Lesson 10:
How to Spend
Whether it’s longing for a new snowboard or a designer jacket; teens often have a difficult time distinguishing between their wants and needs. This lesson will help you differentiate between wants and needs, and understand why separating the two is important in order to make smart financial decisions. You will also explore the concept of opportunity cost and deepen your understanding of what it means to spend responsibly.
Learning Objectives:
- Assess personal spending behavior
- Understand the concept of opportunity cost
- Evaluate spending choices when it comes to personal wants versus needs
Essential Question: “How can I spend my money responsibly?”
Investigate: If I Had a Million Dollars
[Time Required: 20 minutes]
- What would you do if you had one million dollars—would you buy a new laptop? Help out a friend?
- Write in your notebook about how you would spend the money. Today’s lesson is all about spending responsibly, whether you have a million bucks or ten.
- What is the difference between a want and a need? Remember that needs are items we must have to survive (food, shelter, clothing), while wants are nice to have, but not really necessary. For example: we all need clothing, but do we need a Louis Vuitton bag or Diesel jeans? Clothes are a need, but designer clothes are a want.
- Organize your million-dollar purchases, separating the wants from the needs.
- What are some of the differences between a want and a need? How are your values are linked to the purchases you make?
Student Preparation: Opportunity Cost
[Time Required: 10 minutes]
- Distinguishing between wants and needs also means evaluating all options before making a purchase.
- Consider the following scenario: You have $200 and you can either buy a video game console or a cell phone. Which do you buy and why? Why can’t you buy them both?
- Write down your reasoning. Whenever you make a spending decision, choosing one option affects whether or not you can make the other choice. This is called opportunity cost.
- If you bought the cell phone, the video game console would be the opportunity cost and vice versa. Consider the choice between spending $200 on a new phone and making a car payment. If you opt to buy the phone, how will you pay for the car? Opportunity cost can affect choosing between a want and a need.
Challenge: Wants vs. Needs
[Time Required: 20 minutes]
- Download the activity sheet Wishful Wants or Necessary Needs? You will now get to evaluate the needs and wants at play in several different examples.
- Determine the wants and needs in each scenario and justify your reasoning.
Reflection
[Time Required: 5 minutes]
Think back to the beginning of the lesson when you determined how you would spend one million dollars and reflect in your notebook about how your perception has changed. Would you spend the money in the same way? Why or why not?
Americans aren’t typically known for their financial responsibility – yet many are already using complex financial strategies. For example, shopping at the mall calls for cost comparisons, and saving for a skateboard requires budgeting. To learn about responsible money management, it’s important to take a look at the building blocks of financial decision-making. In this lesson, we will examine the spending decisions students already make. Then examine real-life spending scenarios and research, analyze, and present their recommendations.
Learning Objectives:
- Explore personal financial choices
- Learn to make informed financial decisions
- Consider what it means to be financially responsible
Worksheet One: