Y X Money
y
x2=36-y2
x moneyMATH
6x124
Lessons for Life
®
$ # $ + $ — $ % $ 3/4 $ ~ $2
Money Math
Lessons for Life
Written by
Mary C. Suiter
Sarapage McCorkle
Center for Entrepreneurship and Economic Education
University of Missouri—St. Louis
Mathematics Consultant
Helene J. Sherman
University of Missouri—St. Louis
Cover Design by
Sandy Morris
Sponsored by
Citi Office of Financial Education
Department of the Treasury
Jump$tart Coalition® for Personal Financial Literacy
University of Missouri—St. Louis
© Copyright 2008
by The Curators of the University of Missouri
a public corporation
ISBN 978-0-9709279-1-0
Teachers may obtain a free printed copy of Money Math: Lessons for Life by sending an e-mail request to: moneymath@bpd.treas.gov
Copyright © 2008 The Curators of the University of Missouri, a public corporation
Center for Entrepreneurship and Economic Education
University of Missouri-St. Louis
One University Blvd., St. Louis, MO 63121-4499
www.umsl.edu/~econed
Reproduction of this publication is permitted and encouraged.
Printed in the United States of America.
ISBN 978-0-9709279-1-0
$3 = $ ¢ $ 1/2 $ + $ ∞ $ ÷ $2
ii
Money Math: Lessons for Life
Table of Contents
Foreword
v
Correlations to National K-12 Personal Finance Standards
vii
Correlations to NCTM Principles and Standards of Mathematics
xi
Lesson 1
The Secret to Becoming a Millionaire .......................................................................1
Students learn how saving helps people become wealthy. They develop “rules to become a
millionaire” as they work through a series of exercises, learning that it is important to: (1) save early
and often, (2) save as much as possible, (3) earn compound interest, (4) try to earn a high interest
rate, (5) leave deposits and interest earned in the account as long as possible, and (6) choose accounts
for which interest is compounded often. This lesson assumes that students have worked with percents
and decimal equivalents.
Lesson 2
Wallpaper Woes ........................................................................................................ 23
Students hear a story about Tom, a middle-school student who wants to redecorate his bedroom. They
measure the classroom wall dimensions, draw a scale model, and incorporate measurements for
windows and doors to determine the area that could be covered by wallpaper. Students then hear more
about Tom’s redecorating adventure, learning about expenses, budget constraints, and trade-offs. For
assessment, students measure their rooms at home. This lesson requires that students know how to
measure, or a review may be necessary before teaching.
Lesson 3
Math and Taxes: A Pair to Count On.................................................................... 35
Students examine careers and reflect on how workers use math in their occupations. They study
selected occupations, learning about the work skills (human capital) that different workers possess
and salaries that those workers earn. Next, students learn about how taxes are paid on income that
people earn and how income tax is calculated. They learn how the progressive federal income tax is
based on the ability-to-pay principle.
Lesson 4
Spreading the Budget ............................................................................................... 61
Students develop a budget for a college student, using a spreadsheet. They examine the student’s
fixed, variable, and periodic expenses and revise to adjust for cash flow problems that appear on the
first spreadsheet. This lesson is designed to increase student awareness and appreciation of the
efficiency of using computer technology in math applications.
Money Math: Lessons for Life
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
Reproduction is permitted and encouraged.
iii
iv
Money Math: Lessons for Life
Foreward
Let’s face it—kids like money. So, what better way to help young people embrace math than by teaching them about
money…and what better reason can we give them for learning math? Through Money Math: Lessons for Life, middle
grade students apply math skills to some of life’s costly challenges, learning important personal finance concepts along
the way. This wonderfully integrated teaching resource complements what students will likely learn before and afterward,
because financial education isn’t a one-shot deal and financial literacy requires a lifetime of learning. The Jump$tart
Coalition is proud to continue to support this updated curriculum.
Laura Levine, Executive Director
The Jump$tart Coalition for Personal Financial Literacy
In today’s complex financial world, being financially literate is a critical life skill… as important as reading, writing and
arithmetic. So to combine financial education within the teaching of math is an ingenious way to teach both of these
subjects simultaneously. To support financial literacy, Citi made a commitment in 2004 of $200 million over ten years to
support financial education initiatives around the world. We truly believe that you are never too young to learn how to
manage your finances and that Money Math: Lessons for Life is a tool to start our young students on the road to becoming
financially independent.
Dara Duguay, Director
Citi Office of Financial Education
Money Math: Lessons for Life teaches students responsible financial practices before they develop bad habits. For
example, one path to accumulating wealth is to start saving at a young age and let compounding interest pay you for your
effort. Another is to plan your budget realistically, by bringing your income and expenses into balance—minimizing
spending so that you will have money to save. These two life lessons alone would reduce credit card debt, reduce
financial pressures on families, and increase personal savings and wealth.
Barbara Flowers, Director
Center for Entrepreneurship and Economic Education
University of Missouri—St. Louis
We’ve all heard the facts: Americans are borrowing more and saving less; we haven’t planned well enough for retirement;
few of us are prepared for financial emergencies. Dealing with these realities can be stressful, but the best research tells us
that financial education can, and does, make a positive difference in people’s lives. Money Math: Lessons for Life offers a
head start toward financial literacy that applies middle school math concepts through real-life examples from personal
finance. Public Debt is proud to support this unique program that helps our children learn how to make positive financial
decisions—an important skill they can use throughout their lives.
John Swales, Assistant Commissioner
Office of Retail Securities
Bureau of the Public Debt
Department of the Treasury
Money Math: Lessons for Life
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
Reproduction is permitted and encouraged.
v
vi
Money Math: Lessons for Life
Personal Finance Standards
Correlation of Money Math: Lessons for Life to
National Standards in K-12 Personal Finance Education
Financial Responsibility and Decision Making
Lessons
Overall Competency
Apply reliable information and systematic decision-making to personal financial decisions.
1
2
3
4
Standard 1
Expectations – 4th Grade
Take responsibility for
• List examples of financial decisions and their possible
personal financial
consequences.
1
2
3
4
decisions
• Identify ways to be a financially responsible youth
1
2
4
Expectations – 8th Grade
• Identify ways to be a financially responsible young adult.
1
2
3
4
• Give examples of the benefits of financial responsibility
and the costs of financial irresponsibility.
1
2
3
4
Standard 2
Expectations – 4th Grade
Find and evaluate
• Give examples of situations in which financial information
financial information
would lead to better decisions.
1
2
3
4
from a variety of
• Identify sources of financial information.
1
2
3
4
source
Standard 4
Expectations – 4th Grade
Make financial
• Explain how limited personal financial resources affect the
decisions by
choices people make.
1
2
3
4
systematically
• Rank personal wants/needs in order of importance.
1
2
3
4
considering alternatives • Set measurable short-term financial goals.
2
3
4
and consequences
• Outline the steps in systematically evaluating alternatives and
making a decision.
1
2
3
4
Expectations – 8th Grade
• Prioritize personal financial goals.
2
3
4
• Evaluate the results of a financial decision.
1
2
4
• Apply systematic decision making to a medium-term goal.
1
2
3
4
Standard 5
Expectations – 8th Grade
Develop
• Explain how discussing important financial matters with
communication
household members can help reduce conflict.
2
4
strategies for discussing
financial issues
Money Math: Lessons for Life
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
Reproduction is permitted and encouraged.
vii
Money Math: Lessons for Life
Personal Finance Standards
Correlation of Money Math: Lessons for Life to
National Standards in K-12 Personal Finance Education
Income and Careers
Lessons
Overall Competency
Use a career plan to develop personal income potential.
1
2
3
4
Standard 1
Explore career options Expectations – 4th Grade
•
Explain the difference between a career and a job and identify
various jobs in the community.
3
•
Give an example of how an individual’s interests, knowledge, and
abilities can affect career and job choice.
3
•
Examine a job related to a career of interest.
3
Expectations – 8th Grade
•
Give an example of how education and/or training can affect
lifetime income.
3
•
Compare personal skills and interests to various career options.
3
•
Describe the educational/training requirements, income potential,
and primary duties of at least two jobs of interest.
3
Standard 2
Expectations – 4th Grade
Identify sources of
•
Explain the difference between a wage and a salary.
3
personal income
•
Identify jobs children can do to earn money.
1
•
Give examples of sources of income other than a wage or salary.
1
Expectations – 8th Grade
•
Define gift, rent, interest, dividend, capital gain, tip, commission,
and business profit income.
1
3 4
Standard 3
Expectations – 4th Grade
Describe factors
•
Define tax and explain the difference between sales and
affecting take-home
income taxes.
3
pay
•
Give an example of how government uses tax revenues.
3
4
Expectations – 8th Grade
• Explain all items commonly withheld from gross pay.
3
4
Money Math: Lessons for Life
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
viii
Reproduction is permitted and encouraged.
Money Math: Lessons for Life
Personal Finance Standards
Correlation of Money Math: Lessons for Life to
National Standards in K-12 Personal Finance Education
Planning And Money Management
Lessons
Overall Competency
Organize and plan personal finances and use a budget to manage cash flow.
1
2
3
4
Standard 1
Expectations – 4th Grade
Develop a plan for
•
Give examples of household expense categories and sources
spending and saving
of income.
2
4
•
Describe how to allocate a weekly allowance among the
financial goals of spending, saving, and sharing.
1
Expectations – 8th Grade
•
Prepare a personal spending diary.
4
•
Discuss the components of a personal budget, including income,
planned saving, taxes, and fixed and variable expenses.
4
•
Given a household case study, calculate percentages for major
expense categories.
4
Standard 4
Expectations – 4th Grade
Apply consumer skills •
Apply systematic decision making to a personal age-appropriate
to purchase decisions
purchase.
2
4
Expectations – 8th Grade
•
Explain the relationship between spending practices and
achieving financial goals.
1
2
4
•
Given an age-appropriate scenario, describe how to use
systematic decision making to choose among courses of action
that include a range of spending and non-spending alternatives.
1
2
4
Money Math: Lessons for Life
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
Reproduction is permitted and encouraged.
ix
Money Math: Lessons for Life
Personal Finance Standards
Correlation of Money Math: Lessons for Life to
National Standards in K-12 Personal Finance Education
Saving and Investing
Lessons
Overall Competency
Implement a diversified investment strategy that is compatible with personal goals.
1
2
3
4
Standard 1
Expectations – 4th Grade
Discuss how saving
•
Describe the advantages and disadvantages of saving for a
1
4
contributes to financial
short-term goal.
well-being
•
Describe ways that people can cut expenses to save more of
their incomes.
4
Expectations – 8th Grade
•
Give examples of how saving money can improve financial
well being.
1
4
•
Describe the advantages and disadvantages of saving for short-
and medium-term goals.
1
4
•
Explain the value of an emergency fund.
4
•
Explain why saving is a prerequisite to investing.
1
Standard 2
Expectations – 4th Grade
Explain how investing •
Give an example of an investment and explain how it can
builds wealth and helps
grow in value.
1
meet financial goals
Expectations – 8th Grade
•
Apply systematic decision making to determine when to invest
cash not needed for short-term spending or emergencies.
1
•
Define the time value of money and explain how small amounts
of money invested regularly over time grow exponentially.
1
•
Calculate and compare simple interest and compound interest
earnings and explain the benefits of a compound rate of return.
1
Standard 3
Expectations – 4th Grade
Evaluate investment
•
List the advantages of investing money with a financial
alternatives
institution.
1
•
Compare the main features of interest-earning accounts at local
financial institutions.
1
For additional information on National Standards for K-12 Personal Finance Education, visit: www.jumpstart.org
Money Math: Lessons for Life
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
x
Reproduction is permitted and encouraged.
Money Math: Lessons for Life
Standards of Mathematics
Correlation of Money Math: Lessons for Life to
National Standards in K-12 Personal Finance Education
Numbers and Operation Standards for Grades 6-8
Lessons
Content Standard
Instructional goals
Specific expectations for students in grades 6-8
1
2
3
4
for all grades
Understand numbers,
• work flexibly with fractions, decimals, and percents
1
3
4
ways of representing
to solve problems
numbers, relationships
• develop meaning for percents greater than 100 and less than 1
1
3
4
among numbers, and
• develop meaning for percents greater than 100 and less than 1
1
3
4
number systems
• develop an understanding of large numbers and recognize and
appropriately use exponential, scientific, and calculator notation
1
3
• use factors, multiples, prime factorization, and relatively prime
numbers to solve problems
3
4
Understand meanings
• understand the meaning and effects of arithmetic operations
of operations and how
with fractions, decimals, and integers
1
3
4
they relate to one
• use the associative and commutative properties of addition and
another
multiplication and the distributive property of multiplication
over addition to simplify computations with integers,
fractions, and decimals
1
3
4
• understand and use the inverse relationships of addition and
subtraction, multiplication and division, and squaring and finding
square roots to simplify computations and solve problems
1
4
Compute fluently and
• select appropriate methods and tools for computing with
make reasonable
fractions and decimals from among mental computation,
estimates
estimation, calculators or computers, and paper and pencil,
depending on the situation, and apply the selected methods
1
3
4
• develop and analyze algorithms for computing with fractions,
decimals, and integers and develop fluency in their use
1
3
4
• develop and use strategies to estimate the results of rational-
number computations and judge the reasonableness of the results
1
3
4
Money Math: Lessons for Life
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
Reproduction is permitted and encouraged.
xi
Money Math: Lessons for Life
Standards of Mathematics
Correlation of Money Math: Lessons for Life to
National Standards in K-12 Personal Finance Education
Algebra Standard for Grades 6-8
Lessons
Content Standard
Instructional goals for
Specific expectations for students in grades 6-8
1
2
3
4
all grade
Understand patterns,
• represent, analyze, and generalize a variety of patterns with
relations, and functions
tables, graphs, words, and, when possible, symbolic rules
1
3
4
• relate and compare different forms of representation for
a relationship
1
3
4
Represent and analyze
• develop an initial conceptual understanding of different uses
mathematical situations
of variables
1
3
4
and structures using
• use symbolic algebra to represent situations and to solve
algebraic symbols
problems, especially those that involve linear relationships
1
3
4
• recognize and generate equivalent forms for simple algebraic
expressions and solve linear equations
3
4
Use mathematical
• model and solve contextualized problems using various
models to represent and
representations, such as graphs, tables, and equations
1
2
3
4
understand quantitative
relationships
Geometry Standards for Grades 6-8
Lessons
Content Standard
Instructional goals
Specific expectations for students in grades 6-8
1
2
3
4
for all grades
Analyze characteristics
• precisely describe, classify, and understand relationships among
and properties of two-
types of two- and three-dimensional objects using their
and three-dimensional
defining properties
2
geometric shapes and
• understand relationships among the angles, side lengths,
develop mathematical
perimeters, areas, and volumes of similar objects
2
arguments about
geometric relationships
Apply transformations
• describe sizes, positions, and orientations of shapes under
and use symmetry to
informal transformations such as flips, turns, slides, and scaling
2
analyze mathematical
situations
Use visualization,
• draw geometric objects with specified properties, such as side
spatial reasoning, and
lengths or angle measures
geometric modeling to
• use two-dimensional representations of three-dimensional objects
solve problems
to visualize and solve problems such as those involving surface
area and volume
2
• use geometric models to represent and explain numerical and
algebraic relationships
2
• recognize and apply geometric ideas and relationships in areas
outside the mathematics classroom, such as art, science, and
everyday life
2
xii
Money Math: Lessons for Life
Standards of Mathematics
Correlation of Money Math: Lessons for Life to
National Standards in K-12 Personal Finance Education
Measurement Standards for Grades 6-8
Lessons
Content Standard
Instructional goals for
Specific expectations for students in grades 6-8
1
2
3
4
all grades
Understand measurable
• understand relationships among units and convert from one unit to
attributes of objects and
another within the same system
2
the units, systems, and
• understand, select, and use units of appropriate size and type to
processes of
measure angles, perimeter, area, surface area, and volume
2
measurement
Apply appropriate
• select and apply techniques and tools to accurately find length,
techniques, tools, and
area, volume, and angle measures to appropriate levels
formulas to determine
of precision
2
measurements
• develop and use formulas to determine the circumference of
circles and the area of triangles, parallelograms, trapezoids, and
circles and develop strategies to find the area of more-
complex shapes
2
• solve problems involving scale factors, using ratio and proportion
2
Data Analysis and Probability Standards for Grades 6-8
Lessons
Content Standard
Instructional goals for
Specific expectations for students in grades 6-8
1
2
3
4
all grades
Formulate questions
• Formulate questions, design studies, and collect data about a
that can be addressed
characteristic shared by two populations or different
with data and collect,
characteristics within one population
2
3
4
organize, and display
relevant data to answer
them
Select and use
• find, use, and interpret measures of center and spread,
appropriate statistical
including mean and interquartile range
2
4
methods to analyze data
Develop and evaluate
• use observations about differences between two or more samples
inferences and
to make conjectures about the populations from which the
predictions that are
samples were taken
3
4
based on data
• use conjectures to formulate new questions and plan new studies
to answer them
3
4
Money Math: Lessons for Life
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
Reproduction is permitted and encouraged.
xiii
Money Math: Lessons for Life
Standards of Mathematics
Correlation of Money Math: Lessons for Life to
National Standards in K-12 Personal Finance Education
Problem-Solving Standard for Grades 6-8
Lessons
Process Standard
Instructional goals for all grades
1
2
3
4
•
build new mathematical knowledge through problem solving
1
2
3
4
•
solve problems that arise in mathematics and in other contexts
1
2
3
4
•
apply and adapt a variety of appropriate strategies to solve problems
1
2
3
4
•
monitor and reflect on the process of mathematical problem solving
1
2
3
4
Reasoning and Proof Standard for Grades 6-8
Lessons
Process Standard
Instructional goals for all grades
1
2
3
4
•
make and investigate mathematical conjectures
1
2
3
4
•
develop and evaluate mathematical arguments and proofs
1
2
3
4
•
select and use various types of reasoning and methods of proof
1
2
3
4
Communication Standard for Grades 6-8
Lessons
Process Standard
Instructional goals for all grades
1
2
3
4
•
organize and consolidate their mathematical thinking through communication
1
2
3
4
•
communicate their mathematical thinking coherently and clearly to peers,
teachers, and others
1
2
3
4
•
analyze and evaluate the mathematical thinking and strategies of others
1
2
3
4
•
use the language of mathematics to express mathematical ideas precisely
1
2
3
4
Connections Standard for Grades 6-8
Lessons
Process Standard
Instructional goals for all grades
1
2
3
4
•
recognize and use connections among mathematical ideas
1
2
3
4
•
understand how mathematical ideas interconnect and build on one another to produce a
coherent whole
1
2
3
4
•
recognize and apply mathematics in contexts outside of mathematics
1
2
3
4
Representation Standard for Grades 6-8
Lessons
Process Standard
Instructional goals for all grades
1
2
3
4
•
create and use representations to organize, record, and communicate
mathematical ideas
1
2
3
4
•
select, apply, and translate among mathematical representations to solve problems
1
2
3
4
•
use representations to model and interpret physical, social, and mathematical phenomena
1
2
3
4
Money Math: Lessons for Life
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
xiv
Reproduction is permitted and encouraged.
Money Math: Lessons for Life
Lesson 1
The Secret to Becoming a Millionaire
Lesson Description
Students learn how saving helps people become wealthy. They develop
“rules to become a millionaire” as they work through a series of exercises,
learning that it is important to: (1) save early and often, (2) save as much as
possible, (3) earn compound interest, (4) try to earn a high interest rate, (5)
leave deposits and interest earned in the account as long as possible, and (6)
choose accounts for which interest is compounded often. This lesson
assumes that students have worked with percents and decimal equivalents.
Objectives
Students will be able to:
1. define saving, incentive, interest, and opportunity cost.
2. solve problems using interest rate, fractions, decimals, and percentages.
3. calculate compound interest.
4. explain the benefits of compound interest.
5. explain the opportunity cost of saving.
6. describe a savings bond investment.
Mathematics
percent, decimal, data analysis, number sense, solving equations, problem
solving
Concepts
Personal Finance
interest, interest rate, compounding, wealth, saving, savings, inflation,
Concepts
purchasing power
Materials Required
• copies of Activities 1-1 through 1-5 for each student
• transparencies of Visuals 1-1 through 1-7
• calculator for each student
• computers
Time Required
4 - 6 days
Procedure
Get Ready
1. Ask the following. Do you want to be a millionaire? What is a
millionaire? Explain that a millionaire is a person who has wealth totaling
one or more million dollars, noting that wealth is the total value of what a
person owns minus what he or she owes. How could you become a
millionaire? (win the lottery, win a sweepstakes, inherit a million dollars,
earn a high income) Read the following scenario to the class.
Money Math (Lesson 1)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
Reproduction is permitted and encouraged.
1
Money Math: Lessons for Life
Lesson 1
The Secret to Becoming a Millionaire
Last week, Mrs. Addle told her students that they could become
millionaires if they followed the rules she provided them. As a matter of
fact, she guaranteed that if they followed her rules exactly, they would
be millionaires in 47 years! Misha and the rest of her classmates
thought that Mrs. Addle was crazy. If she had rules that would
guarantee that someone could be a millionaire, why was she teaching
seventh-grade math? Why wasn’t she rich and retired? Why didn’t she
follow her own rules? Mrs. Addle told the students to go home and talk
to their families about what she had said.
Misha went home and told her family what Mrs. Addle had said.
Misha’s mother knew a lot about money and financial matters. She just
smiled at Misha and said that Mrs. Addle was correct. When Misha
returned to class the next day, Mrs. Addle asked what the students’
families said. Of the 25 students in Mrs. Addle’s class, 20 students said
that their parents and other family members agreed with Mrs. Addle.
The other five students forgot to ask.
2. Explain that to learn more about being a millionaire, the students must
review what a percent is. (Note: If needed, Visual 1-1 includes a
review.)
3. Point out that in the story, there are 25 students in Misha’s class, and 20
students discovered that their families agreed with Mrs. Addle. Ask the
following questions. (Note: Step-by-step calculations are provided on
Visual 1-2.)
a. What percent of the students’ families thought that Mrs. Addle was
correct? (80%)
b. What percent of the students failed to do their homework? (20%)
Get Going
1. Explain that you will share Mrs. Addle’s secrets with them. When they
become millionaires, they can donate money to the school’s math
department! Discuss the following.
a. How do you earn income? (mow lawns, baby-sit, walk pets, rake
leaves, do chores around the house)
b. What do you do with your income? (save it, spend it, save some and
spend some)
c. Why do you spend your income? (to buy things that they want now,
such as movies, food, and clothes)
d. Why do you save your income? (to buy things they want in the
future)
Money Math (Lesson 1)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
2
Reproduction is permitted and encouraged.
Money Math: Lessons for Life
Lesson 1
The Secret to Becoming a Millionaire
2.
Explain that when people earn income, they can spend it or save it.
When they are spending, they spend their money today for goods and
services, but they give up the chance to use that money to buy goods
and services in the future. When saving, they give up goods and
services now to have other goods and services in the future. When
people make choices, the highest-valued alternative choice that is given
up is their opportunity cost. Read the following scenario.
Next year, you want to take a family and consumer science class, a
woodworking class, and a photography class. However, you only have
room in your schedule for one of these three. Which would you choose?
What would be your second choice?
3. Have several students share their first and second choices. Explain that
their second choice is their opportunity cost—it is the highest-valued
alternative class. When people save, the goods and services that they
would have purchased now—the highest-valued alternative—represent
their opportunity cost. When they spend now, their opportunity cost is
goods and services they could have in the future.
4. Assign Activity 1-1. When they are finished, have students share
answers. (1. $360, $720, $1080, $1440, $1800, $2160; 2. The items
they would have purchased each day with $2. This is their opportunity
cost. 3. A + (B x 180) where A = previous year balance and B = the
amount deposited each day; 4. Save more each day.) Point out that
students have different opportunity costs because their tastes and
priorities are different.
5. Display Visual 1-3. Have students deduce what has changed in each
case. They should develop Rules 1 and 2 to become a millionaire. (In
the first case, the saver is saving for a longer period; therefore,
Millionaire Rule 1 is to start saving early. In the second case, the saver
is saving $4 per day instead of $2 per day; therefore, Millionaire Rule 2
is to save more or to save as much as possible.) Write the two rules on
the board.
6. Discuss the following.
a. How many of you have savings accounts in banks? (Answers will
vary.)
b. What are the benefits of placing your savings in a bank? (The
money is safe in the bank, and the bank pays interest.)
c. What is interest? (Students may or may not know the exact
definition of interest.)
7.
For homework, students who have savings accounts may bring in a
statement from their savings accounts. Have all students look for ads in
local newspapers and listen to television and radio ads about banks. Tell
them to write down any information about interest rates.
Money Math (Lesson 1)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
Reproduction is permitted and encouraged.
3
Money Math: Lessons for Life
Lesson 1
The Secret to Becoming a Millionaire
Teaching Tip:
Keep It Going
Show students how just a
1. Assign Activity 1-2. Allow students to share their answers. (1. $396,
little bit of money can add
$831.60, $1310.76, $1837.84, $2417.62, $3055.38; 2. (A+360) +
up to a lot of cash with
[(A+360) x .10] where A is the previous year’s ending balance, or, 1.10
careful saving and investing.
(A+360); 3. These amounts are higher because they earn interest on the
Ask your students to save
deposit and interest on the interest earned in previous years.)
their pocket change for one
month.
2. Point out that the 10% amount that Uncle Mort pays is an incentive. An
incentive is a reward that encourages people to behave in a particular
Assuming your students save
$1 a day, they should have
way. This incentive encourages people to save and keep their savings.
$30 after one month of
How much of an incentive did Uncle Mort pay the first year? ($360 x
saving. If your students
.10 = $36)
invest $30 worth of change
3. Explain that banks provide an incentive for people to save. When
every month for 10 years,
people make deposits to savings accounts, banks are able to use the
how much money will they
money to loan to others. In return, the banks pay interest to savers.
have if they invest their
money in the following
Interest is a payment for the use of money. Bankers don’t usually tell
ways:
people that they will earn a specific sum of money. Savers are told the
interest rate to be received. The interest rate is the annual interest
• Savings account with a 2%
payment on an amount expressed as a percentage. For example, a bank
annual rate of return
might pay a 4% interest rate on a savings account. Uncle Mort pays
• Money market fund with a
10%.
5% annual rate of return
4. Write the word “compounding” on the board. Ask students what they
• Mutual fund with a 9%
think this word means and how it applies to becoming a millionaire.
annual rate of return
Allow students to look the word up in the dictionary and in newspaper
What can your students buy
advertisements. Guide students to recognize that leaving interest earned
with this money? Will it be
on savings in the savings account so that the saver earns interest on the
enough to purchase a car
original deposit and interest on the interest is called earning compound
when they turn 22?
interest. Have students develop Millionaire Rule 3 and write it on the
board. (Earn compound interest.)
5. Explain that banks pay compound interest on savings, although it may
not be as much as Uncle Mort pays. Discuss the following.
a. Give examples of the interest rates local banks are paying from the
statements, ads, and ad information brought from home. (Answers
will vary; however, the rates are likely to be much lower than the
10% that Uncle Mort pays.)
b. What would happen to the amount of accumulated savings if Uncle
Mort paid only 5%? (It would be less.)
6. Display Visual 1-4. Explain that this table illustrates what would
happen if a bank paid 5% interest compounded annually. Point out that
comparing the savings results at 5% with the savings results for 10%
($2571.12 at 5% compared to $3055.78 at 10%) gives us another rule
for becoming a millionaire. Discuss the following.
a. Based on the comparison between accumulated savings with 5%
interest and with 10% interest, what is the fourth rule of becoming a
Money Math (Lesson 1)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
4
Reproduction is permitted and encouraged.
Money Math: Lessons for Life
Lesson 1
The Secret to Becoming a Millionaire
millionaire? (Try to earn a high interest rate.) Add this rule to the
list on the board.
b. What would happen to accumulated savings if the deposits and
interest were left in the account, earning 5% interest for another six
years? (It would increase.)
c. What is the fifth rule of becoming a millionaire? (Leave deposits
and interest in the account for as long as possible.) Add this rule to
the board.
7. Have students consider how they used their calculators to solve these
problems. Guide them to develop a recursive equation such as [ANS +
0.05(ANS)] = ending balance for each year or [ANS + 0.05(ANS)] +
360 = beginning balance for each successive year.
8. Review the basic rules for becoming a millionaire. Write the following
rules on the board.
(1) Save early and often.
(2) Save as much as possible.
(3) Earn compound interest.
(4) Try to earn a high interest rate.
(5) Leave deposits and interest in the account as long as possible.
Graph It (Optional)
1. Tell students they will create four line graphs on the same set of axes.
These graphs should show the amount of savings earned over time: (a)
when saving $360 per year for six years in a bank, (b) when saving
$360 for 10 years in a bank, (c) when saving $720 per year for six
years, and (3) when saving $360 per year for six years at a 5% interest
rate per year. They determine the dependent and independent variables
and label the axes appropriately. They should retain these graphs for
later use. They may use a graphing calculator, a computer, or paper and
pencil to create the graphs.
2. Have students create a circle graph that shows the percent of total
savings that resulted from deposits by the saver and the percent that
resulted from compound interest when saving $360 per year for six
years at a 5% interest rate. They may use a graphing calculator, a
computer, or paper, pencil, and a protractor.
Check It—Assessment
Display Visual 1-4, and assign Activity 1-3 to each student. When students
are finished, display Visual 1-5 so they can check their answers.
Money Math (Lesson 1)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
Reproduction is permitted and encouraged.
5
Money Math: Lessons for Life
Lesson 1
The Secret to Becoming a Millionaire
Keep Going
1. Have students refer to the savings account and advertisement
information they brought from home. Discuss the following.
a. Do the ads or account statements tell consumers that the interest
rate is compounded annually? Semi-annually? Quarterly? (Answers
will vary.)
b. What do you think these terms mean? (annually - once per year;
semi-annually - twice per year; quarterly - four times per year)
c. How do you think semi-annual or quarterly compounding might
affect accumulated savings? (Answers may vary.)
d. How do you think quarterly interest payments would be calculated?
(Answers may vary.)
2. Assign Activity 1-4 to groups of 4 or 5 students. Tell the groups to
work together to complete the activity. Display Visual 1-6 to check and
correct their answers.
3. Display Visual 1-4 again. Ask students to compare this table with the
quarterly compounding table they completed. Discuss the following.
a. What was the total amount deposited by the saver in each case?
($2160)
b. How much interest was earned with interest compounded annually?
($411.12)
c. How much interest was earned with interest compounded quarterly?
($419.54)
d. How much additional interest was earned through quarterly
compounding? ($8.42)
e. What do you think would happen if interest were compounded
daily? (more accumulated savings at the end of the year)
f. What is the sixth and final rule for becoming a millionaire?
(Deposit money in accounts for which interest is compounded most
often.) Add the rule to the list on the board.
4. Review all rules to becoming a millionaire.
(1) Save early and often.
(2) Save as much as possible.
(3) Earn compound interest.
(4) Leave deposits and interest in the account for as long as possible.
(5) Try to earn high interest rates.
(6) Choose accounts for which interest is compounded often.
Money Math (Lesson 1)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
6
Reproduction is permitted and encouraged.
Money Math: Lessons for Life
Lesson 1
The Secret to Becoming a Millionaire
Teaching Tip:
Compute It
Be sure to tell your students
1. Divide students into pairs. Explain that their task is to discover
that people put their savings
combinations of interest rate, deposit, and years of savings that will
in many places. Many
lead to the goal of becoming millionaires. They may use a financial
people choose to invest their
calculator, spreadsheet financial functions on the computer, or use a
savings in stocks. Buying
financial calculator on a bank’s website.
stocks means buying some
ownership (equity) in a
2. Once they have decided what program to use, they should enter various
company. On average, over
combinations of deposit amounts, interest rates, years of saving, and
time, stocks have earned
how often interest is compounded and note the impact on accumulated
higher returns than savings
savings.
accounts. Stockholders
receive returns from
3. Have student pairs share the combinations with which they would be
dividends (a portion of
happiest. Discuss whether these combinations are realistic with
business profit paid to
questions such as “Is it reasonable to expect an interest rate of 20%?”
stockholders) and capital
or “What amount of monthly income do you think a person must earn
gains (the amount of the
in order to save $3000 per month?”
sale of stock that exceeds the
original price paid by the
stockholder).
Wrap It Up
Tell students to look at the
Discuss the following to highlight important information.
stock tables in the financial
pages of a newspaper. Point
1. What does a percentage represent? (some part of a hundred)
out that the yield (Yld.) is
2.
the return from dividends
How can 55% be expressed as a decimal? (.55) a fraction? (55/100)
stated as a percentage. Have
3. What is interest? (payment for the use of money)
students compare the
dividend yield to interest
4. What is an interest rate? (the annual interest payment on an account
rates on savings accounts.
expressed as a percentage)
Then, point out that most
5. What is compounding? (paying interest on previous interest)
stock investors are interested
in capital gains; that is, the
6. What is saving? (income not spent today to be able to buy goods and
increased value of the stock
services in the future)
from the time it was
purchased. Have students
7. What is opportunity cost? (the highest-valued alternative that is given
research how much stocks,
up)
on average, have increased
8. What is the opportunity cost of saving? (goods and services given up
over time. Information on
today)
the growth of the S&P 500
can be found by searching
9. What are some rules about saving that can help you become a
for S&P 500 History on the
millionaire? (Start saving early and save regularly. Save as much as
internet.
you can. Earn compound interest. Leave the deposit and interest earned
in the account as long as possible. Try to earn a high interest rate. Seek
savings options that compound interest often.)
Check It/Write It—Assessment
Explain that students’ work with the computer or calculator helped them
see the impact of the various rules on the quest to become a millionaire.
Money Math (Lesson 1)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
Reproduction is permitted and encouraged.
7
Money Math: Lessons for Life
Lesson 1
The Secret to Becoming a Millionaire
Divide the students into small groups and tell them to answer the following
questions in writing, as a group.
1. What happens to accumulated savings if the deposit amount increases?
(Savings would increase. Saving larger amounts generates greater
savings in the future.)
2. What happens to accumulated savings if the interest rate increases? (It
would increase.)
3. What happens to accumulated savings if the number of compounding
periods per year increases? Why? (It would increase because every time
compounding occurs, the saver is earning interest on interest earned.)
4. What happens to accumulated savings if the number of years increases?
(It would increase.)
5. What is the key to becoming a millionaire? (Save as much as possible
for as long as possible earning a high interest rate that is compounded
frequently.)
Going Beyond—A Challenge Activity
1. Remind students that one of the important rules about saving is to try to
earn a high interest rate. To do that, savers must investigate various
savings options available. If people save in a piggy bank, they don’t
earn any interest on their savings, and it isn’t particularly safe. If people
place their savings in a savings account at the bank, they earn interest
and it is usually safe because of deposit insurance. However, the
interest rate is usually lower on these accounts than some other savings
options.
2. Explain that people can put their money in a certificate of deposit or
CD. A certificate of deposit is a savings account that pays higher
interest than a regular bank savings account. However, when people put
their money in a CD, they promise to leave the savings in the account
for a certain amount of time, such as six months, a year, or five years.
3. Explain that many people save by buying savings bonds issued by the
United States government. When people buy a savings bond, they are
lending money to the government to help finance programs or projects.
Savings bonds come in different denominations, such as $50, $100, or
$500. They are considered to be a very safe way to save money; that is,
they are virtually risk-free.
4. Point out that the newest type of U.S. savings bond is the I Bond. I
Bonds are inflation-indexed and designed for savers who want to
protect themselves from inflation. Define inflation as an increase in the
average level of prices in the economy. (A simpler definition is an
increase in most prices.)
Money Math (Lesson 1)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
8
Reproduction is permitted and encouraged.
Money Math: Lessons for Life
Lesson 1
The Secret to Becoming a Millionaire
5.
Explain that inflation reduces the purchasing power of savings.
Purchasing power is the ability to buy things with an amount of
money. People save because they want to buy things in the future. If
they can buy a certain amount of things with $1000 today, people want
to be able to buy at least the same things in the future with their
savings. Discuss the following.
a. If you saved $1000 today to buy a $1000 computer next year, would
you be able to buy it if your savings earned 5% and the price of the
computer stayed the same? (Yes because you’d have approximately
$1050 to buy the $1000 computer.)
b. If you saved $1000 today to buy a $1000 computer next year, would
you be able to buy it if your savings earned 5% and the price of the
computer increased 3%? (Yes because you’d have approximately
$1050 to buy the computer that would cost $1030.)
c. If you saved $1000 today to buy a $1000 computer next year, would
you be able to buy it if you savings earned 5% and the price of the
computer increased 7%? (No because you’d have approximately
$1050 to buy the computer that would cost $1070.)
6. Summarize by pointing out that inflation reduces the purchasing power
of accumulated savings. If people’s savings are going to have the same
purchasing power in the future, then the interest/earnings on the savings
must be equal to or greater than the inflation rate. For example, if the
inflation rate is 4%, then the interest rate must be at least 4% so the
saver could still be able to buy the same amount of things in the future
with the money (principal).
7. Explain that this is exactly what the inflation-indexed I Bond is
designed to do—protect the purchasing power of an individual’s
principal AND pay fixed earnings. The I Bond interest rate has two
parts: a fixed interest rate that lasts for 30 years and an inflation rate
that changes every six months. For example, an I Bond may pay a fixed
interest rate of 2%. Inflation may be measured at an annual rate of 3%
for the first six months and 2.5% for the second half of the year. The
combined interest rate for the first six months would be 2% + 3%. The
combined interest rate for the second half of the year would be 2% +
2.5%.
8. Give each student a copy of Activity 1-5, and assign. Display Visual 1-7
to check answers.
Money Math (Lesson 1)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
Reproduction is permitted and encouraged.
9
Money Math: Lessons for Life
Lesson 1
The Secret to Becoming a Millionaire
Check It—Assessment
1. Divide the students into small groups. Assign each group a different
savings instrument. For example, money market funds, treasury bonds,
treasury bills, savings accounts, and certificates of deposits. Ask
students to do some research to answer the following questions.
a. What is this savings instrument called?
b. Does it require a minimum balance?
c. Are there fees or penalties if you withdraw your money before a
specified time?
d. Is this savings method more or less risky than savings bonds?
e. What is the interest rate on this savings instrument?
f. Is interest compounded annually, semi-annually, quarterly, daily?
g. How is the purchasing power of the savings protected from
inflation?
2. Tell students that each group must prepare a brief presentation in which
they compare the advantages and disadvantages of the savings
instrument they researched with the advantages and disadvantages of an
I Bond.
Money Math (Lesson 1)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
10
Reproduction is permitted and encouraged.
Money Math: Lessons for Life
Activity 1-1
It’s Never Too Late
Saving is income not spent now. The accumulated amount of money
saved over a period of time is called savings. Suppose there are 180
days in a school year, and you begin saving $2.00 each day in your
bank beginning in the 7th grade. You save all the money each year.
Your bank fills up and you start saving in an old sock. Answer the
following questions.
1. Calculate the amount of savings that you have at the end of each year.
Please show your work on the back of this sheet. Record your answers
for each year in the “SAVINGS” column of the table below.
GRADE LEVEL
SAVINGS
7th grade
8th grade
9th grade
10th grade
11th grade
12th grade
2. What would you have to give up each day in order to save $2.00? What
do we call the item you would give up?
3. Write a formula to represent the calculations that you made for each
year.
4. According to the formula, what will happen if you increase B?
Money Math (Lesson 1)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
Reproduction is permitted and encouraged.
11
Money Math: Lessons for Life
Activity 1-2
Uncle Mort Makes It Better
Suppose that on the first day of eighth grade you receive the following
message from Uncle Mort. “I am proud that you’ve been saving. I will
pay you 10% on the balance that you saved in the seventh grade and
10% on the balance of your saving at the end of each year.” You have
$360 in your bank. Answer the following questions.
1. Calculate how much money you will have at the end of each year.
Show your work on the back of this page. Write your answers in the
“SAVINGS” column in the table below.
GRADE LEVEL
SAVINGS
7th grade
8th grade
9th grade
10th grade
11th grade
12th grade
2. Write a formula to represent the amount of savings accumulated at the
end of each year.
3. How do the amounts you’ve calculated compare to your previous
savings calculations?
Why?
Money Math (Lesson 1)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
12
Reproduction is permitted and encouraged.
Money Math: Lessons for Life
Activity 1-3
The Miracle of Compounding
1. Write the basic percent equation that you have used in this lesson to
solve for the part of the whole. Use the variables a, b, and c, where a is
the percent, b is the whole, and c is the part of the whole.
2. Read the following sentences. Write an appropriate formula to use to
solve for the percent of allowance spent OR the amount spent.
• Mary received her weekly allowance of $10.
• Mary used two one-dollar bills and two quarters.
• Mary spent one-fourth of her allowance.
3. Answer the following questions, using the information on the overhead
projector.
a. How much did the total amount of savings increase from seventh
grade until graduation from high school?
b. How much did the saver actually deposit in the account during the 6
years?
c. Rewrite the percent equation from #1 to find the percent of the
whole.
d. Use the equation in (c) to find the percent of the total accumulated
savings that savers deposited.
e. What amount of the savings accumulated as a result of interest and
compounding?
f. What percent of the total accumulated savings is this amount?
g. Approximately 16% of the total amount of the savings accumulated
because of interest earned on savings, even though the account only
earned 5% interest per year. Why did this happen?
h. What would happen if the saver kept the money in the account for
ten more years?
Money Math (Lesson 1)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
Reproduction is permitted and encouraged.
13
Money Math: Lessons for Life
Activity 1-4
Confounding Compounding
Uncle Mort has taught you a lot about saving. Now he’s encouraging you
to open a savings account. He says that it’s best to have interest
compounded as often as possible. You still aren’t too certain what
compounded more than once a year means or how it is done. Uncle Mort
sends you an e-mail message with the following example.
Suppose that a bank offers a 5% interest rate, compounded semi-annually.
At the end of six months, the bank will multiply your balance by half the
interest rate and add that amount to your account. So, if you have $180 in
the bank after six months, the bank will add $4.50 to your account. Your
new balance will be $184.50. At the end of the next six months, if you still
have $184.50 in your account, the bank will add $4.61 to your account.
Your new balance will be $189.11.
1. What decimal amount would you use to calculate quarterly interest?
2. Suppose that the bank pays a 5% interest rate, compounded quarterly.
You deposit $360 at the beginning of each grade. Complete the
following table to calculate the total savings you’ll have at the end of
each year. The first two rows are completed for you.
3. How many dollars were deposited during the six years? ____________
4. How much interest was earned? __________________
Money Math (Lesson 1)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
14
Reproduction is permitted and encouraged.
Money Math: Lessons for Life
Activity 1-5
Mary’s Dilemma
Mary Andrews received a $100 I bond for her birthday. Her uncle bought
the electronic savings bond at the government’s TreasuryDirect.gov
website. He sent it to a special account that Mary’s parents set up for her.
Her uncle explained that the fixed interest rate on the bond is 2.0%.
Inflation was recently measured at an annual rate of 2.6%, and economists
predict that it will stay the same for the
rest of the year. Interest is paid every
month, but earnings are compounded
semi-annually. With her parents’ help,
Mary can check her I Bond every six
months to see how much interest she has
earned on her bond.
Mary is very confused by all this jargon.
All she wants to know is what the bond
will be worth on her next birthday. Using
what you have learned about semi-annual compounding and I Bonds, help
Mary determine the value of her bond at the end of one year.
Answer the following questions on the back of this handout.
1. What is the combined interest rate?
2. Use the combined interest rate to estimate how much interest Mary
would earn that year.
3. For the first half of the year, how much interest will Mary earn from the
fixed interest rate?
4. For the first half of the year, how much interest will Mary earn from the
inflation rate?
5. How much will her bond be worth after six months?
6. For the last half of the year, how much interest will she earn from the
fixed interest rate?
7. For the last half of the year, how much interest will Mary earn from the
inflation rate?
8. How much will her bond be worth after the second six months?
9. How much interest will Mary’s bond earn for the year?
10. Why does the interest earned exceed the amount you estimated in #2?
Money Math (Lesson 1)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
Reproduction is permitted and encouraged.
15
Money Math: Lessons for Life
Visual 1-1
Review of Percent
• The word percent means “per hundred.”
• A percent is like a ratio because it
compares a number to 100.
• A percent is a part of a whole.
• A number followed by a percent symbol
(%) has a denominator of 100. This means
that it is easy to write as a fraction or a
decimal. For example, if you earned a 90%
on your last test, you also earned 90/100
that is the same amount as the decimal .90.
To find the percent, we use the following
equation.
a% = c ÷ b and a% · b = c
where a is the percent,
b is the whole, and
c is the part of the whole.
Money Math (Lesson 1)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
16
Reproduction is permitted and encouraged.
Money Math: Lessons for Life
Visual 1-2
Addle’s Answers
➽ What percent of the students’ families thought that Mrs.
Addle was correct?
In this example, 25 is the whole and 20 is the part of the whole, so
we know b and c. Now, we must solve for a.
a ÷ 100 = 20 ÷ 25
What percent of 25 is 20?
a% · 25 = 20
(a ÷ 100) · 25 = 20
.25a = 20
a = 20 ÷ .25
a = 80%
80% of the students learned that their families agreed with
Mrs. Addle.
➽ How can 80% be stated as a decimal?
80% = 80 ÷ 100 = .80 or 8 ÷ 10 = .8
➽ What percent of the students failed to do their homework?
• The whole is represented by 100%.
• The part of the whole that did the homework is 80%, so 20% didn’t.
or, (a/100) · 25 = 5 ,
• so that .25a = 5,
• so that a = 5 ÷ .25,
• therefore, a = 20 or 20% of the students didn’t complete the
homework.
➽ How can 20% be stated as a decimal? (by converting 20% to
20/100 or 2/10 which equals 0.2)
Money Math (Lesson 1)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
Reproduction is permitted and encouraged.
17
Money Math: Lessons for Life
Visual 1-3
Millionaire Rules 1 and 2
Grade Level
Accumulated Savings
3rd grade
$ 360
4th grade
720
5th grade
1080
6th grade
1440
7th grade
1800
8th grade
2160
9th grade
2520
10th grade
2880
11th grade
3240
12th grade
3600
Millionaire
Grade Level
Accumulated Savings
Rule 1:
7th grade
720
8th grade
1440
9th grade
2160
10th grade
2880
11th grade
3600
12th grade
4320
Money Math (Lesson 1)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
18
Reproduction is permitted and encouraged.
Money Math: Lessons for Life
Visual 1-4
Compound Interest
Millionaire
A
B
C
D
E
Rule 2:
Beginning
Interest
Annual End-of-Year
Year
Amount
Rate (5%) Interest
Amount
7th grade
$ 360.00
0.05
$ 18.00
$ 378.00
8th grade
738.00
0.05
36.90
774.90
9th grade
1,134.90
0.05
56.75
1,191.65
10th grade
1,551.65
0.05
77.58
1,629.23
11th grade
1,989.23
0.05
99.46
2,088.69
12th grade
2,448.69
0.05
122.43
2,571.12
Money Math (Lesson 1)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
Reproduction is permitted and encouraged.
19
Money Math: Lessons for Life
Visual 1-5
Answers to Activity 1-3
1. a% · b = c; a = percent; b = whole; c =
part of whole
2. 25% · $10 = $2.50
3a. $2,571.12 - $360 = $2,211.12
3b. $360 · 6 years = $2,160
3c. a% = c ÷ b
3d. $2,160/$2,571.12 = 84%
3e. $2,571.12 - $2,160 = $411.12
3f. $411.12/$2,571.12 = 16%
3g. The interest was compounded. The saver
earned interest on both deposits and
accumulated interest.
3h. The amount of savings would increase
even more.
Money Math (Lesson 1)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
20
Reproduction is permitted and encouraged.
Money Math: Lessons for Life
Visual 1-6
Answers to Activity 1-4
1.
0.05/4 = .0125
2.
Deposit Plus
First
Second
Previous
Quarter
Subtotal
Quarter
Subtotal
Grade Level
Balance
Interest
Interest
7th grade
$ 360.00
$4.50
$364.50
$4.56
$369.06
8th grade
738.34
9.23
747.57
9.34
756.91
9th grade
1135.95
14.20
1150.15
14.38
1164.53
10th grade
1553.83
19.42
1573.25
19.67
1592.92
11th grade
1992.98
24.91
2017.89
25.22
2043.11
12th grade
2454.51
30.68
2485.19
31.06
2516.25
Third
Fourth
Quarter
Subtotal
Quarter
Accumulated Savings
Grade Level
Interest
Interest
7th grade
$4.61
$373.67
$4.67
$378.34
8th grade
9.46
766.37
9.58
775.95
9th grade
14.56
1179.09
14.74
1193.83
10th grade
19.91
1612.82
20.16
1632.98
11th grade
25.54
2068.65
25.86
2094.51
12th grade
31.45
2547.70
31.85
2579.55
3.
$2160.00
4.
$419.55
Money Math (Lesson 1)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
Reproduction is permitted and encouraged.
21
Money Math: Lessons for Life
Visual 1-7
Answers to Activity 1-5
1. 2.0% + 2.6% = 4.6%
2. $100 x 4.6% = $100 x .046 = $4.60
3. 2.0% —
: 2 = .02 —
: 2 = 0.01; $100 x .01 = $1.00
4. 2.6% —
: 2 = .026 —
: 2 = .013; $100 x .013 = $1.30
5. $100 x [1 + (4.6% —
: 2)]
$100 x [1 + (.046 —
: 2)]
$100 x 1.023% = $102.30
6. $102.30 x .01 = $1.02
7. $102.30 x .013 = $1.33
8. $102.30 x 1.023 = $104.65
9. $104.65 - $100 = $4.65
10. Because of compounding, in the second half of the year,
Mary earns interest on her principal AND on the interest
earned in the first half of the year.
Money Math (Lesson 1)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
22
Reproduction is permitted and encouraged.
Money Math: Lessons for Life
Lesson 2
Wallpaper Woes
Lesson Description
Students hear a story about Tom, a middle school student who wants to
redecorate his bedroom. They measure the classroom wall dimensions,
draw a scale model, and incorporate measurements for windows and doors
to determine the area that could be covered by wallpaper. Students then
hear more about Tom's redecorating adventure, learning about expenses,
budget constraints, and trade offs. For assessment, students measure their
rooms at home. This lesson requires that students know how to measure, or
a review may be necessary before teaching.
Objectives
Students will be able to:
1. measure in feet and calculate square feet.
2. define area.
3. calculate the area of squares and rectangles.
4. define trade offs, budget constraint, and expenses.
5. identify trade offs.
Mathematics
measurement, dimension, height, width, length, area, average
Concepts
Personal Finance
trade offs, budget constraint, expenses
Concepts
Materials Required
• a sign for each wall in the classroom (labeled A, B, C, and D) and
masking tape (Prior to class, tape a letter sign to each wall in the
classroom.)
• a yardstick or steel tape measure and a sheet of paper for each group of
students
• one sheet of graph paper, one ruler, and one protractor for each student
• transparency of Visual 2-1
• calculators (optional)
• copy of Activity 2-1 for each student
• book of wallpaper samples or allow students to visit Internet sites
• 2-3 sheets of 8-1/2" x 11" paper, crayons, markers, and/or colored
pencils for each student
• 9" x 12" piece of oak tag for each student
• scissors and glue or glue sticks
Money Math (Lesson 2)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
Reproduction is permitted and encouraged.
23
Money Math: Lessons for Life
Lesson 2
Wallpaper Woes
Time Required
2 - 3 days
Procedure
Get Ready
1. Ask students if they're happy with the way their rooms at home are
decorated. (Answers will vary.) Discuss the following.
a. If you like your room, what do you like? (color, wallpaper,
furniture, posters, pictures)
b. If you don't like your room, what would you change? (color,
wallpaper, posters, pictures) Why? (paper is for younger kids, tired
of the color or the wallpaper pattern, want posters and pictures
related to new things)
2. Explain that they will learn about a middle school boy, Tom, who's
unhappy with the way his room looks. Read the following story to the
class.
My room still looks EXACTLY the way it did when I was ten. Can you
believe it? I just can't stand it any longer. So, over the weekend, I
asked Mom if I could change my room. I told her that I wanted to rip
down the race car wallpaper and put up something else. Mom said I
could change my room, but I couldn't put up strange stuff like skull and
crossbones wallpaper. She also said I would have to figure out how
much wallpaper I needed before we could shop for wallpaper. I said,
"That's easy, I need enough to cover all the walls. The person at the
wallpaper store will know." Mom replied, "Tom, the person at the store
needs some help. You have to measure the walls and have some idea
about how much wallpaper you need before you ever go to the store.
This is where all those important math skills you've learned at school
will come in handy." Let's talk about what you need to know.”
Maybe this redecorating idea wasn't such a great one after all. Maybe
I can just stick some posters over the race cars.
3. Discuss the following.
a. Do you think Tom should give up on the wallpaper idea? (Answers
will vary.)
b. Have any of you ever helped someone in your family buy
wallpaper? (Answers will vary.)
c. What math skills will Tom need to buy wallpaper? (measurement
skills, understanding of dimensions, addition, subtraction,
multiplication, and division skills)
d. If we wanted to buy wallpaper for the classroom, what dimensions
would we need? (the height and width of the walls) Why? (These
measurements allow us to determine the amount of wall space to be
covered with wallpaper.)
Money Math (Lesson 2)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
24
Reproduction is permitted and encouraged.
Money Math: Lessons for Life
Lesson 2
Wallpaper Woes
e. What is a baseboard, and why do you measure only to the baseboard
and not to the floor? (A baseboard is a strip of plastic or wood that
fits on top of the floor and along the bottom of the wall. The
wallpaper will stop at the baseboard. It won't cover the baseboard.)
4. Divide students into groups of 3 or 4, and distribute a yardstick or steel
tape measure and a sheet of paper to each group. Draw the table below
on the board, and ask a member of each group to draw the same table
on the sheet of paper. Allow time for groups of students to measure the
walls in the room and record the measurements.
Note: If there are large
Wall
Height of Wall in Feet
Width of Wall in Feet
errors in measurement of
A
any wall, have the groups
measure again.
B
C
D
Get Going
1. Have each group report its measurements. As each reports, record the
measurements in the table on the board as in the sample table below.
Wall
Heights of Wall in Feet
Widths of Wall in Feet
A
8', 8'6", 8'3", 7'9", 8'
10', 10'6", 10', 10'3", 10'3"
2. Point out any differences in measurements. Given differences, ask for a
way to calculate a single height and width for each wall, given the data.
Guide students to recognize that they can calculate an average height
and width for each wall. Ask how to calculate the average height of the
wall. (Add all height measurements and divide by the number of
groups.) Allow time for students to compute the average heights. Then
ask how to calculate the average width for each wall. (Add all width
measurements for each wall and divide by the number of groups.) Have
students compute the average widths.
3. Record averages on the board, and explain that when determining how
much wallpaper to buy, experts recommend that people round to the
next highest half foot or foot as needed. If necessary, round the averages
calculated.
Money Math (Lesson 2)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
Reproduction is permitted and encouraged.
25
Money Math: Lessons for Life
Lesson 2
Wallpaper Woes
Graph It
1. Distribute rulers and graph paper. Have students draw a scale model of
the room using the averages and a scale of 1" = 1'.
Students should notice they
2. Have one group measure the windows, another measure the chalkboard,
need measurements of
and another measure the doors, then record the measurements on the
doors, windows, chalk-
board. Tell students to use this information to complete the drawing.
boards and other areas that
wouldn't be covered with
paper.
Keep Going
1. Discuss the following.
a. How can these measurements be used to determine the amount of
wallpaper needed for the room? (by determining the area of wall
space that must be covered)
b. What is "area"? (the measure of the interior region of a two
dimensional figure)
c. What type of figure is the wall? (rectangle)
d. How do we determine the area of a rectangle? (Answers will vary.
Guide students to recall that they must multiply the length of the
rectangle by the width.)
e. What is the length of the front wall of the classroom? (Answer
depends on the classroom.)
f. What is the width of the front wall of the classroom? (Answer
depends on the classroom.)
g. Using your drawing, how can you determine the area of the front
wall? (count the number of squares inside the rectangle)
h. Why is area expressed in square units - in this case, square feet? (It
is the sum of the squares inside a two dimensional figure.)
i. Multiplying height by width, how can you determine the total wall
area in the room? (Multiply the height of each wall by the width of
each wall and add the four products.)
2. Have students think of another way to do this problem that might take
less time. Guide them to recognize that they could first add the width of
all four walls and then multiply that sum by the sum of the height of the
four walls. Have them calculate in this way and compare answers. Of
course, the answers will be the same.
Money Math (Lesson 2)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
26
Reproduction is permitted and encouraged.
Money Math: Lessons for Life
Lesson 2
Wallpaper Woes
3.
Ask if they still have a problem to solve before they could purchase
wallpaper.
a. What is it? (The measurement includes the doors, windows, and
chalkboards that shouldn't be covered with paper.)
b. How can the measurements be corrected? (by subtracting the area
of the doors, chalkboards, and windows from the total area)
c. Point out that each single roll of wallpaper contains 30 square feet
of paper. How can the number of single rolls of wallpaper to buy to
paper the walls in the classroom be determined? (divide the area of
the wall space by 30)
4. Read the following scenario to the class.
My mom and I figured out the wall area of my room. Then we went
shopping at a huge hardware store. It had everything - wallpaper,
paint, lamps, blinds, rugs, picture, and posters.
I found some great wallpaper for only $36 per single roll!
I gave the store clerk the area that Mom and I calculated. She
explained that I would need at least 15 single rolls of paper. I also
found two posters, a basketball lamp, some great soccer posters,
and paint for the baseboards in my room.
My room was going to look fabulous, but my mom spoiled the whole
thing with, you guessed it, MATH! First she asked, "Tom, if the
wallpaper is $36 a roll and you need 15 rolls, how much will that
cost?" I replied, "Oh, Mom. I don't know. Don't you have a
calculator?"
5. Pause and have students help Tom with this calculation.
(15 x $36 = $540) Continue reading the story.
"Tom," my mom said anxiously, "that's $540 just for wallpaper. How
much is the gallon of paint?" "Uh, $25," I answered. "And, you
want pictures, posters, a lamp, a bedspread, and blinds?" I think
you should know that there's a limit to what I will spend," Mom
explained.
Well, that ended my shopping spree. My mom told me that she was
willing to spend a total of $700 on the project. She said that $700
was my budget constraint. How am I supposed to get everything I
want? If I spend $540 for wallpaper, I'll only have, um . . . . Does
anyone have a calculator?
6. Pause and have someone help Tom with the calculation.
($700 — $540 = $160)
Money Math (Lesson 2)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
Reproduction is permitted and encouraged.
27
Money Math: Lessons for Life
Lesson 2
Wallpaper Woes
7. Explain that Tom has a budget constraint of $700. A budget constraint
is a limit to the amount that may be spent. Because of this constraint,
Tom can't have everything he wants. He must limit his expenses to
$700 or less. Explain that expenses are payments for goods and
services.
8. Explain that Tom must make some choices. His mom suggested that
first he should make a list of the expenses for his room. Display Visual
2-1 and explain that this is Tom's list. Discuss the following.
a. How much more are Tom's expected expenses than his budget
constraint? ($935 — $700 = $235)
b. Suggest some changes that Tom might make. (only buy one lava
lamp, only buy one soccer poster and frame, wait and ask for the
black light and black light poster as a holiday gift, eliminate the
basketball hoop)
9. Point out that Tom must make some trade offs. Trade offs involve
giving up some of one thing to get more of something else. If Tom buys
more expensive wallpaper, he must give up some of the other things
that he wants. Continue the story.
"Look, Mom," Tom said in a reasonable voice, "I'm perfectly willing
to give up the blinds and the bedspread. After all, our apartment is
on the second floor, so I don't need blinds. I hate to make my bed,
so why have a bedspread?"
Sounding exasperated, Mom responded, "Tom, we need blinds or
curtains on the windows. That's one of the landlord's rules, and I
want the apartment to look nice. You may not like making your bed;
however, I like it when your bed is made, so the bedspread is a
must. Do you have other suggestions?"
Tom replied, "I could buy one lava lamp instead of two and one
soccer poster and frame instead of two. I could wait and ask for the
black light and black light poster for a holiday or birthday gift. I
could do the same with the basketball hoop. I guess I have to have a
trash can, right?" Tom's mother nodded. "Well then, that's all I can
think of."
"Okay, Tom, how much would you save if you did all that?" Tom's
mom asked.
"Gosh, Mom, are you sure you didn't bring a calculator?"
Money Math (Lesson 2)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
28
Reproduction is permitted and encouraged.
Money Math: Lessons for Life
Lesson 2
Wallpaper Woes
10. Pause and ask how much Tom would save with all those changes.
($22.50 by eliminating a lava lamp, $37.50 by eliminating one soccer
poster and frame, $15 by eliminating the basketball hoop, and $30 by
eliminating the black light and black light poster for a total of $105)
Discuss the following.
a. At first, what trade off is Tom willing to make? (He is willing to
give up the bedspread and blinds in order to have the wallpaper.)
b. What does his mom think of this? (She isn't willing to make the
same trade off.)
11. Continue the story.
"Mom, I figured it out. If I make all the changes we discussed, I can
save $105, but that still isn't enough. Maybe I should just stick with
the race cars," Tom said dejectedly.
"Tom, I have a better idea. You know, you chose a designer
wallpaper," she said.
"Yes, isn't it great? The designer's name is Tom, too," Tom said.
"Well, that's not such a good reason to buy the paper, and that
wallpaper is much more expensive than some others. Plus, that
paper has a large pattern repeat. That's why you must buy 15 rolls
of paper. You need more paper in order to match the pattern as the
paper is hung. It would be a good idea if you were a wiser buyer.
There are many other books containing wallpaper samples. Some
might be just as nice but cost less. Why don't you spend a little more
time looking? Perhaps you should think carefully about what's
really important to you. Is the designer wallpaper more important
than the other things you want for your room?"
12. Ask why Tom's mom was right. (Tom hadn't considered all available
options.) Explain that after Tom looked for a while, he found wallpaper
for only $15 a single roll and the pattern repeat was smaller, so he only
needed 14 rolls. He decided he would rather have the less expensive
wallpaper in order to have more of the other items he wanted. Discuss
the following.
a. What trade off is Tom willing to make now? (He's willing to give up
the designer wallpaper in order to have the other items he wants for
his room.)
b. How much would the new wallpaper selection cost?
(14 rolls x $15 = $210)
Money Math (Lesson 2)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
Reproduction is permitted and encouraged.
29
Money Math: Lessons for Life
Lesson 2
Wallpaper Woes
13. Display Visual 2-1 again, explaining that Tom's expenses have changed.
Ask for alternative approaches to calculating a new total. Write student
approaches in sentences on the board. Then have students convert the
sentences as mathematical statements, using symbols and parentheses
as needed.
Subtract $540 from $935 and add $210 to the difference.
($935 — $540) + $210 = $605
Add all numbers substituting $210 for $540.
(45 + 25 + 75 + 15 + 210 + 100 + 90 + 10 + 20 +15) = $605
Subtract $210 from $540 and subtract the difference from $935.
$935 ($540 — $210) = $605
Graph It
Using a computer or pencil, paper, protractor or ruler, have students create
a bar or circle graph showing the portion of Tom's decorating budget
represented by each expenditure.
Wrap It Up
Review lesson content with the following questions.
1. What is area? (the measure, in square units, of the interior region of a
two dimensional figure)
2. What's the formula for calculating the area of a rectangle?
(A = lw)
3. Sue's parents told her that she could buy new clothes, but her budget
constraint was $125. What does that mean? (Sue must limit the amount
that she spends to $125 or less.)
4. What is an expense? (an amount spent to purchase goods or services)
Give an example of an expense you had this week. (lunch, video rental,
candy)
5. Trade offs involve giving up a little of one thing in order to get a little
more of something else. If your parents said that you could have $5
more allowance a week for watching your younger brother after school
on Fridays for one hour, what trade off are they asking you to make?
(give up one hour of free time on Fridays in order to have $5 extra to
spend/save)
Money Math (Lesson 2)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
30
Reproduction is permitted and encouraged.
Money Math: Lessons for Life
Lesson 2
Wallpaper Woes
Check It—Assessment
1. Have students draw a scale model of their bedroom or another room in
their homes, using graph paper and a ruler. The scale should be 1" = 1'.
The model should illustrate walls, doors, and windows. Using the scale
model, students should determine the amount of wallpaper needed to
paper the room.
2. Distribute Activity 2-1 to each student, review instructions, and have
students complete the worksheet.
Going Beyond—A Challenge Activity
1. Ask what a pattern repeat is. After a few answers, explain that on most
wallpaper, there is something called a pattern repeat. This is the vertical
Have students visit a web
distance between one point on a pattern design to the identical point
site to see examples of: drop
vertically. This pattern repeat is an integral part of the design. If the
match, straight across
match, and random match.
pattern repeat is large, the consumer must buy extra paper to match the
pattern. If the pattern is random or the repeat pattern is small, the
www.wallcovering.org/
consumer won't need to buy as much extra paper.
patterns.html or search for
wallpaper pattern examples
2. Tell students that they will design their own wallpaper. The paper must
have a straight across or a drop match pattern. They must design enough
As an alternative, bring in a
paper so that another student can cut the paper into strips and cover a 9"
book of sample wallpaper so
students can look at
x 12" area with it.
different types of pattern
3. Distribute 2-3 sheets of 8-1/2" x 11" paper, crayons, scissors, markers,
repeats.
and colored pencils. Tell students to draw patterns, using a landscape
orientation. Have them carefully cut the sheets into 2-1/2" x 8-1/2"
strips. When finished, have students trade designs. Give each student a
piece of 9" x 12" oak tag (or an 8-1/2" x 11" sheet of paper) and a glue
stick or glue. Tell them to match the strips as though they were hanging
paper by gluing the strips on the oak tag with a portrait orientation.
Money Math (Lesson 2)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
Reproduction is permitted and encouraged.
31
Money Math: Lessons for Life
Activity 2-1
Assessment
Read the paragraphs below and answer the questions that follow.
Kristen wants to buy a new video game with a price of $65. Kristen
receives $15 for an allowance each week. She has been trying to save
$5 each week for the last 5 weeks. So far, she has $5. Kristen is very
frustrated. She can't figure out what she is doing wrong.
She must use her allowance for school lunches as well as for any
entertainment or activities during the week. Last week Kristen paid
$1.50 each school day for lunch. Kristen's neighbor said that he would
pay Kristen $10 to rake leaves on Saturday afternoon, but Kristen
wanted to go to the movies with her friends. The ticket for the matinee
was $4.00, and she spent another $2.50 on popcorn and soda. While
she and her friends waited for their ride home, she spent $1.00 playing
video games at the arcade in the theater.
1. What are expenses? In the space below, write a list of Kristen's
expenses for last week.
2. Kristen chose to go to the movies with her friends rather than rake
leaves. She gave up earning some extra money to spend more time with
her friends. What is this called?
__________________________________________________________
3. Recommend some simple changes Kristen could make to save more of
her allowance.
__________________________________________________________
__________________________________________________________
4. Kristen and her family are going on vacation. Her mother told her that
she could spend $30 on souvenirs, video games, and miniature golf
during the week. What is Kristen's budget constraint for the trip?
__________________________________________________________
Money Math (Lesson 2)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
32
Reproduction is permitted and encouraged.
Money Math: Lessons for Life
Visual 2-1
Tom’s Expenses
Tom's Expenses
2 lava lamps
$ 45
one gallon of high-quality paint
25
2 soccer posters with frames
75
over-the-door basketball hoop
15
15 single rolls of wallpaper
540
bedspread
100
2 blinds for windows
90
one black light poster
10
one black light
20
black-light trash can
15
TOTAL
$ 935
Money Math (Lesson 2)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
Reproduction is permitted and encouraged.
33
Money Math: Lessons for Life
Lesson 3
Math and Taxes: A Pair to Count On
Lesson Description
Students examine careers and reflect on how workers use math in their
occupations. They study selected occupations, learning about the work
skills (human capital) that different workers possess and salaries that those
workers earn. Next, students learn about how taxes are paid on income that
people earn and how income tax is calculated. They learn how the
progressive federal income tax is based on the ability-to-pay principle.
Objectives
Students will be able to:
1. describe examples of human capital.
2. explain the link between human capital and income earning potential
and provide examples.
3. define and provide examples of human and capital resources.
4. define and provide examples of income, saving, taxes, gross income,
and net income.
5. define and provide examples of ability-to-pay and progressive tax.
6. calculate tax rates (percents) and the dollar amount of taxes.
7. read and understand tax tables.
Mathematics
computation and application of percents and decimals, using and applying
Concepts
data in tables, reasoning and problem solving with multi-step problems
Personal Finance
income, saving, taxes, gross income, net income
Concepts
Materials Required
• copy of Activity 3-1, cut apart so there is one card for each group of 3-4
students
• calculators
• copy of Activity 3-2, cut apart so there is one card for each pair of
students
• copy of Activity 3-3 for each pair of students
• black markers, chalkboard, masking tape
• copy of Activity 3-4 for each pair of students
• copy of Activity 3-5 for each student
• transparency of Activity 3-5
• copy of Activity 3-6 for each student
Money Math (Lesson 3)
• transparencies of Visuals 3-1 through 3-4
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
Reproduction is permitted and encouraged.
35
Money Math: Lessons for Life
Lesson 3
Math and Taxes: A Pair to Count On
Time Required
3 - 4 days
Procedure
Get Ready
1. Divide the class into groups of 3 or 4. Give a card from Activity 3-1 to
each group.
2. Explain that each card describes a person with a particular occupation
and a problem facing that person. Tell students to read the cards, decide
what types of math skills/calculations each person must use to solve his
or her problem, solve the problem where possible, and explain their
reasoning in words.
3. Allow time for students to work. Have groups share the information on
their cards, the type of math skills required, and their answers and
reasoning. Discuss the following.
a. What did all people described on the cards have in common? (They
all used mathematics skills to solve a work-related problem.)
b. What types of mathematics skills were required? (basic computation
skills, calculation of area and volume, conversion from customary
to metric measurement, understanding calculation of averages,
calculation of percentages)
c. Think of other occupations that also require the use of mathematics
skills. (Answers will vary.)
d. Can you think of tasks that you or others at home do that require the
use of mathematics? (cooking, painting, wallpapering, buying
carpeting, sewing, woodworking, doing math homework, balancing
the checkbook)
4. Divide students into pairs, and give a card from Activity 3-2 to each
pair.
5. Tell students that these are occupation cards. Ask each pair to identify
only the occupation to the class. Pairs should not read the information
on the card to the class. After each pair states its occupation, discuss the
following with the class.
a. What type of work does a person with this occupation do? (Answers
will vary.)
b. What type of math skills do you think a person with this occupation
might use? (Answers will vary but might include: basic
calculations, graphing, interpretation of data, charts, and tables,
geometry, algebra.)
6. If students have questions about a worker, attempt to answer the
questions as a class.
Money Math (Lesson 3)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
Reproduction is permitted and encouraged.
36
Money Math: Lessons for Life
Lesson 3
Math and Taxes: A Pair to Count On
7. Have each pair answer the questions on Activity 3-3 based on the
occupation chosen. Tell each pair to write its occupation on the back of
Activity 3-3 with a black marker. Tell each pair to tape the paper with
the occupation to the chalkboard.
8. Have one member of each pair identify the occupation, describe the
education necessary, and the math skills involved. After all occupations
have been identified, discuss the following.
a. Which occupation do you think earns the highest salary? (Answers
will vary.)
b. Which occupation do you think earns the lowest salary? (Answers
will vary.)
9. Combine student pairs into small groups. Have groups consider the
occupations on the board and rank them according to yearly wage. The
first occupation they list should be the occupation they think earns the
highest wage, the second occupation should be the one they think earns
the next highest wage, and so on.
10. Allow time for students to work. Have a volunteer group place the signs
on the board in order (left to right) according to its list. Allow time for
other groups to comment or make changes.
11. Have a student who worked with a particular occupation go up to the
board and write the annual salary calculated for that occupation under
the sign. Tell groups to check how well they did in ranking the
occupations according to wage. Rearrange the signs and rewrite salaries
so they are in the correct order. Discuss the following.
a. In general, do the very high-earning occupations require more or
less education than the very low-earning occupations? (more)
b. Give an example of this generalization. (Doctors earn higher wages
and require more education than roofers.)
12. Explain that people who work in the economy are human resources.
Human capital is the quality and quantity of skills, education, and
talents a person has. When people attend classes, become apprentices,
obtain graduate degrees, and receive on-the-job training, they are
investing in or improving their human capital. Have students identify
examples of investment in human capital made by the people about
whom they read. (finished high school; attended trade school, college,
or university; practice; apprenticeships)
13. Have students explain how, in general, investment in human capital
helps a person succeed or “pays off.” (People who invest in their human
capital tend to earn more income over time than those who don’t.) Ask
students why participation in mathematics classes throughout a student’s
school career is considered an investment in human capital. (Math skills
Money Math (Lesson 3)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
Reproduction is permitted and encouraged.
37
Money Math: Lessons for Life
Lesson 3
Math and Taxes: A Pair to Count On
are essential to day-to-day living as well as required for various
occupations. Learning and improving math skills improves a person’s
human capital.)
Keep It Going
1. Explain that the wage or salary that people earn for the work they do is
called income. There are three things that people do with their income.
They can save it, spend it, and pay taxes with it. Everyone must pay
taxes, but it is up to each individual to determine what to do with the
money that is left after paying taxes. Some might spend all of the
money; some might spend some and save some.
2. Explain that saving occurs when people do not spend all their income
on goods and services right away. Taxes are required payments to
government. Discuss the following.
a. What taxes do you pay or are you aware adults pay? (sales tax,
income tax, property tax)
b. On what items do you pay sales tax? (Answers will vary; however,
usually on items purchased such as books, toys, clothes, and food.)
c. For what do you think the money collected as sales tax is used?
(Answers will vary.)
d. To whom do people pay property tax? (local government)
e. For what do you think property taxes are used? (Answers will vary.)
f. To whom do people pay income tax? (federal and state
governments)
g. For what do you think federal income taxes are used? (Answers will
vary.)
3. Explain that federal income taxes are used to provide goods and
services for citizens of the United States and to support the operation of
the federal government. Ask students for examples of goods and
services that the federal government provides. (interstate highways,
bridges, defense, medical research, national weather service, college
loan programs, welfare payments, food stamps, approval of new drugs
through the FDA, testing of meat and other agricultural products,
disaster relief)
4. Point out that people usually learn about income tax when they get their
first job and must pay income taxes. However, the class will have the
opportunity to learn from a young woman named Hannah. Read the
following.
It is March in Hannah’s senior year of high school. She is going to
college in the fall and has a scholarship that covers two-thirds of her
Money Math (Lesson 3)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
Reproduction is permitted and encouraged.
38
Money Math: Lessons for Life
Lesson 3
Math and Taxes: A Pair to Count On
tuition. Her parents have agreed to pay the remaining one-third of her
tuition and her room and board. Hannah must pay for her books each
semester and for her miscellaneous expenses such as pizza, movies, and
other entertainment. Hannah has been looking for a job for several
weeks and has finally found one. Let’s listen while Hannah tells her
mother about her new job.
“Mom! I did it! I found a job. I’ll earn $7.50 per hour at Toys for You.
The manager said I could work weekends until school is out. That will
be about 12 hours a week. She said that I could work at least 25 hours
a week during the summer. Mom, I’ll have almost $2000 before college
starts in the fall. If I combine that with what I’ve already saved, I’ll
have more than enough money for school. Can you believe it? I start
next week—that’s spring break. The manager said to count on 25
hours.”
“Hannah that’s great. Be careful though, before you start counting your
money you need to remember that you have to pay taxes.”
“Yeah, yeah, I know. They gave me some forms to fill out. I have to take
them back tomorrow when I start. What’s the big deal about taxes? All I
have to do is fill out some forms. No problem.”
“Hannah, it is more than just forms. Toys for You will take money from
your check each week. That money will be sent to the state and federal
governments. So don’t plan to receive as much money as you expected
each week.”
“Come on, Mom. No matter what happens, you always have to talk
about the negative stuff. Just be happy I have a job and that I start
tomorrow. Now, I have to figure out what to wear for my first day.
Maybe I’ll go buy a new pair of slacks. After all, I am going to have a
lot of money!”
5.
Pause and ask what Hannah’s mom was trying to tell her about taxes
and her pay. (Answers will vary. Perhaps some student will recognize
that because taxes will be withheld, Hannah’s take-home pay will be
less than she expects.) Continue with the story as follows.
“Mom, Mom, where are you?” Hannah shouted. “I have a really big
problem.”
“Hannah, for heaven’s sake, what are you yelling about?” Mom
replied.
“I just got my first paycheck from Toys for You. Mom, they didn’t pay
me as much as they said they would. I’ve been cheated.”
“Calm down and let me see your paycheck and receipt,” Mom replied.
Money Math (Lesson 3)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
Reproduction is permitted and encouraged.
39
Money Math: Lessons for Life
Lesson 3
Math and Taxes: A Pair to Count On
6.
Display Visual 3-1 and continue reading.
“Hannah, they paid you what they said they would. You worked 30
hours last week and your gross income is $225.”
“But Mom, the check is only for $162. That’s the gross part if you
ask me. They cheated me out of $63.”
“Hannah, gross income means the total amount you earned before
taxes are withheld. The $162 is your net income. That’s the amount
left after you pay taxes. Remember I tried to tell you about taxes.
Gross income is the actual amount you earned before taxes were
withheld.”
“Oh, yeah, those forms I filled out, right?”
“Yes, you filled out forms so that Toys for You could withhold
federal income tax, Social Security and Medicare/Medicaid tax, and
state income tax. Look at your pay receipt.”
7. Refer to the transparency, and ask the following questions.
a. What is Hannah’s gross income? ($225)
b. What is gross income? (the amount earned before taxes are
withheld)
c. How was this amount determined? (by multiplying the number of
hours Hannah worked by her hourly wage, $7.50 x 30)
d. How much did Hannah pay in Federal Income Tax? ($33.75)
e. What percent of Hannah’s total earnings is that? (15%) How did
you find the percent? [($33.75 —
: $225) x 100]
8. Ask if students know what FICA is. (Answers will vary.) Explain that
FICA stands for Federal Insurance Contribution Act. This is money
withheld to support Social Security and Medicare/Medicaid programs.
Social Security is a tax paid by today’s workers that is used today to
pay benefits to retired and disabled workers and their dependents.
Medicare is a health insurance program for the aged and certain
disabled persons. Medicaid provides health and hospitalization benefits
to people who have low incomes. Continue discussing the pay receipt
as follows.
a. How much did Hannah pay in Social Security and
Medicare/Medicaid tax? ($20.25)
b. What percent of Hannah’s total earnings is that? (9%)
c. How did you find that percent? [($20.25 —
: $225) x 100]
d. How much did Hannah pay in state income tax? ($9)
e. What percent of Hannah’s total earnings is that? (4%) How did you
find that percent? [($9 —
: $225) x 100]
Money Math (Lesson 3)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
Reproduction is permitted and encouraged.
40
Money Math: Lessons for Life
Lesson 3
Math and Taxes: A Pair to Count On
f. What is Hannah’s net income? ($162)
g. What is net income? (the amount of earnings received after taxes
are paid)
h. What percent of her income did Hannah pay in taxes? (28%) How
did you find that percent? ( [($225-$162) —
: $225] x 100 ) or (15%
+ 9% + 4% = 28%)
9. Continue the story.
“Well, Mom, this is ridiculous. I am just a kid. Why do I have to pay
taxes? What do I get from the government? This just isn’t fair. I
shouldn’t have to pay taxes.”
“Hannah, think. You get some goods and services from the
government. Plus, you won’t earn much income during the year, so
you’ll probably get a refund. This means that the state and federal
government may give back part or all of the income tax you paid.
The Social Security taxes won’t be refunded.”
10. Ask what types of goods and services Hannah might receive from the
government. (highways, bridges, defense, fire and police protection,
national weather service, testing of meat and other agricultural and
medical products for her protection)
11. Display Visual 3-2. Have students determine Hannah’s expected
earnings if she works 20 hours per week for 20 weeks. ($3,000) Using
this income and the tax table, show how to look up the amount of
In these examples, gross
federal tax that Hannah must pay.
income is equated with
• Find $3,000 of taxable income. Point to the next to last row.
taxable income for
simplification. We have
• Explain that Hannah earned at least $3,000 but less than $3,050.
suggested incorporating
more advanced tax concepts
• Hannah is single. Read across the row to the column labeled
in Going Beyond — A
“single.”
Challenge Activity, which is
• The amount found in this row and column is the amount of federal
the extension section of the
income tax Hannah must pay – $454.
lesson
12. Have students return to work with their “occupation” partners. Give a
copy of Activity 3-4 to each pair and a copy of Activity 3-5 to each
student. Go over the example at the bottom of the Activity 3-5.
13. Demonstrate how to use the tax rate schedules for the Fixits. Display
the transparency of Activity 3-5. Have students write their answers as
you demonstrate.
• Locate the “married filing jointly” schedule.
• Locate the income category for the Fixits. (Over $283,150)
• Read the base tax for this income category. ($85,288.50)
• Show the tax rate for the income amount over $283,150. (39.6%)
Money Math (Lesson 3)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
Reproduction is permitted and encouraged.
41
Money Math: Lessons for Life
Lesson 3
Math and Taxes: A Pair to Count On
• Calculate the amount of tax. ( [(285,000-283,150) x .396] = 732.60
+ 85,288.50 = 86,021.10)
14. Have students enter the information for the mechanic in the table on
Activity 3-4 and complete the remaining problems.
15. When students have completed the work, display Visual 3-3 and have
students check their answers.
16. Refer students to both the tax rate schedule and the table they
completed. Ask students if they can determine any relationship between
the amount of tax paid and the amount of income earned? (Those who
earn more, pay more in taxes.)
17. Explain that the federal income tax system is based on the ability-to
pay principle of taxation. This principle states that a tax is fair if those
who earn different amounts of income pay different amounts of taxes.
The federal income tax is a progressive tax — those who earn more
income pay a larger percent of their income in tax.
18. (Optional) Have students choose a career/occupation in which they are
interested. Use the Internet to determine the average yearly income for
this occupation. Use a recent IRS tax rate schedule to determine the
amount of tax that would be paid and the tax rate as a single person or
married couple.
Wrap It Up
Discuss the major points of the lesson as follows.
1. What is income? (money earned for the use of resources)
2. What is saving? (income not spent on goods and services now)
3. What are taxes? (required payments to government)
4. What is gross income? (the amount earned before taxes and other
deductions are withheld)
5. What is net income? (the amount available after taxes and other
deductions are withheld)
6. What are human resources? (people working in the economy)
7. What is human capital? (the quality of the education, skills, and talents
people possess)
8. How can people invest in their human capital? (through education,
training, practice)
9. What is the relationship between income and human capital? (people
with more and better human capital tend to earn more income)
10. What are some examples of investment in human capital related to
mathematics? (learning basic computation skills, learning to calculate
Money Math (Lesson 3)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
Reproduction is permitted and encouraged.
42
Money Math: Lessons for Life
Lesson 3
Math and Taxes: A Pair to Count On
percents, ratios, area, perimeter, learning to use the calculator
efficiently)
11. What is the ability-to-pay principle of taxation? (People who are able to
pay more should pay more taxes.)
12. What is a progressive tax? (a tax requiring those who earn more to pay
a larger percentage of their income in tax and those who earn less to
pay a smaller percentage of their income in tax)
Check It—Assessment
Hand out Activity 3-6 and have students complete the work. Display Visual
3-4, and allow students to check their work.
Going Beyond— A Challenge Activity
1. Using their work from Activity 3-4, have students consider the
following problem using the example of Pierre.
Next year, Pierre moves to a fancier restaurant and gets a great big
raise! Now, Pierre has his own television show on the Eat Well
channel. He’s still single and earning $165,000 a year. How does
the amount of tax he pays change? (He will pay more taxes because
he has a larger income AND because he will pay a higher tax rate
as he moves to a higher income category.
2. Point out that the chef has moved to a new income category. Explain
that people would usually say that Pierre has reached a new “tax
bracket.” In the higher tax bracket, Pierre will pay a higher percentage
of tax. However, he pays the higher percentage only on his additional
earnings beyond $158,550. This is the case with each tax bracket
(income category) change. Taxpayers only pay the higher tax rate on a
portion of their earnings. This idea of paying a higher percentage of tax
on additional or extra earnings over some amount is referred to as
marginal tax rates.
3. Have students speculate as to what marginal means in this context.
Explain that in economics marginal means the extra or additional of
something. So marginal tax rates are the extra taxes paid on extra
earnings.
4. Have students look at the initial incomes of Pierre and the Joneses. Tell
them to calculate the percent of total income that Pierre and the Joneses
paid in income tax. When work is completed, have students share their
answers. (30,429 —
: 115,000 = 26.5%; 46,324.50 —
: 175,000 =
26.5%)
5. Have students conjecture why that percent is lower than the marginal
tax rates of 31% and 36%, respectively. (The taxpayers don’t pay the
Money Math (Lesson 3)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
Reproduction is permitted and encouraged.
43
Money Math: Lessons for Life
Lesson 3
Math and Taxes: A Pair to Count On
marginal tax rates of 31% and 36% on all their income. They pay the
marginal tax rates only on the income that exceeds the lowest income
amount in their tax bracket. On the other income, they are paying lower
rates.)
6. Explain that when taxpayers complete their income tax forms, they are
allowed to deduct certain items from their taxable earnings. For
example, taxpayers may deduct the interest on mortgage payments and
charitable donations. Ask students how deductions would affect the
amount of tax a person pays. (Deductions reduce the amount of tax a
person pays because deductions are subtracted from the gross earning
amount.)
7. Have students visit the IRS website to research the types of things that
are tax deductible. Then have them complete scenarios for their
occupation that include number of family members, mortgage costs,
and charitable donations. Then allow them to complete a tax form using
a commercial software tax package.
8. Have a certified public accountant visit the class and discuss
deductions, exemptions, and tax credits. Have students complete the
scenarios for their occupation/ family to include the number of family
members and deductions. Then have them complete a tax form using a
commercial software tax package.
9. Have W-4 forms available and help students complete those forms.
10. For additional information about Social Security students can visit the
Social Security Administration website at www.ssa.gov/kids.
Money Math (Lesson 3)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
Reproduction is permitted and encouraged.
44
Money Math: Lessons for Life
Activity 3-1
Math is Everywhere
Wanda Woodworker is a carpenter. She is putting a two-room
addition on Mr. Smith’s house. She must decide how many pieces of
drywall to order. Each sheet of drywall is 4’ X 8’. The rooms will
have 8’ ceilings. One room is 12’ X 16’; the other room is 12’ X 12’.
How many sheets of drywall does she need? Explain your reasoning.
Paul Prentice is a painter. He owns Paul’s Paints and Papers. Paul
charges $20 per hour for painting plus the cost of the paint. He is
painting the exterior of Sandy Beaches’ house. He has determined
that he will need 15 gallons of paint. The paint Sandy selected is
$25 per gallon. Paul estimates that the job will take 24 hours.
What is the estimate? Explain your reasoning.
Patrick Zabrocki is a student teacher. He is teaching a fifth-grade
class a lesson on averages. He has decided to begin by calculating
the average height of students in the class. What does he have to
do? List the steps and explain your reasoning.
Andrea Sooter is a furniture salesperson at a large furniture store.
She receives a monthly base salary of $1000 plus a ten-percent
commission on her sales. Last weekend was Labor Day weekend. The
furniture store had a sale. Andrea’s sales for the weekend brought
her monthly total to $45,000. Andrea wants to estimate her pay
for the month. What is the estimate? Explain your reasoning.
Alan Pretzal is an attorney. He works with many different clients.
He is required to bill each client’s account according the amount of
time he spends working on that client’s legal problems. Mr. Pretzal
charges $100 per hour. Yesterday, he spent thirty minutes on the
ABC account; fifteen minutes on the phone with another client, Mr.
Jones; three and one-half hours on the Clark Candy account; ten
minutes on the phone with Alexis Borgmeyer; and 45 minutes on E-
mail correspondence with Henry’s Hardware. How much should Alan
bill each account? Explain your reasoning.
Kathryn McCorkle is a chef. She has an excellent recipe for
burritos. The recipe serves six people. Kathryn is catering a party
and wants to expand the recipe to serve 100 people. What must
Kathryn do to determine how much of each ingredient she needs?
Explain your reasoning.
Money Math (Lesson 3)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
Reproduction is permitted and encouraged.
45
Money Math: Lessons for Life
Activity 3-1
Math is Everywhere
Dr. Harry Lessman is a family practitioner. A patient, Ms. Strep,
has a sore throat for which the doctor must prescribe an
antibiotic. The dose of antibiotic is 10 milligrams per kilogram
of body weight. This dose should be taken twice per day for
ten days. Ms. Strep weighs 135 pounds. What dose should
Dr. Lessman prescribe? Explain your reasoning.
Martin Walsh owns a gasoline station. It is time for him to order
gasoline. The volume of each tank is 10,000 gallons. He knows how
wide the tank is, how tall it is, and how deep it
is. He has measured the height of gasoline remaining in each of the
three tanks. What must Martin do to determine how much gasoline
to order to fill the tanks? Explain your reasoning.
Courtney Rosser is a seamstress. She is making drapes for
the windows in Mrs. Plum’s conservatory. The windows are
48” wide and 63” long. There are four windows. The material Mrs.
Plum has selected comes in widths of 24”. Drapes
require two and one-half times the width of the window.
How much material should Courtney buy? Explain your
reasoning.
Money Math (Lesson 3)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
Reproduction is permitted and encouraged.
46
Money Math: Lessons for Life
Activity 3-2
When I Grow Up
1. You are a carpenter. Before graduating from high school, you
met with a counselor who asked you many questions. She
helped you recognize that you were physically fit, had
excellent manual dexterity, good mathematics skills, and
enjoyed creating things. She asked you if you might be
interested in pursuing a career as a carpenter. You agreed
that this might be a career for you. Once you graduated from
high school, you took classes at a carpenter trade school and
participated in an apprenticeship program that lasted three
years and included on-the-job training. You are able to work
from blueprints, measuring, marking, and arranging materials.
You check the accuracy of your work with levels, rules, plumb
bobs, and framing squares. Your hourly wage is $18.50. Last
year, there were two months during which you were unable to
work because of inclement weather.
2. You are a painter and paperhanger. During the summers of
your junior and senior years in high school, you worked for a
master painter who was an independent contractor. You set up
and cleaned up. While helping, you learned a lot by watching
the painter work. After you graduated from high school, you
spoke with the contractor about being an apprentice. The
contractor agreed to hire you. You attended classes and
worked as an apprentice for three years. Some of the classes
were mathematics classes.
As a painter and paperhanger you have to prepare surfaces
for paint or paper, mix and apply paints, incorporate some
decorating concepts, and use cost-estimating techniques. Your
hourly wage is $16. You worked the full year last year
because you were able to work inside during inclement
weather.
3. You are a roofer. You chose this career because your family
owns a roofing company and has been in the roofing business
for years. You learned your skills by participating in a three-
year apprenticeship program that combined on-the-job training
and classroom work. In addition to math classes, you also took
a course in mechanical drawing. It is important that you stay
in good physical condition and have excellent balance. Roofing
is strenuous, hot, and dirty work. The longer you have worked
in the business the more involved in budgeting, cost-estimation,
and time estimation you have become. Last year, you earned
$15 per hour. You were out of work three months because of
bad weather.
Money Math (Lesson 3)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
Reproduction is permitted and encouraged.
47
Money Math: Lessons for Life
Activity 3-2
When I Grow Up
4. You are a teacher. When you graduated from high school,
you decided to attend a state university and obtain a degree
in education. When you obtained your degree, you had to
pass a test in order to be certified as a teacher. You are
certified to teach elementary school. To maintain your
certification, you must attend professional development
programs each year. Within two years from receiving your
certification, you must begin work on your masters degree.
You teach fifth-grade. You have a minor in math so you
teach all of the fifth-grade math classes. In exchange, your
teaching partner teaches all of the fifth-grade social studies
classes. In addition to teaching math, you use math skills to
prepare bulletin board displays, prepare grades, and in many
other ways. You work very hard to provide hands-on
activities and math manipulatives so your students will enjoy
and learn mathematics.
You have been teaching for 1-1/2 years. Your salary last
year was $24,390. You are in school for ten months. You
have two months paid vacation. However, during that time,
you must pursue educational opportunities that will help you
obtain your masters degree.
5. You are a lawyer. After graduating from high school, you
earned a bachelor of science degree in economics. After
completing your undergraduate degree, you entered law
school. This took an additional three years. When you
finished law school, you had to pass the state bar exam, a
test that determines whether lawyers are certified to
practice law in a given state. You obtained certification in
your state and three neighboring states. You specialize in
real-estate law. You are a partner in a firm and, as a result,
earn a yearly salary plus bonuses. Your bonuses are based on
the percentage of work you bring to the firm. You must
attend yearly courses and workshops to maintain your
qualifications and to learn about recent developments in real-
estate law.
In your work, you must be able to analyze and interpret
tables of data, graphs, and charts. You also employ basic
mathematics computation skills. Last year, your salary
combined with bonuses averaged $15,000 per month.
Money Math (Lesson 3)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
Reproduction is permitted and encouraged.
48
Money Math: Lessons for Life
Activity 3-2
When I Grow Up
6. You are a chef. In high school, you took business mathematics
and business administration. After high school, you attended a
special cooking school – a culinary institute. This included
classroom instruction as well as two internships at
restaurants. Then you began work as an apprentice chef in a
restaurant. Over time, you developed the experience necessary
to establish your own catering business. You also took some
basic business courses at a local community college. Some
important skills necessary in your work are the ability to
supervise less-skilled workers, limit food costs by minimizing
waste, accurately anticipate the amount of perishable supplies
needed, and maintain day-to-day bookkeeping. You measure,
mix, and cook ingredients according to recipes. You also
develop specialties. You organize and plan menus for your
clients. Last year you estimate that you earned $17.50 per
hour and worked an average of 50 hours per week.
7. You are a physician, a Doctor of Medicine. You examine
patients; order, perform, and interpret diagnostic tests;
diagnose illnesses; and prescribe and administer treatment.
Your specialty is pediatric cardiology. While in high school, you
took many mathematics and advanced science courses. In
college, you majored in pre-med. After earning your bachelors
degree, you went to medical school for four years. After
medical school you spent 7 years in internship and residency.
You had to pass both the state medical exam and a special
exam given by the American Board of Medical Specialists. Now
you are in practice with other pediatric specialists.
As a partner in a medical practice you have office hours,
hospital visits, in-office meetings, and must be on call to serve
patients every other weekend. In general, you work 50 to 60
hours per week. Last year, your average monthly salary was
$18,750. You are still paying back student loans for your many
years of education. But you are grateful to have reached your
goal.
Money Math (Lesson 3)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
Reproduction is permitted and encouraged.
49
Money Math: Lessons for Life
Activity 3-2
When I Grow Up
8. You are a mechanical engineer. You apply the theories and
principles of science and mathematics to solve technical
problems. You design products and machinery to build those
products. Engineering knowledge is applied to improving many
things.
You were always fascinated with how things work. Often you
took things apart to see how they worked and then put them
back together. In high school, you took all the mathematics
and science classes offered. After high school, you attended a
university that offered degrees in a number of engineering
fields. It took four years to complete your degree. You went
on to earn a masters degree in engineering. You are licensed
as a professional engineer. To get this license, you had to
work four years after finishing school and pass a special
exam. To maintain your license, you must attend programs
and courses each year. These courses help you maintain the
technical knowledge you need to be successful. You enjoy
your work because it is challenging. Last year, your hourly
salary was $35.
9. You are an automobile mechanic/service technician. You
inspect, maintain, and repair automobiles and light trucks, such
as vans and pickups with gasoline engines. People who did this
work in the past were called auto mechanics. Now, because of
computerized shop equipment and electric components, they
are increasingly called service technicians.
You’ve always liked learning how things work and fixing things
that didn’t work. You had good reading, mathematics,
communication, and analytical skills. After high school, you
attended an intensive, two-year program that included
classroom work as well as hands-on practice. Your classroom
work included English, basic mathematics, and computers.
After receiving your associate degree, you went to work for a
large automobile dealership. Each year, the dealership sends
you to a training center where you learn how to repair new
car models and receive special training in the repair of things
like fuel-injection systems or air conditioners. Last year, the
dealership was extremely busy. You worked many hours of
overtime. As a result, your weekly salary was $1000.
Money Math (Lesson 3)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
Reproduction is permitted and encouraged.
50
Money Math: Lessons for Life
Activity 3-2
When I Grow Up
10. You are a registered nurse. You help promote health,
prevent disease, and help patients cope with illness. You
provide direct patient care so you must observe, assess, and
record symptoms, reactions, and progress. You assist
physicians during treatments and examinations; administer
medications; and assist patients with recovery. You supervise
licensed practical nurses and aides on your floor.
You are a very caring and sympathetic person. You can direct
others, follow precise orders and determine when assistance
is needed. After graduating from high school,
you attended a university that offered a four-year bachelor
of science in nursing degree. Your training included classroom
instruction and supervised clinical experience in hospitals and
other health facilities. You took courses in anatomy,
physiology, microbiology, chemistry, nutrition, psychology, and
other behavioral sciences as well as nursing. Upon graduation,
you went to work at the hospital. You take continuing
education courses to advance your skills. Last year, you
earned $4,208 per month.
11. You are a certified public accountant. You prepare, analyze,
and verify financial documents in order to provide
information to your clients. You provide accounting, auditing,
tax and consulting services for your clients. Your clients
include businesses, governments, nonprofit organizations, and
individuals.
You have a bachelor’s degree in accounting. While in college,
you participated in an internship program at a public
accounting firm. After graduating from college, you took the
certified public accountant exam. This two-day exam was
very difficult, but you passed. As a result, you have a
license as a certified public accountant (CPA). In order to
renew your license, you must attend continuing education
classes each year. Last year, you earned $95,000.
Money Math (Lesson 3)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
Reproduction is permitted and encouraged.
51
Money Math: Lessons for Life
Activity 3-2
When I Grow Up
12. You are a retail salesperson. You sell new and used automobiles.
You help customers find the vehicle they are looking for and try
to interest them in buying the auto. You describe the auto’s
features, demonstrate its use, and show various models and
colors. You are able to explain the features of various models,
the meaning of manufacturers’ specifications, and the types of
options and financing available. You fill out sales contracts and
complete the paperwork necessary for various payment options.
You have always been able to communicate clearly and
effectively. You have a real talent for persuasion. After finishing
high school, you earned an associate degree in communication.
Once you completed your degree, you went to work for a large
automobile dealer. You participated in a dealer-training program
and in manufacturer’s training. This training provided information
about the technical details of standard and optional equipment.
Each year, you attend additional training regarding new models.
You have been working for the same automobile dealership for
several years. Last year you earned $15 per hour.
13. You are a firefighter. You are called on to put out fires, treat
injuries, and provide other emergency functions. Firefighting
requires organization and teamwork. Between alarms, you clean
and maintain equipment, conduct practice drills and fire
inspections, and participate in physical fitness activities. You are
required to prepare written reports on fire incidents and review
fire-science literature to keep up with technology and changing
practices and policies.
After graduation from high school, you had to pass a written
exam; tests of strength, physical stamina, coordination, and
agility, and a medical examination that included drug screening.
You were among those with the highest scores on all the tests.
That is why you were selected for your job. After accepting the
job, you participated in weeks of training at the department’s
fire academy. This included classroom instruction and practical
training. Some topics you studied were firefighting techniques,
fire prevention, hazardous materials control, and first aid. You
learned how to use axes, fire extinguishers, chain saws, ladders,
and other firefighting equipment. You continue to study and
acquire advanced skills in various fire-related topics. Last year,
you worked an average of 50 hours per week and earned $22
per hour.
Money Math (Lesson 3)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
Reproduction is permitted and encouraged.
52
Money Math: Lessons for Life
Activity 3-3
What’s My Line?
1. What is your occupation?
2. What kinds of tasks do people with this occupation do?
3. How much and what type of education does your occupation
require? (vocational training, community college, four-year college or
university, advanced degrees)
4. What types of mathematics does the occupation require?
5. What is your weekly and monthly salary or wage? How did you
determine your weekly and monthly salary or wage?
6. What is your annual salary? How did you determine your annual
salary?
7. Is this an occupation you might consider for your future? Why?
Money Math (Lesson 3)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
Reproduction is permitted and encouraged.
53
Money Math: Lessons for Life
Activity 3-4
Who Pays? How Much?
Enter the answers for the mechanic from the calculations done in
class on the table below. Use Activity 3-5 to answer the following
questions. Please use a separate sheet of paper to show your work.
Enter your answers in the table below.
1. Pierre Haricots, an executive chef at an exclusive restaurant in
New York City, earns $115,00 per year. If his filing status is single,
how much federal income tax must he pay? What is the tax rate
on the amount over the base amount?
2. In the Jones family, both parents work. One is a successful
stockbroker and the other is a chemical engineer. Their combined
income is $175,000. Their filing status is married filing jointly. How
much federal income tax must they pay? What is the tax rate on
the amount over the base amount?
Tax Rate on
Yearly
Filing
Amount
Income over
Occupation
Income
Status
of Tax
Base Income
Fixits
Pierre
Joneses
Money Math (Lesson 3)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
Reproduction is permitted and encouraged.
54
Money Math: Lessons for Life
Activity 3-5
Another Tax Calculation
Use this schedule if your filing status is Single
If your income is: But not
Your tax is:
of the amount
over—
over—
over—
$
0
25,750
_____ - 15%
$
0
25,750
62,450
3,862.50 + 28%
25,750
62,450
130,250
14,138.50 + 31%
62,450
130,250
283,150
35,156.50 + 36%
130,250
283,150
______
90,200.50 + 39.6%
283,150
Use this schedule if your filing status is Married filing jointly
If your income is: But not
Your tax is:
of the amount
over—
over—
over—
$
0
43,050
_____ - 15%
$
0
43,050
104,050
6,457.50 + 28%
43,050
104,050
158,550
23,537.50 + 31%
104,050
158,550
283,150
40,432.50 + 36%
158,550
283,150
______
85,288.50 + 39.6%
283,150
Tax calculation example for Mr. & Mrs. Fixit
Mr. Fixit is Cartown’s best auto mechanic. He owns a busy auto repair
shop and has a popular television show. He earns $285,000 a year. His
wife doesn’t work outside the home. Their filing status is married filing
jointly.
1. Look at the bottom schedule because the Fixits are married filing
jointly.
2. Under which income category do they fall? ________________
3. What is the base (bottom) tax for this category? ___________
4. What is the tax rate for any income above the lowest income
amount in their category? _____________________________
5. Calculate the total tax by adding the base (bottom) tax amount to
the dollar amount of the percent of income over the lowest income.
6. What is the tax rate that the Fixits pay on all income?________
Money Math (Lesson 3)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
Reproduction is permitted and encouraged.
55
Money Math: Lessons for Life
Activity 3-6
Assessment—A Taxing Situation
This summer, you found your first part-time job working at the mall in
the food court. You are earning $6.50 per hour and have been working
20 hours per week. You are paid every two weeks. You did some
research and found out that the company will withhold 15% of your
pay in federal income tax, 9% in FICA and Medicare tax, and 3% in
state income tax. On a separate sheet of paper, answer questions 1-5.
Be sure to show your work.
1. What is your gross income for two weeks?
2. How much do you pay in federal income tax each time you are
paid? FICA? State income tax?
3. What is your net income each pay period?
4. At the end of 8 weeks, how much net income will you earn? How
much federal income tax will you pay?
5. What human capital do you possess now? What investments can
you make in your human capital?
6. Ms. Lawes is an attorney with a large, successful law firm. Last
year she earned $135,000. How much tax must Ms. Lawes pay?
Use the tax information below to answer the question.
If your income is: But not
Your tax is:
of the amount
over—
over—
over—
104,050
158,550
23,537.50 + 31%
$104,050
7. Ms. Lawes’ assistant earns $35,800 per year. Based on what you
know about the federal income tax system, would you expect the
assistant to pay a larger percentage of her income in tax than Ms.
Lawes? Why?
Money Math (Lesson 3)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
Reproduction is permitted and encouraged.
56
Money Math: Lessons for Life
Visual 3-1
Hannah’s Horrible Truth
Toys for You Pay Receipt
Hannah Smith
Store #87
SSN 494-90-1234
Earnings
Hours
Amount
Deduction
Current Year To Date
Regular
30.00
225.00
FICA Tax and
Medicare Tax
20.25
20.25
Overtime
0.00
0.00
Federal Tax
33.75
33.75
Total
30.00
225.00
State Tax
9.00
9.00
Year-to-Date Gross
225.00
Total
63.00
63.00
Net Pay
162.00
162.00
Money Math (Lesson 3)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
Reproduction is permitted and encouraged.
57
Money Math: Lessons for Life
Visual 3-2
Sample Tax Table
If your taxable
And you are—
income is—
At least
But less than
Single
Married
Married
Head
Filing
Filing
of
Jointly
Separately Household
Your tax is—
2,975
3,000
448
448
448
448
3,000
3,050
454
454
454
454
3,050
3,100
461
461
461
461
Money Math (Lesson 3)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
Reproduction is permitted and encouraged.
58
Money Math: Lessons for Life
Visual 3-3
Answers to Activity 3-4
Occupation
Yearly
Filing
Amount of
Tax Rate on
Income
Status
Tax
Income over the
Base Income
Pierre
$115,000
single
$30,429.00
31%
Joneses
$175,000
married
filing
$46,354.50
36%
jointly
Pierre:
[.31 x (115,000-62,450)] + 14,138.50 = 30,429.00
Joneses:
[.36 x (175,000-158,550] + 40,432.50 = 46,354.50
Money Math (Lesson 3)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
Reproduction is permitted and encouraged.
59
Money Math: Lessons for Life
Visual 3-4
Answers to Activity 3-6
1. 6.50 x 40 = $260
2. federal income tax: $260 x .15 = $39
FICA/Medicare: $260 x .09 = $23.40
state income tax: $260 x .03 = $ 7.80
3. $260 — $39 - $23.40 — $7.80 = $189.80
4. $189.80 x 8 = $1518.40
$39 x 8 = $312.00
5. Ability to read, use math skills, special talents students may
possess. Attend school. Finish high school. Go to college.
Attend a trade school. Participate in an apprenticeship
program.
6. [(135,00-104,050) x .31] + 23,537.50 = $33,132
7. No, because the federal income tax is designed to be a
progressive tax. This means that those who earn less, pay a
smaller percentage of their income in tax than those who earn
more.
© Copyright 2007 by The Curators of the University of Missouri, a public corporation
Money Math (Lesson 3)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
Reproduction is permitted and encouraged.
60
Money Math: Lessons for Life
Lesson 4
Spreading the Budget
Lesson Description
Students develop a budget for a college student using a spreadsheet. They
examine the student’s fixed, variable, and periodic expenses and revise to
adjust for cash flow problems that appear on the first spreadsheet. Note:
Instructions for using a spreadsheet are based on Microsoft Excel® but
generally apply to other spreadsheet software. This lesson is designed to
increase student awareness and appreciation of the efficiency of using
computer technology in math applications. The use of a computer lab is
recommended. If the lesson is taught with a few computers, increase the
time required indicated below.
Objectives
Students will be able to:
1. develop, analyze and revise a budget.
2. define and give examples of fixed expenses.
3. define and give examples of variable expenses.
4. explain how periodic expenses affect the budgeting process.
5. explain and give an example of a budget surplus and a budget deficit.
6. create a spreadsheet for a budget.
Mathematics
organizing numerical data, spreadsheet application, problem solving
Concepts
Personal Finance
budget, gross and net income, payroll taxes, fixed expenses, variable
Concepts
expenses, periodic expenses
Materials Required
• computers with spreadsheet software
• copies of Activities 4-1 through 4-6
• transparencies of Visuals 4-1 through 4-6
Time Required
2-4 days
Procedure
Get Ready
1. Give a copy of Activity 4-1 to each student, and read the scenario
together.
2. Explain the main features of a spreadsheet, using the example. Have
students complete the spreadsheet using the instructions provided.
Money Math (Lesson 4)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
Reproduction is permitted and encouraged.
61
Money Math: Lessons for Life
Lesson 4
Spreading the Budget
Note: if your spreadsheet program uses different methods for formulas,
explain them as students progress through the steps.
3. When students are finished, display a copy of Visual 4-1, so students
may check their work. Debrief with the following questions.
a. What is a budget? (a plan of future income and expenses)
b. Why did Janna’s parents tell her to make a budget? (They wanted
her to consider all income and expenses to make a careful decision
about moving into an apartment.)
c. What are fixed expenses? (expenses that are the same every month)
Give some examples of fixed expenses. (monthly rent, car payment)
d. What are variable expenses? (expenses that can vary from month to
month) Give some examples. (food, clothing, entertainment)
e. The table indicates that Janna has a surplus. Why does she have a
budget surplus? (She has more income than expenses.)
f. Name some ways that Janna may be wrong about really having a
budget surplus. (Her income may be lower, and/or her expenses
may be greater than indicated.)
Keep It Going
1. Give a copy of Activity 4-2 to each student, and read the scenario
together.
2. When students are finished, display Visual 4-2 (or hand out copies if
the print is too small to be seen), so students may check their work.
Debrief with the following questions.
a. What’s the difference between gross income and net income?
(Gross income is the total income that a person receives. Net
income is gross income minus deductions.)
b. What payroll deductions did Janna have? (federal and state income
taxes as well as FICA) Explain that people may have many more
payroll deductions for things such as medical insurance or gifts to
charitable organizations. Janna only has taxes removed from her
paycheck.
c. What is another name for net income? (take-home pay)
3. Give a copy of Activity 4-3 to each student, and read the scenario
together.
4. When students are finished, display Visual 4-3 (or hand out copies if
the print is too small to be seen), so students may check their work.
Debrief with the following questions.
a. Why do you think that car insurance payments were labeled as
“periodic expenses?” (The payments only occur twice a year, not
Money Math (Lesson 4)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
62
Reproduction is permitted and encouraged.
Money Math: Lessons for Life
Lesson 4
Spreading the Budget
every month. They do not occur regularly such as every week or
month. They are payments that are made periodically, not
regularly.)
b. According to your spreadsheet, what is the problem with a periodic
expense? (It makes the expenses higher in some months than others.
In this case, the car insurance payments resulted in a negative
surplus.) Explain that a negative surplus is called a deficit.
c. What could Janna do to resolve her problem? (Answers will vary,
but students are likely to point out that she could save some every
month so she would have the money when she needed it.)
5. Give a copy of Activity 4-4 to each student, and read the scenario in
Part I together. Have students revise their budget spreadsheets once
more. When they’re finished, display Visual 4-4 (or hand out copies if
the print is too small to be seen), so students may check their work.
Debrief with the following questions.
a. On Janna’s spreadsheet, where does she have a problem? (In the
months of November and May, she has a large negative surplus.)
b. What is another term for negative surplus? (deficit)
c. How did you spread out her car payments? (by setting some aside
every month)
d. Why does Janna still have a problem? (She has a negative surplus
every month.)
e. What recommendations could you make to Janna? (Janna must
either increase her monthly income or reduce her monthly
expenses.)
6. Assign Part II. When students are finished, have them report how they
reduced Janna’s expenses and why they chose that approach to her
budget problem.
Wrap It Up
Review the main points of the lesson with the following questions.
1. What is a budget? (a plan of future income and expenses)
2. What are fixed expenses? (expenses that are the same every month)
3. Give some common examples of fixed expenses for a family. (monthly
rent, car payment)
4. What are variable expenses? (expenses that can vary from month to
month)
5. Give some common examples of variable expenses for a family. (food,
clothing, entertainment)
6. What are periodic expenses? (expenses that are made periodically, not
Money Math (Lesson 4)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
Reproduction is permitted and encouraged.
63
Money Math: Lessons for Life
Lesson 4
Spreading the Budget
regularly)
7. Give some common examples of variable expenses for a family. (car
insurance, property taxes)
8. What is a budget surplus? (A budget surplus occurs when income is
greater than expenses.)
9. What is a budget deficit? (A budget deficit is a negative surplus; it
occurs when expenses are greater than income.)
10. How can a budget help individuals and families? (A budget helps
people examine income and plan expenses carefully so that the budget
is balanced or has a surplus. It helps people prepare for the future.)
11. How does the use of a spreadsheet help people prepare budgets? (A
budget spreadsheet makes the preparation easier and faster. It helps
people develop different income and expense scenarios and make
adjustments to prepare for the future.)
Check It — Assessment
Give a copy of Activity 4-5 to each student. Have students read the
scenario and complete the work. (See Visual 4-5 for final spreadsheet and
Visual 4-6 for a suggested written response.)
Money Math (Lesson 4)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
64
Reproduction is permitted and encouraged.
Money Math: Lessons for Life
Lesson 4
Spreading the Budget
Going Beyond—A Challenge Activity
Give a copy of Activity 4-6 to each student, and read the scenario. Have
students revise their budget spreadsheets a final time. When finished, have
students explain how their budgets changed and what Janna had to give up
to take the trip.
Money Math (Lesson 4)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
Reproduction is permitted and encouraged.
65
Money Math: Lessons for Life
Activity 4-1
Budget Beginnings
Janna is a college sophomore. Next year, she and three friends want to live in an apartment instead of
the dormitory. She went home for the weekend to convince her parents about this good idea. Friday
night, Janna announced, “The university will increase fees for room and board next year from $3,600
to $4,050. What a rip-off! That’s $50 more each month, and it’s not worth it. The dormitory is noisy
at night when I study – a real distraction. The food in the cafeteria is barely edible, and it’s not
healthy food. Fifty girls share the same bathroom, and it’s always dirty. People are really noisy.”
Now, Janna was sure she had her parents’ attention, so she continued her story. Heather, Amy, Lisa,
and I found a furnished apartment close to campus with two bedrooms, living room, two baths, eat-in
kitchen, and lots of parking. I’ll pay one-fourth of the rent — $350 each month, including rent,
electricity, water, sewer, and trash pick-up.
Then Janna explained that she would earn $325 per month as a part-time lab assistant in the
chemistry lab, and her parents could give her $400 each month. That’s the amount they paid for room
and board at the university. She has a scholarship for her tuition and books. She pointed out that
would leave plenty of money for other expenses.
Janna’s parents agreed that everything she said was quite true, except for one thing. They didn’t agree
that she would have “plenty of money” left over for other expenses. They asked Janna to prepare a
budget using the spreadsheet program on the computer. They said that she needed to think about
every little aspect of her school life. She had included rent, which is a fixed expense — an expense
that is the same every month. She hadn’t included any variable expenses — expenses that may vary
each month, such as groceries to replace the dorm meals and personal items. Janna went to the
computer and prepared the following budget for her school year.
A
B
C
D
E
F
G
H
I
J
1
ITEM
SEP
OCT
NOV
DEC
JAN
FEB
MAR
APR
MAY
2
INCOME ITEMS
3
Allowance 400.00
4
Part-time work
325.00
5
INCOME
6
7
FIXED EXPENSE ITEMS
8
Rent
350.00
9
FIXED EXPENSES
10
11
VARIABLE EXPENSE ITEMS
12
Groceries/personal items
216.50
13
VARIABLE EXPENSES
14
15
TOTAL EXPENSES
16
17
SURPLUS
Money Math (Lesson 4)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
66
Reproduction is permitted and encouraged.
Money Math: Lessons for Life
Activity 4-1 (page 2)
Budget Beginnings
What Is a Spreadsheet?
A spreadsheet organizes information into a table of horizontal rows and vertical columns. Each row
has a number assigned to it, and each column has a letter assigned to it. Each box in the table is a cell
in which data (information) are placed. The data may be numbers or letters. A cell is the intersection
of a row and column and has an “address” identifying its coordinates. The column heading at the top
shows the column letters, and the row heading at the left shows the numbers. For example,
“allowance” is located in cell A3 and “216.50” is located in cell B12. You can change cells by using
the arrow keys or by clicking on a cell using the mouse.
Creating Janna’s Budget Spreadsheet
A budget is a plan of future income and expenses. It helps people anticipate future problems and
create ways to correct for them. Create Janna’s budget spreadsheet.
Step 1
Click in the A1 cell using the mouse or go to A1 using arrow keys. Cell A1 looks different than the
others with a dark border. When you are using a specific cell, it is called the active cell. Type
“ITEM” in A1. Hit Enter .
Make A1 the active cell and widen column A, so all information in the column fits. Click Format,
click Column, click Width, type “30” and click OK. You may also put the cursor on the line between
A and B in the column heading. You’ll see an arrow indicator. Click and drag until the width is 30.
Click on B in the column heading, hold the Shift key down, and use the right arrow to highlight
columns B through J. Using the mouse, click on Format, click on Cells, and click on Number under
Category. Make sure that you have 2 decimal places. Click OK.
Enter all data. You can format the data in a cell using the toolbar by aligning the data in the center,
right, or left, and by putting the data in boldface or italics. Look at Janna’s budget and format as you
enter information in the cells.
Step 2
B5 should have Janna’s total income. The number is a sum of B3 and B4. Don’t do the addition in
your head and enter it. Tell the program to add the numbers. Type =B3+B4 in cell B5, hit Enter, and
the correct answer should appear.
There’s only one fixed expense, so enter that amount in B9. Do the same with variable expenses in
B13. The sum of fixed and variable expenses is total expenses. In cell B15, type =B9+B13.
The difference between income and total expenses is called the surplus. In cell B17, type =B5-B15.
Step 3
Complete the spreadsheet by entering the remaining months. Because Janna has the same income and
expenses each month, simply copy and paste the data into each month. Make B3 your active cell,
hold down the shift button, and use the down arrow to highlight B3 through B17. Then copy the data.
Go to C3 and paste the data. You may also go to C3, hold down the shift button, use the right arrow
to highlight columns C through J, and then paste the data. This shows how a computer spreadsheet is
so much easier than completing a handwritten, computed table!
Save your file.
Janna took her budget to her parents. They were impressed with her spreadsheet skills and said,
Money Math (Lesson 4)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
Reproduction is permitted and encouraged.
67
Money Math: Lessons for Life
Lesson 4
Spreading the Budget
“Janna, you really did a great job setting up a budget on a spreadsheet! You must have learned a lot
in your computer class at college.” Janna pointed out that she had a monthly surplus, and she asked if
she could rent the apartment. Her parents replied that she still had many things to consider. “Janna,
you must pay taxes on the income you receive — 15% federal income tax, 4% state tax, and about
8% for FICA.”
“What’s FICA?” replied Janna. “It’s for Social Security and Medicare,” her mom explained. Janna
said, “I’m not going to retire for a long time. I don’t need to pay that now.” Mom pointed out that the
law requires that Janna pay her share of Social Security and Medicare. Janna got out her calculator
and said, “Well, taxes reduce my income by $87.75, but my surplus is much more, so I’ll be okay.
May I call my friends and tell them the good news?”
Dad said, “Not quite yet. I don’t think you’ve considered all your expenses. You will probably share
a phone and the basic monthly service is $40 that you can share with your friends. You also spend
about $25 a month on your long distance phone calls. In the university dorm, your room included
access to the Internet and cable TV. In an apartment, you’d have to pay for those things. Internet
access would cost about $20 a month, and cable TV would cost about $30 a month for basic service.
You could divide those expenses among your friends.”
Janna exclaimed, “That’s not so bad. That’s only $5 a month for Internet, $10 a month for a phone,
$7.50 a month for cable TV when we share expenses. That’s the great thing about sharing an
apartment. You can share expenses. Of course, I don’t think my friends will want to share my long
distance bill from calling my sister at her university in Canada. Let’s see another $25 and $22.50
gone. That still leaves a surplus. We’re going to have such a great time in our. . . .”
“Just a minute, Janna,” Dad said. Last year, you spent about $50 a month on gasoline, and you had a
lot of school and entertainment expenses. According to your credit card statements, that was about
$100 a month for notebooks, clothes, movies, and so on. You spent about $125 a month on eating
out!”
“Wait a minute!” exclaimed Janna. “I work in the summer and save $3000 for spending money
during the school year. I forgot to include that in my income. Every month, I can withdraw one-ninth
of my savings so that I have extra income every month. I’m not worried. This is all going to work
out yet. Just wait and see. I’ll go back and revise my budget.”
Money Math (Lesson 4)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
68
Reproduction is permitted and encouraged.
Money Math: Lessons for Life
Lesson 4
Spreading the Budget
A New Budget
Look at the following spreadsheet. You must enter some new categories (that is, rows). Now, Janna
has another income source, some income deductions, and several new expenses.
A
B
C
D
E
F
G
H
I
J
1
ITEM
SEP
OCT
NOV
DEC
JAN
FEB
MAR
APR
MAY
2
INCOME ITEMS
3
Allowance 400.00
400.00
400.00
400.00
400.00
400.00
400.00
400.00
400.00
4
Part-time work
325.00 325.00 325.00 325.00 325.00 325.00 325.00 325.00 325.00
5
Savings withdrawal
6
INCOME
7
8
DEDUCTIONS
9
Federal income tax (15%)
10
State income tax (4%)
11
FICA (8%)
12
TOTAL DEDUCTIONS
13
14
NET INCOME
15
16
FIXED EXPENSE ITEMS
17
Rent
350.00
18
Basic phone service
19
Cable television
20
Internet access
21
FIXED EXPENSES
22
23
VARIABLE EXPENSE ITEMS
24
Groceries/personal items
216.50
25
Long distance phone calls
26
Eating out
27
Gasoline
28
School/entertainment
29
VARIABLE EXPENSES
30
31
TOTAL EXPENSES
32
33
SURPLUS
NOTE: You now have more than one fixed and variable expense, so you must tell the computer to
add the expenses. Go to B21 (which probably says 350.00). Type =B17+B18+B19+B20. Be sure to
put a similar equation in B29 for variable expenses. Copy B21 to C21 through J21. Then use the
same process for copying B29.
Money Math (Lesson 4)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
Reproduction is permitted and encouraged.
69
Money Math: Lessons for Life
Activity 4-3
More Budget Revisions
Janna rushed back to her parents after she worked hard on her budget spreadsheet. “Look!” she cried,
“I did it! I still have a monthly surplus. Now, may I call Heather, Amy, and Lisa with the good
news?”
The look on her father’s face told her that the call would not take place. Dad looked at the
spreadsheet, and once again told Janna what a terrific job she had done. “Janna, I’m proud of your
good work. However, there’s still something that you haven’t considered.”
“How could there possibly be anything else?” asked Janna. “This is a total picture of my financial
life!”
“Not quite,” replied Janna’s father. “You forgot that you pay car insurance twice a year — $600 each
time. That was the deal we made last year when we agreed that you could take your car to college.
You must pay your car insurance on the first of November and again on the first of May.”
“Okay, okay. I’ll put that in my spreadsheet. I’ll be right back.” Janna was gone for a while, then
came running back to her parents. “Just look at this spreadsheet! I’ve got a terrible problem! What
am I going to do?”
Revise Janna’s budget one more time.
• Periodic expenses occur occasionally, such as every six months or once a year.
• Go to cell A31, and insert four rows. Leave row 30 blank. Type PERIODIC EXPENSES (left
alignment) in row 31. Type car insurance (left alignment) in row 32. Type PERIODIC
EXPENSES IN ROW 33 (right alignment). Row 34 should be blank. See the following example.
A
B
C
D
E
F
G
H
I
J
1
ITEM
SEP
OCT
NOV
DEC
JAN
FEB
MAR
APR
MAY
29
VARIABLE EXPENSES
516.50 516.50 516.50 516.50 516.50 516.50 516.50 516.50 516.50
30
31
PERIODIC EXPENSE ITEMS
32
car insurance
33
PERIODIC EXPENSES
34
35
TOTAL EXPENSES
• Enter car insurance payments in November and May. Enter a sum for periodic expenses in row
36.
• Go to B35 and revise the formula to include periodic expenses. Copy to the remaining cells in
row 35. The surplus amounts in row 37 should change automatically.
• Save your file.
Money Math (Lesson 4)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
70
Reproduction is permitted and encouraged.
Money Math: Lessons for Life
Activity 4-4
More and More Budget Revisions
“What’s the matter?” asked Janna’s mother.
“Mom, I’ve got a terrible problem in November and May when I pay my car insurance. I don’t want
to choose between an apartment and my car!” exclaimed Janna.
Janna’s mom told Janna to calm down. “Janna, she said. It’s not as bad as it appears. You have a
surplus of -518.42. That’s a negative surplus or a deficit. Let’s think about a solution to your
problem.”
Eventually Janna thought that she could save $100 each month so that she could pay for the car
insurance when it was due. Mom thought that she had a great idea and told Janna to revise her budget
one more time.
Janna said, “Boy, I’m glad that I learned how to use a spreadsheet. I would have to keep doing the
WHOLE budget over and over again if I were doing this with paper and pencil. Thank goodness for
computers!”
After a while, Janna reappeared. “I can’t believe it! I’ve still got a problem! What’s next? Now I have
a negative surplus every month!”
Revise Janna’s spreadsheet one more time to see what she’s talking about.
• Janna has $1200 in car expenses. Insert a row above FIXED EXPENSES and under Internet
access for “saving.” Janna should save every month for car insurance, based on 9 months.
• In November and May, Janna’s savings withdrawals will be $600 more than usual so she can pay
her car insurance.
• Janna’s deficit should be -51.75 every month.
• Save your file.
Part II
Just one more revision.
Make a decision for Janna so that she has a positive surplus once again. Janna really can’t earn any
more money. She’s a full-time college student who already works as much as possible. As Janna said,
“I guess that I’ll just have to cut some expenses.”
Enter your changes into the spreadsheet. Be prepared to explain and defend your changes to the class.
Money Math (Lesson 4)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
Reproduction is permitted and encouraged.
71
Money Math: Lessons for Life
Activity 4-5
Help!
Read the following e-mail from Josh. Use the information to develop a spreadsheet budget for the
school year. Determine if Josh has a budget surplus or deficit. Make sure to include a monthly
payment for the money he owes you, his friend.
Write a response to Josh. In the message, explain what a budget spreadsheet is. Define budget deficit
and budget surplus. Explain why Josh has one or the other. Also, define fixed, variable, and periodic
expenses and make a list of Josh’s fixed, variable, and periodic expenses. Suggest actions that Josh
could take to bring his budget into balance.
Hi!
I thought I’d better write before my mother talks with yours. I had the money to repay what I
borrowed from you. You know that I’ve been working all summer and saving for school clothes and
the trip to Three Banners over the Desert Water Park at the end of May. I had plenty of money—
enough to repay you and buy the other things. But that was before my life started to fall apart.
Luckily no one was hurt when the rock flew through Mrs. Smith’s window. I could have earned more
money to pay for the window if the blade on the lawn mower hadn’t bent when it hit the rock. Oh,
well, Mom says I won’t have to pay to have the lawn mower repaired.
Anyway, I still have $270 left. Sometime during the year, I want to buy two pairs of Frumpy and
Fitch jeans. They’re $45 each. Admission to the water park along with food, video arcade, and shows
will cost $72. It’s worth it though. Mom says I have to put at least 10 percent of the $270 in my
savings account. I’ll never understand that. I put money in the account so I can buy stuff in the
future. Who cares about that? I want stuff now. Mom also says that I have to provide my own
spending money each month and money for gifts for holidays and birthdays. How am I supposed to
know how much I’ll need for things like that when they haven’t even happened yet? I guess I’ll need
at least $10 every month for fun things like movies and skating. I’ll also need at least $5 per month
for food. How much do you think I’ll need? How many months are there during the school year? You
know what else? I promised to donate $2 each month to a Save the Rainforest fund at school. I
decided that I just wouldn’t do that because I’ve had all of these problems. Mom says a promise is a
promise and I have to make the donation. Gosh, how would anyone know if I didn’t? Parents! I
guess I’ll just buy the stuff I want right now. Then, I’ll use the rest for spending money until I run
out. But what about saving and the trip in May and the Rainforest fund? I give up!
I know I still owe you $25 and I’ll repay you. Someday. Soon. I promise. You know you can trust
me. I’m really reliable. It may take a while though. Hey, maybe I’ll find a job shoveling snow in a
few months.
Your friend,
Josh
Money Math (Lesson 4)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
72
Reproduction is permitted and encouraged.
Money Math: Lessons for Life
Activity 4-6
Let’s Work This Problem and Solve It!
Janna is very happy sharing an apartment with her three friends, and everything is working out fine.
Janna developed a budget with a small surplus, and she’s managed her money very well for two
months. On October 31, Janna and her roommates had enough surplus to host a Halloween party.
While Janna was admiring Barbara and Claire’s 60s costumes, Barbara exclaimed, “Have you heard
about the trip to New Mexico for Habitat for Humanity“. It will happen during our spring break. I
went last year, and it was such a wonderful experience. We repair and fix up homes for people who
can’t afford to do it themselves. There’s a cost, but it’s really worth it.”
“How much?” asked Janna.
“Only $800, but you must pay a $200 deposit by the end of next week. Will you join us?” asked
Claire.
“It sounds perfect. I worked with them last summer, and it was very rewarding. I’ll work on my
budget and let you know in a couple of days,” replied Janna
Using your last spreadsheet, work out a budget that will allow Janna to go on the trip. Be prepared to
discuss how you changed the budget and what Janna must give up.
Money Math (Lesson 4)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
Reproduction is permitted and encouraged.
73
Money Math: Lessons for Life
Visual 4-1
Budget Beginnings
A
B
C
D
E
F
G
H
I
J
1
ITEM
SEP
OCT
NOV
DEC
JAN
FEB
MAR
APR
MAY
2
INCOME ITEMS
3
Allowance 400.00
400.00
400.00
400.00
400.00
400.00
400.00
400.00
400.00
4
Part-time work
325.00 325.00
325.00 325.00
325.00 325.00 325.00 325.00 325.00
5
INCOME 725.00 725.00 725.00 725.00
725.00 725.00 725.00 725.00 725.00
6
7
FIXED EXPENSE ITEMS
8
Rent
350.00 350.00
350.00 350.00
350.00 350.00 350.00 350.00 350.00
9
FIXED EXPENSES 350.00 350.00
350.00 350.00
350.00 350.00 350.00 350.00 350.00
10
11
VARIABLE EXPENSE ITEMS
12
Groceries/personal items
216.50 216.50
216.50 216.50
216.50 216.50 216.50 216.50 216.50
13
VARIABLE EXPENSES 216.50 216.50
216.50 216.50
216.50 216.50 216.50 216.50 216.50
14
15
TOTAL EXPENSES 566.50 566.50 566.50 566.50
566.50 566.50 566.50 566.50 566.50
16
17
SURPLUS 158.50 158.50 158.50 158.50
158.50 158.50 158.50 158.50 158.50
Money Math (Lesson 4)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
74
Reproduction is permitted and encouraged.
Money Math: Lessons for Life
Visual 4-2
A
B
C
D
E
F
G
H
I
J
1
ITEM
SEP
OCT
NOV
DEC
JAN
FEB
MAR
APR
MAY
2
INCOME ITEMS
3
Allowance 400.00
400.00
400.00
400.00
400.00
400.00
400.00
400.00
400.00
4
Part-time work
325.00
325.00
325.00 325.00 325.00 325.00 325.00 325.00
325.00
5
Savings withdrawal
333.33
333.33
333.33 333.33 333.33 333.33 333.33 333.33
333.33
6
GROSS INCOME 1058.33 1058.33 1058.33 1058.33 1058.33 1058.33 1058.33 1058.33 1058.33
7
8
DEDUCTIONS
9
Federal income tax (15%)
48.75
48.75
48.75
48.75
48.75
48.75
48.75
48.75
48.75
10
State income tax (4%)
13.00
13.00
13.00
13.00
13.00
13.00
13.00
13.00
13.00
11
FICA (8%)
26.00
26.00
26.00
26.00
26.00
26.00
26.00
26.00
26.00
12
TOTAL DEDUCTIONS
87.75
87.75
87.75
87.75
87.75
87.75
87.75
87.75
87.75
13
14
NET INCOME 970.58
970.58
970.58 970.58 970.58 970.58 970.58 970.58
970.58
15
16
FIXED EXPENSE ITEMS
17
Rent
350.00
350.00
350.00 350.00 350.00 350.00 350.00 350.00
350.00
18
Basic phone service
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
19
Cable television
7.50
7.50
7.50
7.50
7.50
7.50
7.50
7.50
7.50
20
Internet access
5.00
5.00
5.00
5.00
5.00
5.00
5.00
5.00
5.00
21
FIXED EXPENSES 372.50
372.50
372.50 372.50 372.50 372.50 372.50 372.50
372.50
22
23
VARIABLE EXP. ITEMS
24
Groceries/personal items
216.50
216.50
216.50 216.50 216.50 216.50 216.50 216.50
216.50
25
Long distance phone calls
25.00
25.00
25.00
25.00
25.00
25.00
25.00
25.00
25.00
26
Eating out
125.00
125.00
125.00 125.00 125.00 125.00 125.00 125.00
125.00
27
Gasoline
50.00
50.00
50.00
50.00
50.00
50.00
50.00
50.00
50.00
28
School/entertainment
100.00
100.00
100.00 100.00 100.00 100.00 100.00 100.00
100.00
29
VARIABLE EXPENSES 516.50
516.50
516.50 516.50 516.50 516.50 516.50 516.50
516.50
30
31
TOTAL EXPENSES 889.00
889.00
889.00 889.00 889.00 889.00 889.00 889.00
889.00
32
33
SURPLUS
81.58
81.58
81.58
81.58
81.58
81.58
81.58
81.58
81.58
Money Math (Lesson 4)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
Reproduction is permitted and encouraged.
75
Money Math: Lessons for Life
Visual 4-3
Check It!
A
B
C
D
E
F
G
H
I
J
1
ITEM
SEP
OCT
NOV
DEC
JAN
FEB
MAR
APR
MAY
2
INCOME ITEMS
3
Allowance 400.00
400.00
400.00
400.00
400.00
400.00
400.00
400.00
400.00
4
Part-time work
325.00 325.00
325.00 325.00 325.00 325.00 325.00 325.00
325.00
5
Savings withdrawal
333.33 333.33
333.33 333.33 333.33 333.33 333.33 333.33
333.33
6
GROSS INCOME 1058.33 1058.33 1058.33 1058.33 1058.33 1058.33 1058.33 1058.33 1058.33
7
8
DEDUCTIONS
9
Federal income tax (15%)
48.75
48.75
48.75
48.75
48.75
48.75
48.75
48.75
48.75
10
State income tax (4%)
13.00
13.00
13.00
13.00
13.00
13.00
13.00
13.00
13.00
11
Social security/Medicare (8%)
26.00
26.00
26.00
26.00
26.00
26.00
26.00
26.00
26.00
12
TOTAL DEDUCTIONS
87.75
87.75
87.75
87.75
87.75
87.75
87.75
87.75
87.75
13
14
NET INCOME 970.58 970.58
970.58 970.58 970.58 970.58 970.58 970.58
970.58
15
16
FIXED EXPENSE ITEMS
17
Rent
350.00 350.00
350.00 350.00 350.00 350.00 350.00 350.00
350.00
18
Basic phone service
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
19
Cable television
7.50
7.50
7.50
7.50
7.50
7.50
7.50
7.50
7.50
20
Internet access
5.00
5.00
5.00
5.00
5.00
5.00
5.00
5.00
5.00
21
FIXED EXPENSES 372.50 372.50
372.50 372.50 372.50 372.50 372.50 372.50
372.50
22
23
VARIABLE EXPENSE ITEMS
24
Groceries/personal items
216.50 216.50
216.50 216.50 216.50 216.50 216.50 216.50
216.50
25
Long distance phone calls
25.00
25.00
25.00
25.00
25.00
25.00
25.00
25.00
25.00
26
Eating out
125.00 125.00
125.00 125.00 125.00 125.00 125.00 125.00
125.00
27
Gasoline
50.00
50.00
50.00
50.00
50.00
50.00
50.00
50.00
50.00
28
School/entertainment
100.00 100.00
100.00 100.00 100.00 100.00 100.00 100.00
100.00
29
VARIABLE EXPENSES 516.50 516.50
516.50 516.50 516.50 516.50 516.50 516.50
516.50
30
31
PERIODIC EXPENSE ITEMS
32
Car insurance
600.00
600.00
33
PERIODIC EXPENSES
600.00
600.00
34
35
TOTAL EXPENSES 889.00 889.00 1,489.00 889.00 889.00 889.00 889.00 889.00 1,489.00
36
37
SURPLUS
81.58
81.58 -518.42
81.58
81.58
81.58
81.58
81.58
-518.42
Money Math (Lesson 4)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
76
Reproduction is permitted and encouraged.
Money Math: Lessons for Life
Visual 4-4
More and More Budget Revisions
A
B
C
D
E
F
G
H
I
J
1
ITEM
SEP
OCT
NOV
DEC
JAN
FEB
MAR
APR
MAY
2
INCOME ITEMS
3
Allowance
400.00 400.00 400.00 400.00 400.00 400.00 400.00 400.00 400.00
4 Part-time work
325.00 325.00 325.00 325.00 325.00 325.00 325.00 325.00 325.00
5 Savings withdrawal
333.33 333.33 933.33 333.33 333.33 333.33 333.33 333.33 933.33
6
GROSS INCOME 1058.33 1058.33 1658.33 1058.33 1058.33 1058.33 1058.33 1058.33 1658.33
7
8
DEDUCTIONS
9 Federal income tax (15%)
48.75
48.75
48.75
48.75
48.75
48.75
48.75
48.75
48.75
10 State income tax (4%)
13.00
13.00
13.00
13.00
13.00
13.00
13.00
13.00
13.00
11 Social security/Medicare (8%)
26.00
26.00
26.00
26.00
26.00
26.00
26.00
26.00
26.00
12
TOTAL DEDUCTIONS
87.75
87.75
87.75
87.75
87.75
87.75
87.75
87.75
87.75
13
14
NET INCOME 970.58 970.58 1570.58 970.58 970.58 970.58 970.58 970.58 1570.58
15
16
FIXED EXPENSE ITEMS
17
Rent
350.00 350.00 350.00 350.00 350.00 350.00 350.00 350.00 350.00
18 Basic phone service
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
10.00
19 Cable television
7.50
7.50
7.50
7.50
7.50
7.50
7.50
7.50
7.50
20 Internet access
5.00
5.00
5.00
5.00
5.00
5.00
5.00
5.00
5.00
21
Saving
133.33 133.33 133.33 133.33 133.33 133.33 133.33 133.33 133.33
22
FIXED EXPENSES 505.83 505.83 505.83 505.83 505.83 505.83 505.83 505.83 505.83
23
24
VARIABLE EXPENSE ITEMS
25 Groceries/personal items
216.50 216.50 216.50 216.50 216.50 216.50 216.50 216.50 216.50
26 Long distance phone calls
25.00
25.00
25.00
25.00
25.00
25.00
25.00
25.00
25.00
27 Eating out
125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00
28
Gasoline
50.00
50.00
50.00
50.00
50.00
50.00
50.00
50.00
50.00
29
School/entertainment
100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
30
VARIABLE EXPENSES 516.50 516.50 516.50 516.50 516.50 516.50 516.50 516.50 516.50
31
32
PERIODIC EXPENSE ITEMS
33 Car insurance
600.00
600.00
34
PERIODIC EXPENSES
600.00
600.00
35
36
TOTAL EXPENSES 1022.33 1022.33 1622.33 1022.33 1022.33 1022.33 1022.33 1022.33 1622.33
37
38
SURPLUS -51.75
-51.75
-51.75
-51.75
-51.75
-51.75
-51.75
-51.75
-51.75
Money Math (Lesson 4)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
Reproduction is permitted and encouraged.
77
Money Math: Lessons for Life
Visual 4-5
Check It!
ITEM
SEP
OCT
NOV
DEC
JAN
FEB
MAR
APR
MAY
INCOME ITEMS
Part-time work
30.00
30.00
30.00
30.00
30.00
30.00 30.00
30.00
30.00
INCOME
30.00
30.00
30.00
30.00
30.00
30.00 30.00
30.00
30.00
FIXED EXPENSE ITEMS
Save the Rainforest Fund
2.00
2.00
2.00
2.00
2.00
2.00
2.00
2.00
2.00
Loan Repayment
2.78
2.78
2.78
2.78
2.78
2.78
2.78
2.78
2.78
FIXED EXPENSES
4.78
4.78
4.78
4.78
4.78
4.78
4.78
4.78
4.78
VARIABLE EXPENSE ITEMS
Entertainment
10.00
10.00
10.00
10.00
10.00
10.00 10.00
10.00
10.00
Food/snacks
5.00
5.00
5.00
5.00
5.00
5.00
5.00
5.00
5.00
Clothing
10.00
10.00
10.00
10.00
10.00
10.00 10.00
10.00
10.00
VARIABLE EXPENSES
25.00
25.00
25.00
25.00
25.00
25.00 25.00
25.00
25.00
SAVING
3.00
3.00
3.00
3.00
3.00
3.00
3.00
3.00
3.00
PERIODIC EXPENSE ITEMS
Gifts
5.00
5.00
5.00
5.00
5.00
5.00
5.00
5.00
5.00
Water park
8.00
8.00
8.00
8.00
8.00
8.00
8.00
8.00
8.00
PERIODIC EXPENSES
13.00
13.00
13.00
13.00
13.00
13.00 13.00
13.00
13.00
TOTAL EXPENSES
45.78
45.78
45.78
45.78
45.78
45.78 45.78
45.78
45.78
SURPLUS
-15.78
-15.78 -15.78 -15.78 -15.78 -15.78 -15.78 -15.78
-15.78
Money Math (Lesson 4)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
78
Reproduction is permitted and encouraged.
Money Math: Lessons for Life
Visual 4-6
Check It Answers
Josh, I think that I can help you. I’ve prepared a budget spreadsheet for you. That’s a list of your
monthly income and expenses. It will help you see how much money you have for each month and
what your expected expenses are. Right now you have a problem because you have a budget deficit.
That means that you are planning to spend more each month than the money you have available.
Sometimes people have budget surpluses. That means that they have more money available each
month than what they expect to spend. Too bad that’s not your problem.
If you look at the spreadsheet, you’ll see that I have several categories of expenses. Fixed expenses
don’t vary from month to month. For you, the donation to the rainforest fund is a fixed expense.
Since you’re my good friend, I’ve decided you can pay part of the $25 you owe me each month.
Then it won’t be so hard. That payment is also a fixed expense. You also have some variable
expenses. These expenses can change from month to month. For example, one month you might
spend more for food or clothing than in another month.
You also have some periodic expenses. These occur once in a while. The trip to the water park and
gifts for holidays are periodic expenses. I also included the saving your mother recommended. It’s
only $3 per month. That’s not so bad. If you look at the entire spreadsheet, you’ll notice that you
only have $30 to spend each month. There are 9 months in the school year so I divided $270 by 9.
However, you expect to spend $45.78 each month. You can’t do that. You don’t have enough money.
I have some suggestions that might help you balance your budget. That means your expenses equal
the amount of money you have to spend. To do that, you have to reduce what you spend and/or
increase your income. You can reduce the amount you want each month for clothes. Your old jeans
still fit, so you can get by with one pair of Frumpy and Fitch jeans. You’ll only need $5 each month
for clothes. Also, you can make gifts instead of buying gifts. You’ll only need $2 each month for
gifts. You could also reduce the amount you spend at the water park if you bring some snacks from
home and play fewer video games. You’ll only need $7 each month.
Finally, I think you better plan on shoveling snow and babysitting each month. Maybe you could be a
soccer referee for the little kids’ soccer program at the community center, too. That will give you
some additional income. I bet you can earn about $15 a month. You could also ask your grandparents
for money for your birthday. That would help. You might end up with extra spending money for the
trip!
Money Math (Lesson 4)
© Copyright 2008 by The Curators of the University of Missouri, a public corporation
Reproduction is permitted and encouraged.
79
U n i v e r s i t y o f M i s s o u r i - S t . L o u i s
C e n t e r f o r E n t r e p r e n e u r s h i p & E c o n o m i c E d u c a t i o n
I S B N 9 7 8 - 0 - 9 7 0 9 2 7 9 -1- 0
2007202-9/07
