F. Financial Literacy · Money and Finances: Exchange Rates, Budgets, Financial Decisions and Interest

Creating a Budget for a Longer-Term Goal

F1.3 A1About 45 minutes

Learning goals

I can create a monthly budget with income, expenses and savings.
I can plan how much to save each month to reach a longer-term goal.
I can spread yearly or one-time costs over many months.
I can check that a budget is balanced.

Words to know

budget
A plan for how money coming in will be used: spent, saved or given.

income
Money coming in, like an allowance or money from a job.

expense
Money going out to pay for something.

fixed expense
An expense that's the same each time, like a $15 monthly music subscription.

variable expense
An expense that changes, like snacks or outings.

longer-term goal
A goal that takes many months or years to reach.

balanced budget
A budget where income equals expenses plus savings, so no money is missing or unplanned.

sinking fund
Money set aside a little each month for a cost you know is coming, like holiday gifts.

Remember from Grades 5 and 6

In Grade 5 you designed budgets with income, expenses, saving and giving. In Grade 6 you set financial goals and found how many weeks it would take to reach them, including 13% HST.

In Grade 7 you'll build budgets for bigger goals that take many months, and plan for costs that don't come every month.

Kai's big goal

Kai is starting Grade 8 next September and wants a used laptop for schoolwork and coding. A good one costs about $600, tax included. It's now September, so Kai has 12 months.

Kai earns $40 a month in allowance for chores and about $60 a month babysitting a neighbour's kids. Kai also spends money on snacks, outings with friends, gifts and giving to a cause. Can Kai do it? A budget will tell us.

A glass jar partly filled with coins on a desk beside a closed laptop and a notebook. — Saving a little each month adds up. A big goal like a laptop needs a plan that runs for many months. AI-generated image

Steps to build a budget for a longer-term goal

Set the goal. What, how much (with tax), and by when?
Find the monthly savings needed. Goal ÷ number of months. Round up to a convenient amount.
List income for one month.
List expenses: fixed and variable. Include giving if you choose to give.
Pay yourself first. Put the savings in the budget before the spending.
Check it's balanced: income = expenses + savings.
Plan to track and adjust (next lesson!).

Kai's monthly budget	Amount
Income: allowance	$40
Income: babysitting	$60
Total income	$100
Savings for laptop (pay yourself first)	$50
Snacks	$20
Fun with friends	$15
Gifts (sinking fund)	$10
Giving to the local food bank	$5
Total savings + expenses	$100

Income $100 = savings $50 + expenses $50. The budget is balanced.

Half of Kai's income goes to the laptop fund. The other half covers snacks, fun, gifts and giving.

Worked example

Example 1: Is Kai's plan enough?

Kai saves $50 a month for 12 months. The laptop costs $600. Will Kai reach the goal?

Monthly savings needed: 600 ÷ 12 = $50.
Kai's budget saves exactly $50, so 12 × 50 = $600. ✓
Check the balance: 50 + 20 + 15 + 10 + 5 = 100 = income ✓

Yes, if Kai sticks to the budget. But there's no extra room, so any surprise could put Kai behind. Next lesson shows how to track and adjust.

Saving $50 a month, Kai's laptop fund climbs one step each month and reaches $600 after 12 months, right on time.

Worked example

Example 2: Adding HST

Priya wants a tablet that costs $530 before tax in 10 months. In Ontario, add 13% HST. How much should she save each month?

HST: 13% of 530. 10% is 53, 1% is 5.30, so 3% is 15.90. 13% = 53 + 15.90 = $68.90.
Total cost: 530 + 68.90 = $598.90.
Per month: 598.90 ÷ 10 = $59.89. Round up to $60 a month so she's not short.

Priya should save $60 a month. (10 × 60 = 600, which covers $598.90.)

Worked example

Example 3: Spreading out a yearly cost

Kai buys gifts for 4 family birthdays at about $15 each, and spends about $60 on winter holiday gifts. How much should go in the gift fund each month?

Yearly gift cost: 4 × 15 + 60 = 60 + 60 = $120.
Per month: 120 ÷ 12 = $10.

$10 a month. Saving a little each month for a known cost (a sinking fund) means December doesn't wreck the budget.

Worked example

Example 4: A family scenario

The Martin family wants to save $3600 for a summer trip to visit relatives in Nova Scotia in 18 months. Their monthly take-home income is $6200. Their monthly expenses (housing, food, transportation, bills and other) add up to $5850. Can they reach the goal?

Savings needed: 3600 ÷ 18 = $200 a month.
Money left after expenses: 6200 − 5850 = $350 a month.
350 > 200, so yes. They could save $200 for the trip and still have $150 for an emergency fund or other goals.

Yes. Budget: income $6200 = expenses $5850 + trip savings $200 + emergency fund $150.

Pay yourself first

If you save whatever is left over at the end of the month, there's often nothing left! Put the savings in your budget first, as if it were a bill you must pay. Some people move it to a separate account or jar on the day they get their money.

Set realistic goals

A goal that's too hard can make you feel like giving up. If the monthly savings are more than your budget can handle, you can: choose a later deadline, find more income, lower some expenses, or pick a less expensive goal. Adjusting isn't failing; it's planning.

Just for fun

A budget is just you telling your money where to go, instead of wondering at the end of the month where it went!

Hands-on activity

My 6-month budget plan

You need: paper (or a spreadsheet with a grown-up), a pencil, a ruler and a calculator.

Choose a longer-term goal that would take you about 6 months or more (it can be pretend). Find its price with a grown-up and add 13% HST if needed.
Work out how much you need to save each month. Round up.
List your real or pretend monthly income.
List your expenses: at least one fixed and two variable. Add a sinking fund for gifts or another known cost.
Put your savings first, then the expenses. Check: income = expenses + savings.
If it doesn't balance, adjust something and explain what you changed.
Draw a bar like Kai's showing your budget.

What to look for: a full goal price (with tax if needed), monthly savings rounded up, a balanced total and a sensible reason for any adjustment.

Your turn

A goal costs $480 and the deadline is 8 months away. How much should you save each month?

Monthly income: $75. Expenses: snacks $15, phone top-up $20, fun $10. How much is left to save? Is the budget balanced if all of it is saved?

Is this budget balanced? Income $120. Savings $40, food $35, transit $25, fun $25.

Give one fixed expense and one variable expense a Grade 7 student might have.

A bike costs $350 before tax. What is the cost with 13% HST?

You spend about $90 a year on birthday gifts. How much should go into a gift fund each month?

More practice: warm-up

What does income mean?

$300 goal in 6 months: how much per month?

Income $50, expenses $30. How much can you save?

Is a $10 monthly streaming subscription fixed or variable?

What does "pay yourself first" mean?

More practice: on your own

A goal costs $725 and you have 5 months. How much per month? Round up to a whole dollar.

A camp costs $540 (no tax). Lena already has $120 and has 7 months. How much should she save each month?

Income: allowance $30 + dog walking $45. Expenses: snacks $12, fun $18, giving $5. Goal: $400. How many months will it take if all leftover money is saved?

A skateboard costs $180 before tax. With 13% HST, how much per month to buy it in 4 months? Round up to the next dollar.

Sam's budget has income $90 and expenses $95. Give two different ways to balance it.

Challenge

Jada's goal is $1200 for a school trip in 15 months. Her income is $110 a month and her expenses are $40. Can she make it? If not, how much short will she be at the deadline?

The Ahmed family wants $4500 for a used car's down payment in 2 years. Their monthly income is $5800 and expenses are $5500. Can they do it?

Kai's laptop goal is $600 in 12 months, saving $50 a month. Halfway through, Kai learns the laptop now costs $660. Kai has saved $300. How much must Kai save each month for the last 6 months?

Check your understanding

Quiz

A goal costs $900 and you have 12 months. How much should you save each month?

Which budget is balanced?

Which is a variable expense?

A $200 item costs how much with 13% HST?

You need $598.90 in 10 months. What's the best monthly savings amount?

Why use a sinking fund for holiday gifts?

For parents and teachers

Big idea: F1.3 asks students to create, track, and adjust sample budgets designed to meet longer-term financial goals for various scenarios. This lesson is about creating; the next is about tracking and adjusting. Scenarios include a student's goal and a family's goal.

Common difficulties:

Rounding down the monthly savings, which leaves them short. Always round up.
Forgetting HST on taxable goals in Ontario.
Unbalanced budgets: check that income = expenses + savings.
Rushing through numbers. Encourage your child to re-read each question and check every step, for example by confirming that the budget still balances.

How to help: Share (at a comfortable level) one longer-term goal your family saved for and how you did it. Let your child build a budget for a real goal. All amounts in this lesson are examples. This lesson also builds A1 skills: perseverance and setting realistic goals.