Young Money Classroom Activities 11 Ways to Save Money Summary One of the best ways to make money is to save money. Every dollar saved on essential purchases stretches your income by the amount saved. Thus, a 25% discount means you gain a dollar of reserve for every three dollars you spend. A two-for-one sale means you gain one dollar in value for every dollar you spend. Earning a dollar to gain a dollar is a bit more difficult because of taxes and other expenses. For every dollar you earn, you may gain only 85¢ after federal taxes and 75¢ after state taxes and work-related expenses. This is 75¢ you need for spending, but it is not quite as valuable as a whole dollar saved on a discounted purchase for an essential item. So what’s a student on a tight budget to do? Both earning money and saving money are important strategies to follow. If you don’t earn money, you won’t have it to spend. If you don’t spend it carefully and save when you can, you won’t have nearly as much to meet your needs. Of course, you can borrow money; but if you do, you will have debt that keeps growing until you pay it off. And, yes, you will have to pay it off, and you may find that those dollars that were so easy to borrow and spend grow into large debt balances that are much, much harder to repay. Discussion After your students have read “11 Ways to Save Money,” break the class into small groups to discuss the following. Then have each small group share its highlights with the whole class. 1. What area of expense do you think represents the biggest money problem for college students? What are some of the ways they contend with this problem? 2. Among the 11 ways to save money presented in the article, which do you find most appealing? Which do you think is most popular among college students in general? Why? 3. What are some of the most common ways that you and other college students use to stretch your dollars and get the most out of the money that you have? 4. If you could earn extra money by using one of your talents, what talent would it be and how would you use it to earn extra money? Are there services you could provide other students, like doing oil changes or providing rides, in exchange for services from them? Project Ideas • Make up and use a survey instrument of ten or more items asking students on your campus about the strategies they use or could use to earn income and stretch the dollars they have. You might ask every second student in your survey to evaluate the answers provided by the student before them in terms of how easy, practical, productive and satisfying they think the strategies mentioned would be for themselves and other students. • Make a budget form that includes all of the expenses that college students normally need to include. Take this form and use it to have yourself and your friends enter their income and expenses according to the categories named. Discuss your observations and insights. • Food and drink are probably among the biggest concerns of college students. Focus on this area of the student budget and come up with a list of strategies that can provide the best return on the dollars spent. Include mention of the particular markets, restaurants,
cafeterias, snack bars, and other special places that could contribute to strategizing an economical and satisfying diet. Potential Quiz/Test Question 1. How can affinity and membership cards be used to increase your buying power? 2. How can working as a salesperson increase your discount on clothes or electronics? 3. Why would you want to order a meal bigger than you could eat at a nice restaurant? 4. What are some of the ways in which a college student’s talents can be turned into cash? 5. When does it make sense to stock up on items that appear regularly in your budget? 6. What can make a cheap personal gift a good substitute for a more expensive gift? 7. Why is occasional splurging a good strategy for people living on a skinny budget? 8. Where can college students find temporary employment to make extra money? 9. What are some of the best places to find loose change for sodas and snacks? 10. What are some resources that can make comparison shopping easier? Additional Challenges 1. Construct a semester budget form for college students using your choice of the following expense categories and/or others you think would be appropriate: tuition, room, board, books, school supplies, school fees, school parking, health insurance, food at home, food out, rent, electricity, fuel, telephones, cable TV, Internet service, personal care, home care, entertainment, memberships, contributions, gifts, transportation, travel, vacations, loan payments, credit card payments, and petty expenses. 2. If you have a job, review the chart titled “After-tax Value of College Student Earnings.” Use what you learn from this review and the examples given to figure your own after-tax earnings on the worksheet titled “Figuring the After-tax Value of Your Earnings.” List your work-related expenses at the bottom of the form, and use the information you have put together to compare the value of dollars you earn to dollars you save in various ways. Glossary Affinity card—a membership or credit card that is associated with a particular group such as a college alumni association, a cultural society, or professional group. Budget form—a paper instrument that lists a person’s or household’s sources of income and types of expenses with spaces next to each listing to enter the amount that applies to each. Opportunity cost—the cost involved in choosing one thing at the expense of another, such as the cost of study time that would be given up to engage in paid employment. Personal exemption—the amount of money allowed to be deducted from taxable income per individual covered by an income tax form. This amount of money is exempt from tax.
Chart: After-Tax Value of College Student Earnings
Earning money is the way to wealth, but a dollar saved can be worth more than a dollar earned. The chart below projects the relative after-tax value of dollars earned by college students. While every dollar up to $90,000 in income is subject to Social Security and Medicare taxes, only the taxable dollars remaining after certain deductions and exemptions are subtracted are subject to federal income tax. While every student is eligible for the standard or itemized deduction, not every student is eligible for a personal exemption. Anyone who can be claimed as a dependent by another taxpayer is not eligible for the personal exemption. This includes full-time students under age 24 whose parents pay more than half of their support who can be so claimed whether they actually are or not. Students who cannot be claimed as a dependent by another taxpayer are eligible for the personal exemption as well as the standard or itemized deduction. Because few college students itemize their deductions, only the standard deduction is used in the chart below. Gross Income 7.65% Social Security plus Medicare Tax on income up to $90,000 Taxable Income Reduced by $4,850 Standard Deduction Remaining Income Reduced by $3,100 Personal Exemption
Taxable Income
Dependent Student $10,000 $15,000 $20,000 $765 $5,150 $1,148 $9,850 $1,530 $15,150
Non-dependent Student $10,000 $15,000 $20,000 $765 $5,150 $2,050 $1,148 $9,850 $6,750 $6,750 $675 $1,530 $15,150 $12,050 $12,050 $715 $735 $970 $9,030 $1,823 $13,177 $2,980 $17,020
$5,150 $515
$9,850 $715 $405
$15,150 $715 $1,200 $3,445 $16,555
$2,050 $205
10% Federal Income Tax on $0-7,150 of Taxable Income 15% Federal Income Tax on $7,151-$29,000 of Taxable Income
Total Tax on Income
(Federal Taxes Only)
$1,280 $8,720
$2,268 $12,732
After-Tax Income
(Gross Income minus Taxes)
Per $ After Tax Value
(After-tax income divided by gross income)
87¢
85¢
83¢
90¢
88¢
85¢
Worksheet: Figuring the After-Tax Value of Your Earnings
Directions: After reviewing the chart titled “After-Tax Value of College Student Earnings,” use what you learn to figure or project the after-tax value of your earnings. First, determine if you can be claimed as the dependent of another taxpayer. If you are under age 24 and your parents pay more than half your support, you can be claimed as a dependent whether you are actually claimed or not. Enter your projected income in the second row of the second column and follow the pattern for the dependent student to determine the after-tax value of the dollars you earn. If you cannot be claimed as a dependent by another taxpayer, enter your projected income in the second row of the fifth column and use the pattern illustrated for the non-dependent student. Yourself Gross Income 7.65% Social Security plus Medicare Tax on income up to $90,000 Taxable Income Reduced by $4,850 Standard Deduction Remaining Income Reduced by $3,100 Personal Exemption
Taxable Income
Dependent Student $15,000 $1,148 $9,850 $20,000 $1,530 $15,150
Yoursel f
Non-dependent Student $15,000 $20,000 $1,148 $9,850 $6,750 $1,530 $15,150 $12,050 $12,050 $715 $735 $1,823 $13,177 88¢ $2,980 $17,020 85¢
$9,850 $715 $405 $2,268 $12,732 85¢
$15,150 $715 $1,200 $3,445 $16,555 83¢
$6,750 $675
10% Federal Income Tax on $0-7,150 of Taxable Income 15% Federal Income Tax on $7,151-$29,000 of Taxable Income
Total Tax on Income
(Federal Taxes Only)
After-Tax Income
(Gross Income minus Taxes)
Per $ After-Tax Value
(After-tax income divided by gross income)
Note: The value of your employment earnings may be further reduced by state income taxes and work-related expenses, such as travel to and from work, special clothing or laundering, and any opportunity costs involved. Estimate how much these will reduce your per $ after-tax value. This worksheet was developed by Ron Wall, Financial Wellness Associates.