Earning money
Income is money you receive. Adults usually earn income by working at a job. The amount depends on the job, skills, education and hours worked.
Ways people earn income:
- wages: pay per hour (for example, $17 per hour)
- salary: a set amount per year
- running a business
- tips and commissions
Kids might earn money from an allowance, doing extra chores, babysitting, shovelling snow, mowing lawns or selling crafts.
Spending and saving
When you have money, you have three main choices:
- Spend it on goods and services.
- Save it for the future.
- Share or donate some to help others.
Spending on a need (like food or a winter coat) usually comes before spending on a want (like a game or treats).
What is a budget?
A budget is a plan for how to use your money. It helps you:
- make sure you have enough for important things
- avoid spending more than you have
- save for goals
Making a budget
- List your income: how much money you get.
- List your expenses: what you spend money on. An expense is anything you pay for.
- Set savings goals.
- Compare: Is your income more than your expenses and savings? If not, adjust.
Example: Jaya’s monthly budget
| Income | |
|---|---|
| Allowance ($5 per week × 4) | $20 |
| Pet-sitting for a neighbour | $10 |
| Total income | $30 |
| Plan | Amount |
|---|---|
| Savings for a new bike | $12 |
| Spending (snacks, small toys) | $10 |
| Sharing (animal shelter donation) | $3 |
| Birthday gift for a friend | $5 |
| Total | $30 |
Jaya’s budget balances: income equals spending, saving and sharing.
Saving for a goal
A financial goal is something you plan to save money for.
- Short-term goals take a few weeks, like a book or a toy.
- Long-term goals take months or years, like a bike, a trip or college.
How long will it take?
Goal amount ÷ savings per week = number of weeks
Example: Jaya wants a $96 bike and saves $3 per week. $96 ÷ $3 = 32 weeks. If she saves $6 per week, it will take only 16 weeks!
Where to keep your savings
- At home: a piggy bank or jar. It’s easy to reach, but easy to spend, and could be lost.
- At a bank: a savings account keeps money safe. Banks may pay interest: extra money for keeping savings with them.
Interest example
If a bank pays 2% interest per year on $100, after one year you would have $102. The longer you save, the more interest you earn, because you also earn interest on your interest. This is called compound interest.
Smart money habits
- Pay yourself first: save some money as soon as you get it.
- Wait before buying: if you still want something after a few days, it may be worth it.
- Compare prices at different stores or online.
- Track your spending to see where your money goes.
- Avoid impulse buying: buying something on the spot without thinking.
Try it yourself
- Make a budget for one month with an imaginary income of $25.
- Choose a financial goal. How long will it take to save at $4 a week?
- Track everything you spend for one week. What surprised you?
- Compare the price of the same item at two stores.
Quick recap
- Income is money you receive, often by earning it through work.
- A budget plans how to spend, save and share money.
- Expenses are what you spend money on.
- Savings help you reach financial goals.
- Banks keep savings safe and may pay interest.