Saving and Budgeting

Now that you've made money, what do you do with it to build wealth? The first step is to create a budget, or a plan for saving and spending. You need to set your goals and analyse your spending before you can save money

Setting Financial Goals

The key to being successful at saving is to plan carefully. Be realistic, establish time frames, devise a plan, and be flexible as your goals may change. Some of your goals may be short-term, or something you can accomplish fairly quickly. Others may be classified as long-term goals that will take more time to achieve. For example, a short-term goal may be to save $3 000 in three years for a new computer system, a long-term goal may be to save $10 000 for college or university.

In the space provided below, write down you short-term goals and when you would like to achieve them. Once you know your goals, you can begin to save to achieve those goals. Tips to help you be systematic about saving are save every month, and have your savings automatically deducted from your paycheque or bank account.

My short-term goals are:

1 _________________________________________________________

2 __________________________________________________________


My long-term goals are:

1. __________________________________________________________

2. __________________________________________________________


Distinguishing between Needs and Wants

Your needs are the things you must buy for your daily living. These things might include school supplies, clothes, gym shoes or bus fare. Your wants are things that you may wish to have but are not necessary to your daily living. These might include CDs, movie tickets, magazines, or fast food. We try to spend money on both our needs and our wants.

One way to avoid either spending only on needs or only on wants is to classify your expenditures as needs or wants, then set aside enough of your earnings to buy your needs. Put as much aside as possible for savings. Leave a smaller amount for your wants. How much you set aside for savings will depend upon how eager you are to build wealth. The idea of setting aside an amount for your savings before you spend on your wants is called the pay-yourself-first principle.

Many people spend to satisfy their wants and find that there is nothing left over for savings. The pay-yourself-first principle avoids this problem and puts you on the road to rapid wealth-building.

Analysing My Expenditures

  1. Make a table like the one shown below. List your expenditures by category. Beside each category write the average amount you spend on that item each month.

  2. Calculate the total expenditures.

  3. Calculate each expenditure as a percent of your total expenditures.
Need or
Average Monthly
Percent of Total
School supplies
Bus fare
Fast food
Entertainment e.g.. movies
Merchandise e.g.. jewellery, CDs
Other expenditures
  1. Enter your percentages into a spreadsheet. Construct and print a circle graph showing each of your six major expenditures as a percent of the total.

  2. Mark each expenditure on your circle graph as n or w depending on whether it is a need or a want.
    1. What percent of your expenditures are needs?
    2. What percent are wants?

  3. Describe what your circle graph indicates about your expenditures.

Saving Money

Building wealth is like filling a sink with water - you turn on the tap and plug the sink. The stronger the stream of water from the tap, the faster the sink fills. However, if the plug leaks, the water drains out. The sink fills fastest when the tap is on full and the drain is plugged or has a slow leak. It's the same with wealth-building. You accumulate savings most quickly when you maximize your earnings and limit your spending (expenditures).

Fraser and Anita began saving for their college education when they were in Grade 9. The graphs below show Fraser's and Anita's expenditures and savings during each of their four years of high school.

  1. The relationship among savings,earnings, and expenditures is expressed in the following equation.
    Savings = Earnings - Expenditures

    Explain how to calculate the earnings if you know the savings and the expenditures.

  2. Use the graphs above to help you complete these tables for Fraser's and Anita's savings.
  Fraser's Savings Anita's Savings
Grade 9 Grade 10 Grade 11 Grade 12 Grade 9 Grade 10 Grade 11 Grade 12
  1. a) Who had the greater total earnings?
    b) Who had the greater total savings?

  2. What are the two ways that Fraser could increase his total savings?

Planning Your Savings

  1. a) Find the amount you calculated as your total monthly expenditures (needs plus wants) from the "Analysing my Expenditures" worksheet.

    b) Estimate your average monthly earnings.

    c) Using Parts a) and b), estimate how much you can save each month. This is the amount you should put in savings each month before you spend on any wants.

    d) if you save the amount in Part c) every month, what will you save in a year?

When you are in high school, you may be able to earn and save more than you can now. Estimate what you think you might be able to save in each of your four years in high school and record these amounts in the table below. How do you plan to achieve these targets? Consider what kind of job you may have, your expenditures and how to reduce them before establishing your savings.

Estimated Annual Savings

Grade 9 Grade 10 Grade 11 Grade 12

I plan to achieve these savings targets by: ____________________________________________________