reasonable or not. Possible questions include:
- Are there comparable products in stores? At what price? Are they comparable to our price?
- Who is our target customer? Why would these customers choose to spend their money on our products and not elsewhere?
- Are there ways to reduce our expenses to maximize our profits? Where in the budget can we afford such a reduction?
Note that there are a variety of correct answers to these questions and the goal is to help initiate mathematical conversations.
Knowledge: Budget
A budget is an estimate or plan to manage income and expenses over a set period; for example, many people have a weekly or monthly budget.
Source: The Ontario Curriculum. Mathematics, Grades 1-8 Ontario Ministry of Education, 2020.
Knowledge: Income
Income is money that an individual receives in exchange for work or from investments.
Source: The Ontario Curriculum. Mathematics, Grades 1-8 Ontario Ministry of Education, 2020.
Knowledge: Expenses
Expenses are things that one spends money on; for example, most adults’ expenses include food, shelter, utilities, and entertainment.
Source: The Ontario Curriculum. Mathematics, Grades 1-8 Ontario Ministry of Education, 2020.