The article summarizes the guiding rules adhered to by a 26-year-old man to build up his savings. The strategies are simple and could apply to most young people.  As with everything about the use of our money, it comes down to the decisions that we make and the trade-offs we are willing to make. The article also helps to show that setting goals can help motivate one to save for the future. And it shows that a person can find lower-cost spending and purchasing alternatives that help build up savings over time.

Appropriate Subject Area(s):

Personal finance, money, social studies, consumer studies, decision-making, goal-Setting

Key Questions to Explore:

1. What are the reasons for saving money?
2. What are some strategies to help save money?
3. What factors can affect one’s ability to save money?

New Terminology:

Generation Y, tax-free savings account, registered retirement savings plan, Airbnb, home buyers’ plan

Introduction to Lesson and Task:

It is often difficult to save money.  This can apply to both young and older Canadians, but it is often particularly challenging when you are young: incomes are at the start-up stage and there are lots of expenses to get households set up and so on.  As the article shows, though, some of those choices made at a young age are more expensive than others, and those can often determine whether saving money is possible.

A key point to stress to young people as they learn about managing their money is that saving doesn’t just happen.  In fact, if you manage your money with the hope that, at the end of the month some will be left over, that is often not the case.  There are so many pressures to buy, so many options available, so many things that can bring instant gratification, that it is hard to find left-over money at month’s end unless you make a plan to save. And the best plan for saving is one that is noted in the article: that is, if you can, pay yourself first. At the beginning of the month, set some money aside for savings.  Also, try to make saving automatic through things like a payroll deduction that will automatically put money in your savings account each month before you receive your paycheque. You can always draw money out if you find you need it – but at least this way you start with some savings and, if you use it for other purposes, at least you are thinking about it and making that choice.

So the article helps provide ideas for how to build up savings. But, for many young people, there need to be more than ideas and ways to save – there needs to be a motivation. Given all the options and choices for instant gratification, saving for savings sake is not a very motivating reason to hold off spending your money. To help motivate young people to assign a priority to saving some of their money, it helps to link saving to goals and things that one hopes to do, or buy, in the future. And, at an early age, setting shorter-term goals is particularly important since it identifies something that can be achieved within a fairly short time period. Setting and achieving a goal is a very strong motivator.  It builds a sense of self-efficacy – a belief in one’s ability to accomplish tasks and achieve goals. This will help instill a positive attitude toward saving and serve as a motivation to forego some current consumption.

It is also true, as many Canadians can show, that you don’t need a large income to be able to save money. It is true that having more money can make it easier, but some people with large incomes save very little, if anything at all, and make choices so that all their income is used up on expenses and they carry large debts. Much of it comes down to lifestyle and the choices that we make. As the article shows, this young man finds less costly ways to entertain and to avoid the high costs of frequently eating out. Many young people use up significant portions of their incomes at restaurants, bars and fast-food outlets. A few simple changes can make a significant difference over time. To show how this is true, students may want to try using the following interactive calculator to show how some small changes can add up to significant savings. http://www.buildingfuturesnetwork.com/page.php?id=EGEC01

To stress: saving doesn’t just happen – it needs a plan. And every spending decision made today involves a trade-off – that is, giving up something else, either today or in the future. Making some small changes in lifestyle choices and spending decisions can make a significant difference over time.

Action (lesson plan and task):

• Distribute the article prior to the class and ask students to read it and think about whether they are a “spender” or a “saver” and why.
• It would also be ideal if, leading up to the class, you could conduct an exercise that helps to illustrate the difference between instant gratification and the benefits that can come from deferred consumption. Here is one example/suggestion: purchase some kind of treat that you think students would like – a small one – something like those bags of little Snickers bars or something similar.  You might want to get a few different kinds to address different tastes and preferences. Also, get a quantity of Monopoly type money of single denomination, such as $5. Tell students that you are going to give each one of them $5 a day and, if they wish, they can use the $5 to buy one of the treats. After three days, though, any student who still has $15 – that is, those who saved their money rather than spending it each day – will get an additional $5 and be able to obtain four treats on day three. This will set students up to make a decision of whether to buy and enjoy today or save and, overall, be better off for it. It will also help students to think about whether they are spenders and instant gratifiers or savers willing to defer spending today with the goal of being better off in the future.
• At the beginning of the class, discuss with students what they learned from the activity and the article. Distribute a piece of paper to each student and have them write on it, in big letters, “Spender” or “Saver” to indicate which they think best describes them. Ask students to hold up their signs so that you can scan the room to see how the numbers break down.
• Ask those who identified themselves as spenders to share their reasons and what it is that makes them spenders. What are the incentives that push them to spend? Do they feel in control of their spending – or do they think their emotions, advertising, etc. push them into more spending than they might undertake if they could go back and reconsider? Make a list of reasons students spend and factors that tend to push them to spend money.
• Next, ask the savers to give reasons why they save. What is it that motivates them to save? How hard is it to save with all the pressures that there are to spend?
• Work with the whole class to make a list of answers to the question “Why save?” [Handout #1 is provided to support this discussion]
• Discuss the fact that saving just doesn’t happen.  You have to plan to save and you need a reason to serve as a motivator to make a plan, make the trade-offs and postpone current consumption to help achieve future goals and ambitions.
• Discuss lifestyle choices that many young people face that can often have an impact on their ability to save money.
• Discuss the power of advertising and peer pressure in influencing people’s decisions to spend and buy things.
• Use the interactive calculator with the class to show them how some small lifestyle changes and choices can help build up savings: http://www.buildingfuturesnetwork.com/page.php?id=EGEC01
• Draw upon the article to discuss with students some of the strategies and decisions that can help people to save money.
• Use Handouts #2 and #3 to talk with students about some of the tips about being able to save.
• For homework, ask students to track their spending for one week without making any changes to what they usually do.  Then, in the following week, ask them to look for changes they could make in what they spend money on and how much they spend and see if they can find ways to save money.  Use the calculator to work out how much they could save in one year if they made the changes that they tried in week two. Ask them to write and submit a summary report on the changes they made, the amount they could save, what the total would be in savings for a year – and if they think they could actually make those changes stick.

Consolidation of Learning:

After the two weeks, discuss with students their experience, what they learned and whether they found it easy or hard to make lifestyle changes and choices that could help them to save. Have students share their ideas and changes with other students.

Success Criteria:

• Students can explain why it is important to save some of their money.
• Students can explore different ways of saving money.
• Students will link their savings activities and plans to goals.

Confirming Activity:

• After one or two months, ask students to discuss whether their decisions about money, and their savings activity have changed in any way since the lesson.