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Importance of Saving Money

Learning Objectives

• To understand the importance of saving money
• Different ways of saving money
• Understanding the difference between needs and wants
• Choosing a savings goal
• Knowing about expenditure and budgeting

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Vocabulary

• Allowance:- Money given to you regularly for a specific purpose
• Self- reliant:- Not needing help or support from other people.
• Negotiation:- A discussion between two or more parties to reach an agreement. In finance, it’s related to money.
• Budget:- A spending plan based on income and expenses

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A short story - who will pay for the trip?

This is a story of two best friends named Emily and Jennifer, who studied in the same school. The two girls spent most of their time together, whether it was playing or studying. Both of them loved to do the same things and had similar interests. While they had so much in common, there was one stark difference in their personalities.

Emily loved to buy things, anything that attracted her, no matter whether she needed it or not. Whatever pocket money she would get from her parents, she would spend all of it - sometimes on designer clothes, sometimes on random things. On the other hand, Jennifer was very careful with her money. She would not spend it on anything, rather mostly on essential items.

One day, their school sent out a notice that they were planning a trip. Interested students could pay the fee and apply. Emily and Jennifer were thrilled. They had always wanted to go on a trip together. When they went home, both of them asked their parents for the permission.

While Jennifer’s parents gave their approval instantly, Emily’s parents politely rejected her request. They said it was quite expensive and they didn’t have enough money to fund the trip. Emily was really sad to hear that. She desperately wanted to go out with her best friend. But now she knew that she can’t.

Emily told Jennifer about her problem and that she won’t be able to go with her. Jennifer felt sad too. Then, suddenly she remembered she had some money with her. She had a habit of saving money since she was small. So she checked her savings jar and counted the money. It had enough money to cover the cost of the trip. Her happiness knew no bounds. She told Emily to take her money and return it later.

Emily was speechless! She then realised the importance of saving money. She thought about how she spent all her money on unnecessary things and had none of it left when she actually needed it. As much as she was happy that Jennifer could help her out, she was equally guilty. She told Jennifer that she won’t take money from her, but from now onwards, will save her own money. And next time, she could sponsor her trip herself.

Why You Should Save?

You might have often heard from your parents to “save money”. Whenever they think you’re overspending, they stop giving you allowances. But have you ever thought why do they do so? Why are they always saving money? Because saving money can be really beneficial. Read these points given below to understand why you should save money.

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• Savings allow you to buy things in future for which you don’t have money right now. (Brief explanation with an example, like – suppose you wish to buy a video game, but your parents do not have money for it. In that case, you can save a little money every month that you get from your parents, and later use it to buy the video game for yourself.)

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• Savings can prevent you from facing financial troubles or emergencies (brief explanation with an example, like – in case you don’t have enough money to buy stationery, then you can use the money you have been saving over time to purchase it.)

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• Savings help you become self-reliant (brief explanation with an example, like - you don’t always want to rely on your parents for money. Sometimes you may want to buy something that gives you pleasure but your parents don’t approve of it. For example: a fancy pencil box. You can use your savings to buy it.

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Practical Problems

Problem: Johnathan sells his old books and gets $50. Out of this he decides to spend 70% on buying new notebooks and save 30%. He does this for next 2 months. How much money would he have saved at the end of 3 months?

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Solution: Johnathan’s earnings on selling the books = $50

Amount he saved = 30% of his earnings

= $50 x 30/100

= $15

Total amount saved in 3 months = $15 x 3

= $45

Hence, Johnathan’s total savings are $45.

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Problem: Peter is a student who works part-time as a content writer. He charges $0.05 per word. He submitted 12 blog articles of 1,000 words each in the last month. Out of his total earnings, he spends 70% on his daily expenses, 10% on entertainment, and saves 20%. Find out: a.) His total earnings, b.) Expenditure on daily expenses, c.) Expenditure on entertainment, and d.) total savings

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Solution: Peter’s charges per word = $0.05

Total number of words written by him = 12 x 1,000

= 12,000

a.) Peter’s total earnings = 12,000 x $0.05

= $600

b.) Expenditure on daily expenses = $600 x 70/100

= $420

c.) Expenditure on entertainment = $600 x 10/100

= $60

d.) Peter’s total savings = $600 x 20/100

= $120

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How you can save money

• Spend money majorly on your “needs” and not on “wants”. (Brief explanation with an example)
• Have a savings goal (Decide on something that you wish to buy/achieve with your saved money. It can be your favourite toy, dress, or anything you like.)
• Keep a piggy bank to store your money. (brief explanation)
• Learn the art of negotiation. (Negotiating will not only help you save you money but will also teach you business skills.)
• Write down these messages and repeat them daily:

1. Saving is a great habit.

2. I love saving.

3. It feels good to save money and plan for my future.

Fun activities to try at home

• Buy two chocolates (or whatever you like) every day for a week. You can eat one right away and save the other one for later. Do this for all 7 days. By the end of the week, you will have a bag full of chocolates. Now you can use them to plan your own little party. The same concept applies to money.

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• Keep three different jars to manage your money. Label them as – “Spend, Save, and Donate”. Distribute your pocket money into these jars. For example, you can put 70% of your money in the spending jar, 20% in the savings jar, and 10% in the donate jar. You can change these percentages as per your wish. Check how much money you have saved by the end of the month. Use this money to buy what you planned for

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• Participate in vacation planning and budgeting with your parents. Planning a holiday is a really cool activity to do. You need to decide on so many things – accommodation, transport, places to visit, fun activities to do, food, etc. For this, you need to prepare a budget, as to how much money you’re planning to spend on each thing. Get involved with your parents in this discussion. You can also suggest ideas where you think something can be done in a cheaper way.

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Play these online games

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• Bankaroo

Bankaroo is a virtual bank for kids. You can easily track your expenses, plan your saving goals, and earn badges upon achieving those goals. It’s a fun game that will help you understand the concept of saving.

Learn more about Bankaroo.

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• Renegade Buggies

It is a dynamic, quick-paced endless runner game created by the National Center for Families Learning (NCFL). The objective of the game is to save money while shopping for groceries virtually. The ultimate goal is to save as much money as possible.

Learn more about this game here.

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