Description
What our Financial Literacy: Needs, Wants, and Opportunity Costs lesson plan includes
Lesson Objectives and Overview: Financial Literacy: Needs, Wants, and Opportunity Costs teaches students about the difference between needs and wants and how advertising influences our purchasing decisions. They will understand why waiting to purchase something is a good economic strategy. In addition, they will comprehend the economic theory of opportunity costs by comparing the costs and benefits of individual choices. By the end of the lesson, students will identify positive and negative incentives that influence economic decisions. This lesson is for students in 5th grade and 6th grade.
Classroom Procedure
Every lesson plan provides you with a classroom procedure page that outlines a step-by-step guide to follow. You do not have to follow the guide exactly. The guide helps you organize the lesson and details when to hand out worksheets. It also lists information in the yellow box that you might find useful. You will find the lesson objectives, state standards, and number of class sessions the lesson should take to complete in this area. In addition, it describes the supplies you will need as well as what and how you need to prepare beforehand.
Options for Lesson
You can take advantage of the suggestions in the “Options for Lesson” section that offers additional activities or ideas to incorporate into the lesson plan. Students love online games. At the start of the lesson and after a review of the content pages, allow students to go to the “Needs and Wants” game online. The game is part of the financial literacy course presented by the Florida Department of Financial Services as a public service.
Teacher Notes
The paragraph on this page gives you a little more information on the lesson overall and describes what you may want to focus your teaching on. The blank lines are available for you to write out any thoughts or ideas you have as you prepare.
FINANCIAL LITERACY: NEEDS, WANTS, AND OPPORTUNITY COSTS LESSON PLAN CONTENT PAGES
Needs and Wants
The Financial Literacy: Needs, Wants, and Opportunity Costs lesson includes three content pages. You have probably earned money for doing chores around the house or odd jobs like lawn work for a neighbor. Maybe you got money for a special occasion such as your birthday or a holiday. Perhaps you started a savings account at a financial institution like a bank or credit union. Or maybe you sold something to raise funds for your sports team or school. In any case, you have some experience with money. However, even if you have a lot of experience with money, you may not be aware of some basic principles of financial literacy that can help you manage your finances better.
Financial literacy means knowing how money works, how to manage it, and how to make smart choices with it. The skills you learn from financial literacy can be applied to other situations where money may not be involved. For instance, time management seems like a problem for almost everyone. Do you always manage your time as wisely as you should?
Scenario
Suppose you have a big test coming up tomorrow. You know that to do well on the test, you need to study for at least two hours. So, you plan to study right after dinner. After dinner, your best friend sends you a text inviting you to play Fortnite in about five minutes. You think, “What harm can it do if I play for about 30 minutes? I will still have time to study, so everything is good.”
If you are like most of us, you end up losing track of time, playing the game for too long having no time to study for the test. And now, on test day, you regret not putting the time in to do well. We’ve all been there. But it’s not necessary if we use some of the principles of financial literacy to manage our time better so we can study and still play with our friends.
The basic principles of decision making begin with the word responsibility. You are responsible for your decisions. In every decision, we have two or more choices. Let’s return to the example of studying for a test. The options are to play games or study. Yes, it is possible you could have done both if you had planned for both. And though you had good intentions of doing that, you didn’t. Planning is only as good as the implementation of the plan!
Opportunity Costs
Unfortunately, when we decide between choices, we eliminate the option(s) we don’t pick. The cost of missing out on the next best option is the opportunity cost or the consequence of our choice. In this case, you did not do as well as you could have on the test, a negative consequence. On the other hand, had you chosen to study, you would have done well on the test, a positive consequence. In financial terms, how we spend or not spend the money we earn is a personal choice and involves opportunity costs. Let’s take a look at an example.
You want to buy a new game that costs $85. You have earned $45 from cutting your neighbor’s lawn and doing other jobs. Your grandmother gave you $20 for your birthday. You just found out the game you want goes on sale on Friday for $65.
On Thursday, your best friend calls and invites you to go to the movies with some friends on Friday. The movie, popcorn, and soft drink will cost about $20. What do you do—buy the game or go to the movie? If you choose the game, your opportunity cost is the movie with your friends. On the other hand, if you select the movie, your opportunity cost is that the game will not be on sale, and you won’t have enough money to purchase it. So, you have to decide what you value more—the game or a great time with your friends.
One way to approach the dilemma of opportunity costs is to think about your decision differently. Is your purchase a need or a want? Nearly all financial decisions involve needs or wants. Some don’t, but most do.
What’s a Need? What’s a Want?
A need is something that is a necessity. For example, an extreme case of a need is oxygen. We need oxygen to survive! A want, though, is something you can put off for a time. For example, you may want the newest shoes. Everyone is talking about them, and your favorite athlete is promoting them. However, the shoes you have now are only a month old. Do you really need a new pair of shoes just because an athlete tells you so? Probably not, and unlike oxygen, you will not die from not getting new shoes!
Most wants result from the influence of others on our decision making. Our responsibility is to ensure that we make decisions based on information and not on others’ influence. For instance, we will probably get a better deal by waiting and postponing a buying decision. When things first appear in the stores, the price is usually at its highest. Over time the price drops. How does this apply to our game vs. movie dilemma?
First, games or movies are both wants and not needs. The consequence of not getting either is not a live-or-die choice. Second, is it possible the game will go on sale again later? Maybe, but if we go to the movie and spend $20, we will need to earn another $20 to replace it. Even if the game goes on sale later, we will still be short $20. Can you and your friends go to the movies later? Yes, but once you have paid $65 for the game, you will have to save $20 to go to the movie. The consequence of the game or movie is the same—choosing one means giving up the other for the time being.
Asking if something is a need or a want and evaluating opportunity costs is the best way to make financial decisions. It is also helpful to think about all our decisions by assessing the potential upside or downside. Ultimately, a decision is a personal choice, and you will either benefit or suffer from the consequence of your decision.
FINANCIAL LITERACY: NEEDS, WANTS, AND OPPORTUNITY COSTS LESSON PLAN WORKSHEETS
The Financial Literacy: Needs, Wants, and Opportunity Costs lesson plan includes three worksheets: an activity worksheet, a practice worksheet, and a homework assignment. Each one will reinforce students’ comprehension of lesson material in different ways and help them demonstrate when they learned. Use the guidelines on the classroom procedure page to determine when to distribute each worksheet to the class.
NEED OR WANT ACTIVITY WORKSHEET
With a partner, students will assess if each of the items in the list on the table is a NEED or a WANT. Depending on their point of view, some can be both. They will discuss with their partner the best decision. An example is done for them.
OPPORTUNITY COST PRACTICE WORKSHEET
For the practice worksheet, students will read through two scenarios. They must decide what the best decision is and what the opportunity cost is for that decision.
FINANCIAL LITERACY: NEEDS, WANTS, AND OPPORTUNITY COSTS HOMEWORK ASSIGNMENT
The homework worksheet requires students to practice identifying things as needs or wants. They will look around their home and make a list of as many items as possible that are needs and wants. Then, they will estimate the cost for each item and total them.
Worksheet Answer Keys
There is an answer key for the practice worksheet at the end of the lesson plan document. If you choose to administer the lesson pages to your students via PDF, you will need to save a new file that omits this page. Otherwise, you can simply print out the applicable pages and keep this as reference for yourself when grading assignments.
