By Leah Peterson
In the Fall 2015 issue of The Change Agent on Celebrations, Calvin Mazy-Franks (p. 28) writes about the lure of overspending for holidays and Angela Hutchinson (p. 29) writes about the impulse to give excessive gifts to please others. November and December are largely thought of as a “spending” season, but the pressure to buy gifts or holiday themed items, often beyond our means, can come up throughout the year. Perhaps there are those who carefully budget their spending and stick to their budgets, but I’d guess that more often than not, gifts and holidays are the biggest cause of impulse buys and overspending. Practice creating a budget can assist students with basic financial literacy and numeracy skills.
Lesson Idea: Creating a Holiday Budget
- Have the class read “Overspending! It’s What We Do!” by Calvin Mazy-Franks on page 28 of the Celebrations (Fall 2015) issue of The Change Agent and “Spending Money to Say I Love You” by Angela Hutchinson on page 29. You could give students both articles or give half the students one article and half the other. “Overspending” is reading level 8 and “Spending Money” is level 6. Change Agent article levels are freely available at http://changeagent.nelrc.org/in-the-classroom/reading-levels/ . If you’re a Change Agent subscriber, “Overspending” is also available in audio on the Change Agent website.
- Ask the class to list the reasons that the two authors give for excessive spending and to add any of their own. Do your students agree with the list? How can using and following a budget help ward against overspending? Students can discuss when they might choose to use a budget.
- Either as a class, or in groups, make a list of categories that qualify as holiday spending that should be included in a budget. Students can focus on any holiday that they celebrate. Then compare to the list on the Practical Money Skills website, Bankrate’s worksheet, or other similar source. Were there items that were left off the list that should have been included?
- Create a chart along the lines of this one from ConsumerCredit.com. Depending on your students’ levels, and access to technology, they could create the chart themselves or if this isn’t an area you want to spend time on, you can speed up the process by having the template set up. Have students individually enter how much they think is reasonable for each category ($20 for wrapping paper?), then compare their numbers with a partner. If you have students use a spreadsheet for their charts, you can show them how to sum a column to show their total expenses.
- PracticalMoneySkills.com recommends that people spend no more that 1.5% of their annual income on holidays, or if they do, to have special savings set aside for that purpose. What does 1.5% look like? Experiment with the PracticalMoneySkills Calculator. Demonstrate first to the whole class, picking a salary at random and entering some numbers into the calculator so that you can discuss how the results are shown. Then have students try it on their own. Do the amounts they picked out fit within 1.5%? If not, what are some areas to trim back or strategies that can be used to spend less.
- Of course, a budget is only any good if you follow it. Ideally, you would need to set aside a portion of the amount you need each month. Have students divide their total budget by 12 to see how much they would need to set aside each month to reach their goal. Consider that if done in reverse, putting it on a credit card and paying it off after the fact, they would need to calculate in the interest from the credit card.
- If they choose to, students can print out their budgets to take home and experiment with. They can track their spending for the year and see how accurate they were, then make adjustments to tweak it for subsequent years.
Note: As income and spending is a personal topic, you may want to offer students hypothetical situations to use instead of their own, and then provide the resources they need to make their own real budget at home.