Introduction to Income and Expenses for Kids and Teens
This video provides the definition of income and expenses in a simple, concise way for kids and beginners. It could be used by kids & teens to learn about income and expenses, or used as a money & personal finance resource by parents and teachers as part of a Financial Literacy course or K-12 curriculum.
Suitable for students from grade levels:
- Elementary School
- Middle School
- High School
The topics covered are:
- What is Income
- Types of Income
- Concept of Income Tax
- What are Expenses
- Types of Expenses
- Relationship between income and expenses
What are Income and Expenses?
Let’s start with income. Income is the money you receive from different sources. It can be earned income, which is money you earn from various sources, like a job, tips, or from your business.
Are there any other types of income?
Income can also be categorized into active income and passive income.
Active income is income you actively have to work for. Like income from a job, or from running a business.
Passive income is income you get without actively having to do work, like income from pension or social security. It also includes money from rent, royalties, or income from your investments.
Do I get to keep all of my income?
No. You have to pay a portion of it to the government as income tax.
Well, what are Expenses?
Expenses refer to the money you need to pay for goods and services that you buy or use.
There are 2 types of expenses:
- Essential expenses take care of your needs, like mortgage or rent, utilities, groceries, etc.
- Discretionary expenses cover your wants, like eating out, going to the movies, and vacations.
Are there any other types of expenses?
Expenses can also be categorized into fixed expenses, and variable expenses.
Fixed expenses stay the same every month, like rent, insurance, and loan payments.
Variable expenses can change from time to time. These include utilities, eating out, and entertainment.
Can you give me some other examples of expenses?
A few more examples of expenses are shopping for clothes, transportation, cell phone bills, cable TV, gym memberships, etc.
Should my income be more than my expenses, or the other way around?
Ideally, your income should be more than your expenses, but sometimes, your expenses will be more than your income. This is when you need to borrow money to cover the difference.
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However, this is not sustainable in the long term. You need to create a budget to examine your finances and find ways to cut expenses to live within your means. Alternatively, you would need to find ways to earn more money than your total planned expenses.