Lesson Notes By Weeks and Term v5 - Grade 7

Lesson Video

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Performance objectives

• Define different types of income and expenses.
• Create a simple personal budget.
• Understand how budgeting affects your choices.
• Find ways to save money and cut costs.
• See why smart spending is important in South Africa.

Lesson summary

Welcome, Grade 7 learners! This week, we delve deeper into the fascinating world of financial literacy, focusing on income, expenses, and budgets. Understanding these concepts is crucial for your future success, not just in school, but in life. In a country like South Africa, where managing resources wisely is vital, having strong financial skills empowers you to make informed decisions about your money, avoid debt, and achieve your financial goals. Whether you dream of starting your own business, going to university, or simply having a comfortable life, mastering these concepts will set you on the right path.

Lesson notes

Let's break down the core concepts: income, expenses, and budgets. a)

Income: Income is the money you receive. It’s what comes in.

There are different types of income: Earned Income: Money earned through work. This could be a salary from a part-time job (like helping out at a local spaza shop or mowing lawns), pocket money earned for completing chores, or even profits from a small business you run (selling sweets at school, perhaps).

Unearned Income: Money received without directly working for it.

Examples include: Allowances: Regular money given by parents or guardians.

Gifts: Money received for birthdays or holidays.

Interest: Money earned on savings accounts. Even a small savings account at a bank like Capitec or FNB can earn interest. Imagine you put R100 into a savings account, and the bank gives you R5 extra at the end of the year – that R5 is interest income.

Social Grants: While you are unlikely to receive them directly, it is important to know that this form of income supports many families in South Africa. b)

Expenses: Expenses are the money you spend. It’s what goes out.

Expenses can be categorized into: Needs: Essential items required for survival and well-being.

These include: Food: Basic groceries like maize meal, bread, vegetables, and fruit.

Clothing: Necessary clothes for school and weather.

Transport: Bus fare or taxi fare to school (if applicable).

School Supplies: Pens, paper, textbooks.

Wants: Non-essential items that are nice to have, but not crucial for survival.

These include: Entertainment: Going to the movies, buying snacks, playing video games.

Toys: Figurines, games, etc.

Designer Clothes: Expensive branded clothing when cheaper alternatives are available. Airtime/Data (Beyond Essential Communication): Spending excessive money on mobile data for social media instead of schoolwork. c)

Budgets: A budget is a plan for how you will spend your money. It helps you track your income and expenses, ensuring you don't spend more than you earn and allowing you to save for your goals. Budgets can be created weekly, monthly, or even annually. Why are budgets important?

Control: Budgets give you control over your finances.

Savings: They help you save for important things like a new bicycle or future education.

Avoid Debt: They prevent you from spending more than you have, which can lead to debt (borrowing money you can't repay).

Financial Goals: They help you achieve your financial goals, like saving up for a specific item.

How to Create a Simple Budget: List Your Income: Identify all sources of income and how much you receive from each.

List Your Expenses: Identify all your expenses and how much you spend on each. Divide them into needs and wants.

Calculate the Difference: Subtract your total expenses from your total income.

Surplus: If your income is greater than your expenses, you have a surplus – money left over! You can save or invest this surplus.

Deficit: If your expenses are greater than your income, you have a deficit. This means you are spending more than you earn and need to cut back on expenses.

Adjust Your Budget: If you have a deficit, identify areas where you can reduce your spending, especially on wants.

Worked example

Example 1:

Sipho earns R50 per week from doing chores for his grandmother. He also receives a R20 allowance from his parents. He spends R30 on airtime, R20 on sweets, and saves the rest.

Let's create a budget for Sipho:

Income:

Chores: R50

Allowance: R20

Total Income: R70

Expenses:

Airtime: R30

Sweets: R20

Total Expenses: R50

Surplus/Deficit: R70 (Income) - R50 (Expenses) = R20

Conclusion: Sipho has a surplus of R20, which he is saving. This is great! He could consider reducing the amount spent on sweets (a want) to save even more.

Example 2:

Aisha receives a monthly allowance of R

2

0

0. She spends R100 on data, R50 on snacks, and R50 on bus fare to school.

Let's analyze Aisha's budget:

Income:

Allowance: R200

Total Income: R200

Expenses:

Data: R100

Snacks: R50

Bus Fare: R50

Total Expenses: R200

Surplus/Deficit: R200 (Income) - R200 (Expenses) = R0

Conclusion: Aisha breaks even. While she isn't in debt, she isn't saving either. She might consider reducing her data usage or snack spending to save money for a specific goal, like new shoes.