Section 3: Expenditure

Activity 1

In the previous sections we differentiated between needs and wants and the types of resources available to people. We also recognised the importance of income as a resource.

Also ask if they tend to spend the same amount of money on the same items each week, or if their pattern of spending tends to vary.

• Do they plan their spending?
• Why/why not?
• Do they think this is necessary or important?
• Do they ever find that they don’t have enough money to cover their needs, wants or planned expenditure?
• Do they ever plan to save money each week/month?

Top three spends

1. Tell the class to think about how they spent money the previous week. If students say they didn’t spend any money the previous week ask them to think about money that others, such as their parents or guardians, spent on them.

2. Invite each student to write down their three biggest weekly expenses in order of the amount of money spent (where number one costs the most amount of money and number three costs the least amount of money). Give the following prompts if necessary: food and drink, phone credit, clothes, entertainment etc.

3. Invite students to calculate the total spent on their top three items.  Encourage them to carry out this step individually. Sharing the amount they spent is not necessary.

4. Facilitate a whole class discussion using the following questions as prompts:

• What do young people spend the most money on?
• What do they spend the least money on?
• Do you think young people manage to save money on a weekly basis?
• What stops young people from saving money?  What helps them to save money?
• How can young people make sure that they have enough money to buy the things they need and not spend more than they have?

Saving

Saving involves putting some of your current income aside with a view to spending it at a later date. Saving is really about delayed spending as people who save intend to use it in the future.

This future spending might be for something specific, such as a holiday or car, or for something unknown, such as an emergency or saving for a ‘rainy day’. This concept of putting money aside for an unknown future expense and building up a ‘financial cushion’ is an important one and should be fully explained to students before proceeding.

At the end of this activity students should have an understanding of what people their age spend their money on and appreciate the importance of planning their spending.

Activity 2

Once students have an understanding of individual expenditure expand on this idea to consider the different types of household spending (e.g. mortgage or rent, running a car, groceries, gifts etc.).

Ask the students to think about how and why households plan their spending and discuss the concept of impulse buying.

Impulse buying may involve one or two expensive items or a large number of low cost items. Either way, these purchases will add up and may mean that you are short money to pay for more essential items. When shopping it is best to make a list and stick to it as much as possible. This will lead to fewer problems with unplanned spending

Before proceeding facilitate a whole class discussion to ensure that students understand impulse buying and the effect it can have on budgeting.

Introduce the idea of the different categories of expenditure below and discuss the differences between each category:

• Fixed Expenditure: These are regular payments where the amount paid doesn’t vary with usage, e.g. rent or mortgage payment.
• Irregular Expenditure: This is where the timing and/or amount of spending will vary. This is normally linked to household usage such as energy bills.
• Discretionary Expenditure: Non-essential spending, this is spending on wants rather than needs.

Present the lists of items in the worksheet below and ask the students to identify any differences between the types of spending involved in each group. Ask students to consider which type of spending is most important and should therefore be prioritised.

Student worksheet: Fixed, irregular and discretionary Expenditure

Alternatively, this may be a good opportunity for students to create a mind map to explore and present the different forms of expenditure discussed above.

Once students have an understanding of the different types of expenditure discuss the household expenditure plan worksheet below. Use this opportunity to consolidate prior learning about types of expenditure. Highlight and discuss the pattern of payments across each section of the plan and also focus on the calculation of subtotals and totals

In this worksheet Frank and Karen Kerrigan both work outside the home and they have three children. This is their expenditure plan for three months.

Student worksheet: Kerrigan household expenditure plan