Personal Financial Literacy

Personal financial literacy is mainly used in connection with personal finance matters. Financial literacy often entails the knowledge of properly making decisions pertaining to certain personal finance areas like real estate, insurance, investing, saving (especially for college), tax planning and retirement. We apply this daily with our classroom economic system.

We specifically learned a few areas of personal financial literacy. We focused on:

• calculating profit in a given situation 
• determining the relationship between income, expense, and profit
• describing the purpose of financial institutions
• determining fixed expenses and variable expenses

Financial Institutions

The basic purpose of financial institutions include keeping money safe, borrowing money, and lending money.

Fixed and Variable Expenses

Fixed expenses are expenses that occur regularly and the amount does not change.

• car payment
• mortgage payment or rent
• insurance (health and car)
• housekeeper

Variable expenses are expenses in which the amount does change based on need or choice/want.

• electric bill
• water bill
• groceries
• eating out
• movies/entertainment

Here is a video that shows the difference between the two expenses:

Fixed and Variable Expenses

Here are a couple of games to play to practice these skills:

Tractor Race

Chicken Volleyball

Sheep Fight

Match Game

Chicken Run

Profit

Profit is the money that is made in a business after all the costs and expenses are paid. Profit is calculated by subtracting expenses (cost or payment for goods and services) from income (money earned or received): 

income - expenses = profit 

The calculations that we do depend on what information the question is asking us to find. There are times we are looking to find: 

• the profit:
• income - expenses = profit
• the expenses:
• income - profit = expenses
• or the income (revenue):
• profit + expenses = income

Here is a strip diagram that we use when calculating profit:

This helps us determine which operation to use to find the missing piece.

Here is a video that helps explain it some more:

Profit, Revenue, Income, and Margin for Kids

Let me know if you have any questions!