Lesson Notes By Weeks and Term v5 - Grade 7

Lesson Video

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Performance objectives

• Define income, expenses, and budgets with South African examples.
• Differentiate between fixed and variable expenses.
• Construct a simple personal or household budget.
• Explain the importance of budgeting and saving.

Lesson summary

Welcome, Grade 7 learners! This week, we delve deeper into the fascinating world of financial literacy, specifically focusing on income, expenses, and budgets. Understanding these concepts is crucial for making smart financial decisions throughout your lives, not just when you're older. In a country like South Africa, where economic challenges are prevalent, being financially literate empowers you to navigate these challenges, plan for your future, and contribute positively to your communities.

Lesson notes

Income: Income is the money you receive regularly. It can come from various sources. For most adults, this is usually a salary or wages earned from working.

However, income can also come from other sources like: Pocket money: Money given to you by your parents or guardians.

Allowances: A regular payment, often for completing chores or tasks.

Gifts: Money received as presents.

Small business earnings: If you sell something you made or offer a service (like tutoring younger learners).

Grants/Bursaries: Money received to help with education costs. (Important in South Africa)

Example: Thando receives R50 per week pocket money from her parents for helping with chores around the house. She also earns R20 per hour tutoring younger learners on Saturdays. This pocket money and tutoring income are both part of Thando's total income.

Expenses: Expenses are the things you spend money on. Expenses can be broadly categorized into two types: Fixed and Variable.

Fixed Expenses: These are expenses that stay relatively the same each month. They are predictable and easier to budget for.

Example (South Africa context): School fees, monthly bus fare to school (if it's a fixed amount), a fixed monthly contribution towards a stokvel.

Variable Expenses: These are expenses that change from month to month. They are less predictable and require careful tracking.

Example (South Africa context): Groceries, electricity bill (which depends on usage), transport costs (if using taxis and the amount varies), entertainment (going to the movies, buying snacks), airtime.

Budget: A budget is a plan that shows how much money you have coming in (income) and how you plan to spend it (expenses) over a certain period, usually a month.

Creating a budget helps you: Track your spending. Identify areas where you can save money. Ensure you're not spending more than you earn. Achieve your financial goals (like saving for something you want).

Creating a Budget: List your Income: Determine all sources of income for the period (e.g., monthly income).

List your Fixed Expenses: List all your fixed expenses for the period.

List your Variable Expenses: Estimate your variable expenses. It’s helpful to track your spending for a week or month to get an idea of how much you spend on different categories.

Calculate Total Expenses: Add up all your fixed and variable expenses.

Calculate the Difference: Subtract total expenses from total income. This will show you if you have a surplus (more income than expenses) or a deficit (more expenses than income).

Example: Let's say Zola receives R200 per month pocket money.

Income: R200 Fixed Expenses: R50 (Contribution to a savings club at school)

Variable Expenses: R80 (Airtime), R40 (Snacks), R30 (Transport)

Budget: Income: R200 Fixed Expenses: R50 Variable Expenses: R80 + R40 + R30 = R150 Total Expenses: R50 + R150 = R200 Difference: R200 (Income) - R200 (Expenses) = R0 In this case, Zola is breaking even. She is spending all her income. To save money, Zola would need to reduce her expenses.

Importance of Budgeting and Saving: Budgeting allows you to control your finances and make informed decisions about your money. Saving is essential for achieving future goals, such as buying a new phone, furthering your education, or even starting a small business. It also provides a financial safety net in case of unexpected expenses or emergencies. Understanding the concept of compound interest and its benefits can further motivate saving (although this is typically covered in later grades, it is worth mentioning briefly). Guided Practice (With Solutions)

Question 1: Sipho earns R150 per month from doing odd jobs for his neighbours. His fixed expenses are R30 for a weekly data bundle. His variable expenses include R40 on snacks and R20 on transport. Create a simple budget for Sipho. Does he have a surplus or a deficit? By how much?

Solution: Income: R150 Fixed Expenses: R30 (data bundle) 4 weeks = R120 Variable Expenses: R40 (snacks) + R20 (transport) = R60 Total Expenses: R120 + R60 = R180 Difference: R150 (Income) - R180 (Expenses) = -R30 Sipho has a deficit of R

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0. This means he is spending more than he earns. He needs to either increase his income or decrease his expenses.

Question 2: Identify whether the following expenses are fixed or variable: a) Monthly rent for a house b) Cost of petrol for a car c) Monthly subscription to a streaming service d)

Cost of groceries e)

School fees Solution: a) Fixed b) Variable c)

Fixed d)

Variable e)

Fixed Question 3: Maria receives R100 pocket money weekly. She wants to save R500 to buy a new phone. She spends R25 weekly on airtime and R15 on snacks. How long will it take her to save enough money for the phone if she continues her current spending habits?