Lesson Notes By Weeks and Term v5 - Grade 7

Lesson Video

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Performance objectives

• Define income, expenses, and budget with South African examples.
• Differentiate between fixed and variable expenses.
• Construct a simple personal budget from a scenario.
• Explain the importance of budgeting in the South African context.
• Identify strategies for managing expenses and increasing savings.

Lesson summary

Financial literacy is crucial for every South African, especially young people. Understanding how money works – how to earn it, spend it wisely, and plan for the future – empowers you to make informed decisions and build a secure future. Many South Africans face challenges related to debt and poverty. By learning about income, expenses, and budgets now, you'll be better equipped to manage your finances responsibly and avoid these pitfalls. You’ll also understand the importance of saving and investing, and how that contributes to long-term financial well-being. This week, we'll delve deeper into the specifics of income, expenses, and, most importantly, how to create a budget.

Lesson notes

Income: Income is the money you receive on a regular basis. For Grade 7 learners, this might be pocket money from parents/guardians, earnings from doing chores, or gifts of money. In a household, income can come from salaries, wages, social grants (like child support grants), pensions, or income from a small business (e.g., selling fruit and vegetables, providing hair-styling services). Understanding your sources of income is the first step in managing your finances.

Expenses: Expenses are the money you spend on goods and services. Expenses can be divided into two main categories: Fixed Expenses: These are expenses that stay the same each month. Examples for a household could be rent/bond repayment, school fees, insurance premiums (e.g., life insurance, car insurance), or a fixed monthly payment for internet access. For a Grade 7 learner, a fixed expense might be a set amount put towards a specific monthly goal (e.g., saving for a video game).

Variable Expenses: These expenses change from month to month. Examples for a household include groceries, electricity, water, transport costs (petrol, bus fare), entertainment, and clothing. For a Grade 7 learner, variable expenses might be snacks, airtime, bus fare to school, or money spent on entertainment with friends.

Budget: A budget is a plan for how you will spend your money. It helps you track your income and expenses so you can see where your money is going and make sure you are not spending more than you earn. A budget is a crucial tool for financial planning and achieving your financial goals. A well-managed budget can help you avoid debt and save for important things.

Creating a Budget: Calculate your Income: Add up all your sources of income for a specific period (e.g., a month).

List your Expenses: Make a list of all your fixed and variable expenses. Try to estimate how much you spend on each item per month. Keeping track of your expenses for a month will give you an accurate picture.

Calculate Total Expenses: Add up all your expenses.

Calculate Surplus/Deficit: Subtract your total expenses from your total income. If the result is positive, you have a surplus. This means you are spending less than you earn, and you have money left over that you can save or invest. If the result is negative, you have a deficit. This means you are spending more than you earn, and you need to find ways to reduce your expenses or increase your income.

Worked example

Example 1: Sipho's Budget

Sipho is a Grade 7 learner. He receives R200 pocket money per month. He also earns R50 per month for helping his neighbour with gardening.

His expenses are:

Snacks: R80

Airtime: R40

Bus fare: R60

Savings: R20

Let's create Sipho's budget:

Income:

Pocket Money: R200

Gardening: R50

Total Income: R250