Have you ever walked into a store and spotted something you really wanted to buy? Maybe someone told you to save your money so you could get it one day. But how do you earn money to buy the things you want or need? Today, we’re going to learn some important words and ideas that will help you understand money better. Let’s get started with our friend, Frankie Finance!
A need is something you must have to live, like food, water, clothes, and a place to live. A want is something that would be fun to have, but you can live without it, like a skateboard, video game, or your favorite toy. Knowing the difference between needs and wants can help you make smart choices with your money.
A budget is a plan for how you will use your money. It includes the money you earn or receive as gifts (called income) and the money you spend (called expenses). Creating a budget helps you make sure you don’t spend more money than you have, which can keep you out of debt.
Debt is money you borrow from someone else that you have to pay back. It’s important to be careful with debt so you don’t owe more money than you can pay back.
Saving is when you put money aside to use later. For example, if you’re saving up for a special toy, you might keep your money in a piggy bank or a savings account at a bank.
Have you heard of a loan? A loan is money you borrow, and you have to pay it back. Loans are often used for big purchases, like a house or a car. When you take a loan, you usually have to pay back the full amount plus a little extra, called interest.
A savings account is where you keep money you want to save for a while. You can even earn a little extra money, also called interest, while your money is in the bank.
A checking account is another type of bank account that you use to pay bills with checks or a debit card. Checking accounts don’t earn interest.
A credit card is a small plastic card that lets you borrow money from a credit card company. You have to pay back the money you borrow, usually with interest.
A debit card is linked directly to your bank account, so when you use it, you’re spending money you already have.
Let’s see what we’ve learned:
Checking and savings accounts are basically the same thing.
False. Savings accounts are for money you plan to save and earn interest, while checking accounts are for paying bills and don’t earn interest.
______ is a plan for managing your money.
Budget.
A need is something you must have to survive, while a want is something that would be fun to have but you can live without.
Great job, financial friends! Learning about money is important for making good choices in the future. What’s one thing you can do to become better with money?
Hope you had fun learning with us! Visit us at learnbrite.org for more free resources and fun learning activities.
Needs vs. Wants Scavenger Hunt: At home, make a list of 5 items you think are needs and 5 items you think are wants. Discuss with a family member why you categorized each item as a need or a want. Did they agree with your choices? This activity helps you understand the difference between needs and wants in your everyday life.
Create Your Own Budget: Pretend you have $10 to spend for the week. Make a simple budget by deciding how much you will spend on needs (like snacks) and how much you will save for a want (like a toy). Use play money or draw your own money to help visualize your budget. This will help you practice making smart choices with money.
Role-Playing Game: With a friend or family member, take turns being a shopkeeper and a customer. Use play money to buy and sell items. As the customer, decide if you are buying a need or a want. As the shopkeeper, help the customer understand the difference. This game will help you learn about spending and making decisions about needs and wants.
Here’s a sanitized version of the transcript:
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Have you ever seen something in a store that you really wanted to buy? Maybe someone even told you to save your money so you can buy it someday. How do you earn money to buy things you want or need? Today, we are going to define and explain certain words and phrases that will help you become more financially literate. Let’s grab our friend Frankie Finance to help us along the way!
**Needs and Wants**
A need is something you must have to survive, like food, water, clothing, and shelter. A want, on the other hand, is something that would be fun to have, but you can live without it, like a skateboard, video game, or favorite toy. Knowing the difference between needs and wants can help you be more responsible with your money.
**Making a Budget**
A budget is a plan for managing your money. It is based on your estimation of income (the money you earn or receive as a gift) plus your expenses (the money you spend). One of the main reasons to create a budget is to help you live within your means. In other words, a budget can keep you from spending money you don’t have and avoid going into debt.
**Debt**
Debt is money you borrow from someone else that must be repaid.
**Saving vs. Borrowing**
Saving is when you set money aside for the future and do not spend it right away. For example, if you are saving up for a special toy or activity, you might have a piggy bank at home or a savings account at a bank.
Have you ever heard of a loan? A loan is money you borrow from someone, and you are expected to pay it back. Most often, a loan is given for a specific reason, like helping to purchase something big, such as a house or a car. Quite often, you will have to pay interest on the loan, which means the bank expects you to pay back the full amount plus an extra charge for borrowing the money. This extra charge is called interest and is a percentage of the borrowed amount.
A savings account is a place where you put money that you intend to save for a while. You can actually earn a little extra money while your money is in the bank, which is also called interest. Instead of giving money back to the bank for a loan, it is a little extra money that you earn while your money sits in the bank.
A checking account is another kind of bank account that you can use to pay bills either by check or with a debit card. Checking accounts do not earn interest.
**Credit vs. Debit**
A credit card is a small hard plastic card issued by a credit card company or other financial institution. They are basically a type of loan because using a credit card means you are borrowing money from the company that issued the card. Here’s how it works: the credit card company loans you money, and you pay it back according to a schedule, usually one payment per month with interest on the unpaid amount.
On the other hand, debit cards are linked directly to your bank account, which means you use your debit card to pay for things with money you already have in your savings or checking account.
Want to learn more? We have more videos that go into more detail about each of these skills. For now, let’s review what we learned today.
**True or False**
Checking and savings accounts are basically the same exact thing.
– False. Savings accounts are for money that you are planning to save for a while and earn interest, while checking accounts are used to pay for bills and other immediate needs and do not earn interest.
**Fill in the Blank**
______ is a plan for managing your money.
– Budget.
**What is the difference between a need and a want?**
– A need is something you must have to survive, while a want is something that would be fun to have but you can live without.
Fantastic job, financial friends! Learning financial literacy is important as you create good money habits for the future. What is one thing you can work on to become more financially literate?
Hope you had fun learning with us! Visit us at learnbrite.org for thousands of free resources and turnkey solutions for teachers and homeschoolers.
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