Income and Expenses

Overview

Duration: 60 minutes
Class Size: 10 students
Unit: Financial Freedom Essentials (Lesson 2 of 7)
Age Group: Year 13 (17-18 years)
Curriculum Link: National Curriculum for England – Personal Finance capability (Part of the PSHE Education framework) and Mathematics (Financial Literacy elements)

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Learning Objectives

By the end of the lesson, students will:

• Identify and distinguish different sources of income (employment, investments, government benefits, etc.)
• Categorise expenses into fixed, variable, and discretionary
• Understand the importance of budgeting for financial planning
• Create a simple personal budget to forecast income and expenses

These objectives align with the National Curriculum requirements for:

• PSHE Education (Personal Finance capability): Pupils learn how to manage money, budgeting skills, and financial decision-making (DfE statutory guidance on PSHE, 2021).
• Mathematics (Financial literacy strand): Apply knowledge of financial mathematics in everyday contexts, including budgeting and calculation of income/expenditure.

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Resources Needed

• Whiteboard and markers
• Student laptops/tablets or paper and pens
• Projector/slideshow with summary tables and examples
• Pre-prepared template for budgeting (printed or digital)
• Sample payslips or income statements (fictional data)
• Envelopes or sorting cards with varying income and expense items

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Lesson Structure

1. Starter Activity (10 minutes)

Objective: Activate prior knowledge and introduce vocabulary

• Task: Quick round-robin: each student names one possible source of income and one expense from their own or imagined experiences.
• Class Discussion: Teacher writes answers on board splitting the terms into two columns: Income / Expenses. Highlight common types and clarify terms like “gross/pay before tax” vs “net/pay after tax”.
• Curriculum Link: Reinforces knowledge of personal finance vocabulary, supporting PSHE personal finance capability.

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2. Explore Income Sources (15 minutes)

Objective: Identify and categorise income sources

• Mini Input: Teacher explains typical sources of income: earned (salaries, hourly wages), unearned (rental income, dividends), and government benefits (tax credits, Universal Credit).
• Activity: In pairs, students receive envelopes with different income types (e.g., part-time job, part dividends, savings account interest) and decide which category they belong to, justifying their reasoning.
• Reflection: Quick feedback and consolidation on board.
• Curriculum Alignment: Applies real-world context to mathematical understanding of income.

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3. Categorise Expenses (15 minutes)

Objective: Understand expense categories and implications for budgeting

• Teacher Explains:

  • Fixed expenses (rent, subscriptions)
  • Variable expenses (utilities, groceries)
  • Discretionary expenses (eating out, hobbies)

• Group Work: Students sort cards representing various expenses into fixed, variable, or discretionary categories. Teacher facilitates discussion about why classification matters (e.g., managing variable vs fixed costs).

• Link to budgeting: How knowing categories supports making choices and priorities within budget.

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4. Practical Budget Creation (15 minutes)

Objective: Create a simple monthly budget integrating income and expenses

• Instructions: Using the template, each student creates a monthly budget based on fictional income and expected expenses provided (or their own estimates).
• Support students to:
  • Calculate net income after tax
  • Allocate money to fixed and variable expenses
  • Analyse discretionary spending and consider adjustments
• Peer Review: In pairs, students explain their budget decisions.
• Curriculum Connection: Meets personal finance learning goals with practical numerical skills

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5. Plenary and Assessment (5 minutes)

• Whole Class Discussion: What challenges did you face in making your budget? How can this exercise help your future financial planning?
• Formative Assessment: Teacher collects budget sheets to assess understanding of income vs expenses and budgeting accuracy.
• Exit Ticket: Each student writes down one new thing they learned about managing money and one question they still have.

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Differentiation

• Provide scaffolding examples to support learners struggling with calculations
• Challenge higher achievers to consider savings and emergency fund in budgets
• Use mixed ability grouping during card sort activity

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Extension Ideas

• Invite a guest speaker from a local bank or financial adviser (virtual or in-person) to talk about savings accounts and investment returns in future lessons
• Assign a personal finance diary task for students to track real income and expenses over a week

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Curriculum Mapping Summary

Learning Objective	Curriculum Link	Assessment Method
Identify sources of income	PSHE Education - managing money, understanding income types	Budget templates, discussion
Categorise expenses	PSHE Education - budgeting skills	Card sorting activity
Create simple budget	Maths - financial literacy, personal finance	Completed budget sheets
Reflect on financial planning	PSHE - personal decision making, managing risk	Exit ticket, class discussion

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This lesson sets a strong practical foundation for financial independence and literacy in line with statutory guidance. By balancing direct instruction with interactive tasks, it engages Year 13 students effectively, preparing them for real-life financial decisions after school.