Spend, Save, Invest, or Donate (3-5)

3, 4, 5

This lesson will introduce the basic personal finance terms spend, save, invest and donate in the context of making economic decisions or choices with money. The important economic concepts of scarcity and opportunity cost, plus the concepts of philanthropy and common good, will be taught and reinforced through the discussion of Sam’s choices in Sam and the Lucky Money. Reasons why people invest and donate will also be explored. Younger students will discuss, sing and perform the song “You Can Bank on Me.”

Teacher Note: This lesson offers an activity journal for students (see Handout Five). Copy and staple or bind in some way for student use during all the lessons. If reproducing this is not appropriate or possible for each of your students, selected pages may be used independently during the unit

Lesson Rating 
PrintGrades 2 & 3—Two 45-50 Minute Class Periods Grades 4 & 5—Three 45-50 Minute Class Periods

The learner will:

  • define philanthropy (philanthropist) as giving time, talent, or treasure, and taking action for the common good.
  • describe the concepts of: wants, needs, resources, scarcity, opportunity cost.
  • define the vocabulary words spend, save, invest, and donate.
  • sing the song “You Can Bank on Me.” (younger learners)
  • brainstorm motivations for giving, and options for donating.
  • describe choices one can make with money.
  • Chart paper and markers
  • Overhead projector transparency or teacher created classroom poster of lyrics for the song “You Can Bank on Me” (Handout One)
  • Personal Finance Definitions: Save, Invest, Spend, Donate (Handout Two)
  • Economics and Money Visual Organizer (Handout Three)
  • Letter to Families (Handout Four)
  • A copy of the book Sam and the Lucky Money by Karen Chin (see Bibliographical References).
  • A large jar or clear container for collecting change.
  • Activity Journals (Handout Five) (optional)
Home Connection 

Interactive Parent/Student Homework: Send home a letter introducing the unit and explaining that the class will be raising money for a donation to a charitable cause. Encourage the students to get small change from their own savings banks and earn money doing extra jobs around the house. Encourage families to suggest a charity that the class might consider. (See Handout Four: Letter to Families.

  • Chin, Karen.Sam and the Lucky Money.Lee and Low Books (reprint edition), 1997.ISBN: 1880000539


  1. Day One: Anticipatory Set: Display a $20 bill and ask the students what they would do with $20 if it were given to them.Ask students if they ever receive gifts of money for holidays or special occasions.Discuss with students what they usually do with their own money.Tell the students that today they are going to learn about some different things people can do with their money. Teacher note: Review student and expanded teacher definitions of save, spend, invest, and donate prior to class (Handout Two) and use as needed in the following class discussion.

  2. Tell the students that there are four different things they can do with their money.They can spend it, save it, invest it, or donate it. On four separate pieces of chart paper, list the following words as headings: spend, save, invest, and donate.Lead a class discussion generating ideas to define these vocabulary words.

    1. What does it mean to spend money?
    2. How do people save money?
    3. What does it mean to donate money?
    4. What does it mean to invest money?
  3. List the children’s responses on the appropriate charts. Add to their responses as needed to clarify the definitions.

  4. Display the four charts in the following manner in the front of the classroom:

  5. Use the charts visual positions to explain that all donating is a form of (a subset of) spending, and likewise, all investing is a form of(subset of) saving. To donate money, money must be spent, to invest money, money must first be saved. In other words, all donating is a form of spending, since you are indeed spending money on something, but not all spending is donating, since you can always spend money on your own wants and needs. In a similar fashion, all investing is a form of saving, since the money had to be set aside or saved in the first place to be invested in something. Some kinds of saving, such as simply keeping money in a container or under a mattress, does not grow in value or does not gain interest. Those funds are saved, but not invested, and are usually saved for short-term goals.

  6. Tell the class that you are going to teach them a new word and you want to see if they can pronounce it correctly. Tell them it is related to the word “donate". Philanthropy is giving time, talent, or treasure and taking action for the common good.Write that definition on a new piece of chart paper or the display area. Practice pronouncing the word with the class. Talk about what the students’ treasures, time and talents might be (money, candy, a special toy, time to offer help to someone, talents they might use to help someone in need, etc.) and how adults donate treasure for various philanthropic organizations or charities.

  7. For younger students, proceed to the discussion of wants and needs below.

  8. For older students, as appropriate, use the Economics and Money Visual Organizer (Handout Three) with the overhead projector for the following discussion about wants, needs, and resources. Reveal only the top parts of the transparency relating to Wants and Resources and cover the remaining portions of the visual organizer and for now. (The rest of the visual organizer will be used on Day Two with the Sam and the Lucky Money discussion.)

  9. Discuss wants and needs with students. Wants are desires for goods and services we would like to have. Many wants that people have, including of course the numerous wants that younger students have, are not really necessary to have for survival.People have unlimited wants. They never seem to be satisfied. They always want more.

  10. Confirm this with students by naming desired goods and services for students their age and asking who wants them.

  11. Needs are a special kind of want, and refer to things we must have or “need” to survive, such as food, water, shelter, etc. Discuss with students some concrete examples of wants and needs in their lives.

  12. Teacher Note: Most economists do not distinguish between wants and needs because what some people call “needs” can vary greatly by individual and might simply be a wants for others.Instead of debating whether one person’s need is just another person’s want, economists avoid the argument by lumping needs into the general category of wants. The important thing for students to learn here is that wants in general are unlimited, even though individuals can certainly limit their own wants voluntarily and might say they only have a limited number of needs and wants.

  13. Discuss with students how resources are limited in the world. There is a limit to everything in the world. We simply cannot have everything we want and this defines the problem of scarcity, which everyone must face.

  14. Write the word scarcity on the board. Ask students to give examples of times in their lives when they “can’t have everything they want” or “can’t have it all”. Explain that the condition or problem of scarcity forces people everywhere to have to choose, or make a choice, between one thing and another. Scarcity is inescapable and makes life interesting because of the choices we can make. Ask students:

  15. What prevents you from having everything that you want? Is it possible to ever be fully satisfy your wants? What happens when your last “want” is satisfied?

  16. Referring back to the word philanthropy. Explain to students that the time, talent, and treasure voluntarily given for the common good is an excellent example of scarcity at work. At the heart of philanthropy is an economic choice that an individual makes. It is a choice of what to do with these limited resources. (Time, talent, treasure-there is a limit as to how many of these resources are available to give! Someone chooses to spend some of their limited resources for the common good.)

  17. Explain that a when a person chooses to spend, they have to make choices, because of the condition of scarcity. They can choose to spend money on goods and services to satisfy their own wants and needs, or they can choose to spend, or donate to a special cause or charity. Explain to the class that in the near future they will help select a charity to receive donations from the class.

  18. Brainstorm with students and build a list of some local examples of philanthropy or of charity. (Examples could include various school fund drives, programs for hungry and homeless people, arts events, church programs, local parks, environmental groups, etc.)

  19. Mention to students that in the letter to their families, (Handout Four), families are asked to suggest a charity that is important to their family for the class to consider before making the decision in Lesson 3 about which charity will receive funds raised by the class.

  20. Discuss with the class who benefits from philanthropy. Is it the individual only? What benefits do the school, the neighborhood, the community receive? Does our nation benefit? How about the world?

  21. Write the definition of common good, “working together for the benefit of everyone” on the chart or board. Ask students who has a responsibility for the common good.

  22. Explain that paying taxes is one way to meet that responsibility. Give examples of taxes (sales, gasoline, income, business, property, etc.) to make the point.

  23. Besides paying taxes for local, state and national government to advance our common good, explain that philanthropy is another important way we can choose to contribute to the common good. Philanthropy is a choice, it is also a valuable freedom to be able to spend or donate time, talent, or treasure to improve the common good.

  24. For older students, explain that common good is an important democratic principle. Many people believe in the importance of voluntarily giving of time, talent, and treasure to work together to promote the general betterment of everyone in society. Explain that the United States was founded with this principle in mind.

  25. For second graders, teach the children the lyrics for the song “You Can Bank on Me.”(See Handout One.) Make sure the students understand the concepts in the lyrics.

  26. For older students, review and rehearse the words and definitions. Suggestions include writing all words on the board or overhead and calling on volunteers to do one or more of the following:

  27. 1. supply missing words from teacher prompts 2. use a particular term properly in a sentence 3. compare the meanings of certain terms 4. pick one word from the list and link it in some way to another 5. reflect on how the vocabulary and concepts in the lesson could impact their attitudes and behavior regarding money

    Day Two: (Grades 4 & 5) Purpose: Students learn how to multiply and calculate part of a number, given the percentage rate of interest and the number itself. Students will learn that interest on invested savings can easily be calculated and added to the principal. Teacher note: This is an opportune time teach more about decimals, percentages, and interest, and practice some computations common in later elementary (grades 4-5) math curriculum. Both multiplying by hand and calculators can be used.

  28. Before discussing the concept of “invest,” introduce the concept of a goal to the students. Ask students if they know what a goal is. Explain that a goal is something you plan to do in the future, either in the short-term (something soon, usually less than a year) or for the long-term (usually longer than a year away). Give examples of goals and ask students if they or their families have any goals (they do not have to be monetary).

  29. Help students relate goals to goods or services for which they or their family have saved money. Explain that if you are saving money to buy goods or services for the future, you have a goal. Ask students to identify some short-term and long-term saving goals they or their families might have.

  30. Long-run goals that involve saving money for future goods and services could include buying a house, a car, a big family trip, paying for college, or saving for retirement. Tell students that when saving for a long-run goal it is very common to invest savings because there is more time for it to grow in value until it will be needed.

  31. Display the “invest” bank section of the four-part bank. Explain that when money is invested money wisely, it grows in value. It grows by receiving additional money payments (interest) from other groups, such as other individuals, banks, companies, governments, etc., who pay for the privilege of being able to use the money invested with them. So, the money payment one receives over and above what they originally loaned out (invested) is called interest. It is like being paid “rent” for being able to use the money. Banks and credit unions will pay interest to students who loan them some money to use for a specified time period.

  32. Teacher note: To extend this learning further, a phone call or stop at a local bank or credit union may result in brochures that describe simple savings accounts that students and families can use for simple investing.

  33. “Interest is interesting” because it can go two ways. It might also have to be paid to someone else for the privilege of borrowing their money. Consumers (people who consume goods and services) can also be borrowers and have to pay interest, rather than receive interest.This happens when borrowers pay interest (money payment or fee) to lenders, such as other individuals, bank and credit card companies, credit unions, or other sources.

  34. So, interest is simply the money payment for being able to use someone else’s money. Interest is either “payments spent for the use of borrowed money or payments received (income) for invested money”, depending on which side of the transaction one is on. When one saves and then invests money, it is the money received. When one borrows, it is the additional money one spends.

  35. Teacher Note: If teaching the concepts of principal, interest, percentage, converting percents to decimals, computations of interest earned, and compounding interest are not appropriate for your students, please omit part or all of the following instructional procedures and proceed to the “closing” procedures. Compounding of interest may or may not be discussed here, depending on the readiness of your students.

  36. Explain to students:

    1. The original amount of money they have set aside to invest, upon which interest will be calculated, is called the principal.If the student were borrowing money, the original amount borrowed would also be called the principal.
    2. In the following example it is assumed they will be gaining interest at the interest rate (expressed as a percentage of the principal) of 10% per year on the “invested” part of their savings.
    3. Percentage means parts per hundred, so 10% would be .10, or ten hundredths. Explain that any percentage can be changed to a decimal by moving the decimal point two places to the left. Show examples of how 6% becomes .06 after adding a zero in the decimal place for tenths and how 50% becomes .50 quite easily by moving two places to the left of the zero and installing a decimal point in front of the number five. In the same vein, show students that 150% would translate into a decimal of 1.50. Check for understanding by quizzing students using a variety of examples.
  37. On the board show the computation of 10% annual interest on a $1000 amount invested. Use multiplication operations to show the $1000 principal multiplied by (.10) resulting in $100 as the amount of interest. Ask students to make the same calculation on paper and with a calculator. The $100 interest, in this case, is a money payment being paid to the investor, a benefit, because they invested some of their savings in an interest bearing account and are receiving a return on it. Also, show students that if they borrowed $1000 and paid 10% interest, that the money payment would be going in the opposite direction and would be a cost for them to be able to borrow.

  38. Ask students to calculate various interest rate percentages to see if they properly convert percents to decimals and correctly multiply to obtain the interest amount. Explain that a sound knowledge of mathematics makes it possible to make better economic and personal financial decisions. This can greatly impact how much money they have to spend, donate, save, or invest.

  39. As review, ask students to name the four choices a person has with the interest (money) they might earn:

    1. spend the interest earned now on a good or service,
    2. spend by donating it to a charity for the common good,
    3. save it for the short-term without gaining interest,
    4. save the interest and re-invest the new interest earned by adding it to the original principal. (or re-invest in something else where interest is earned!) If interest is now added to the principal, ask students what will happen to the interest earned after the next time period if the interest rate remains the same. (Interest earned will be higher because the principal has increased due to interest being added to it.)
  40. Ask students to brainstorm places where people can invest money to increase its value for spending, saving, investing, or donating. Record their responses on chart paper or the board.

  41. Hand out appropriate saving and investing information from local banks, credit unions, United States government, etc. and check for current interest rates and particulars for basic statement savings accounts, Certificates of Deposit (CD’s) of various lengths, and United States Savings Bonds.

  42. In closing, use the four part bank as a model to review and check for understanding of spend, donate, save, invest, and the terms interest, percentage, and principal.

  43. Teacher Note: Excellent lessons for Grades K-12 on the concepts of investing, interest, compounding interest, etc. are available through the National Council on Economic Education here. 

    Day Two: Grades 2 & 3 Day Three: Grades 4 & 5 Anticipatory Set: Tell the students, “Yesterday we learned about the words spend, save, invest, and donate. Today we are going to talk about why anyone would choose to donate their money, time or talents to someone else.”

  44. Review the definitions on the chart paper from yesterday.

  45. Teacher Note: This is a book about a young boy going shopping in Chinatown with his mom. He receives a gift of “lucky money” which he can spend any way he chooses. Sam soon finds he can’t always get everything he wants, so, like everyone, he faces the problem of scarcity, he has to make choices with what to do with a limited resource, in this case, money. Sam’s surprise encounter with a needy person sets the stage for our main topic today: donate. It would be helpful to share with students that everyone who spends, saves, invests, or donates has to deal with the scarcity problem, since people always seem to want more than they can get.Sometimes, such as the case with the poor man in the story, they cannot even get what they need. Use the Economics and Money Visual Organizer (Handout Three) again to facilitate the following class discussion, reviewing wants and resources from the previous day, revealing new portions (scarcity, opportunity cost, choice, spend, save, donate, and invest) of the visual organizer as the discussion unfolds.

  46. Before beginning the discussion of the book, briefly review the essential economics concept of scarcity, “the condition of not being able to have all of the goods and services that you want.”Add this definition to the chart paper of definitions from yesterday.

  47. Remind students that because of scarcity, we are forced to make choices. Every choice we make has an opportunity cost, which is the next best alternative given up when the choice is made. Make sure students understand that the “cost” part of opportunity cost does not necessarily refer to money costs given up, but to all possible things we may give up when we choose one thing over another, like time, talents, other resources, or lost opportunities to do other things. This is an important distinction for students to understand. Ask students to give examples of various opportunity costs they have experienced with choices they have made.

  48. Read aloud the book Sam and the Lucky Money by Karen Chin (see Bibliographical References). Ask students to listen for examples of wants and needs, the condition of scarcity, choices, and opportunity costs.

  49. Ask the students to recall and/or discuss:

    1. What are some economic wants that Sam had?What were some of his needs?Were there any other needs in the story?
    2. Why is it important for Sam to learn the difference between needs and our wants (to be able to manage our money wisely)
    3. What choices did Sam have for spending his money?
    4. What was the scarcity problem in the story that made Sam angry and disappointed?
    5. Have the students ever felt the way Sam did in the story when he was angry that he didn’t have more money?
    6. What was the scarcity problem faced by the needy person in the story?
    7. What are some possible reasons why the man was so poor that he did not have shoes?
    8. How did Sam finally spend his money?
    9. Have students ever felt like donating their money to someone who needed it more?
    10. Who, in life, has to face scarcity situations with their money?Do rich people?
    11. The last sentence in the story says: “As they headed home for more New Year’s celebration, Sam knew he was the lucky one.”Ask students to reflect on what this means.
    12. Finally, refer to the “donate” chart on the board and ask students how the scarcity problem we all face relates to the word “donate.”
  50. Brainstorm on the “donate” chart, if there is room, different people, organizations, and/or charitable groups who could make good use of donations.

  51. Ask the children to reflect quietly about why someone might like to donate time, treasure or talent. Ask them to raise their hands and tell the class possible reasons to donate. Talk about the benefits when someone donates. Talk about the costs of donating and remind students that every choice they make has an opportunity cost.

  52. Ask the students to raise their hands if they would like to raise some money to donate. Inform students they will decide later in the week to whom they will donate their money.

  53. Show the students the jar for collecting money. Tell them that they may bring in coins from home. If students are able to bring in coins, it will add up to enough money to donate to a charity of their choice. Talk with the students about where the money might come from. They are not to solicit money—it should come from them (and their families).Students could offer to do jobs to earn money to donate.


Teacher observation of student responses during the group discussions. A teacher created vocabulary quiz, if desired.

Philanthropy Framework

  1. Strand PHIL.I Definitions of Philanthropy
    1. Standard DP 01. Define Philanthropy
    3. Standard DP 05. Role of Foundations
  2. Strand PHIL.III Philanthropy and the Individual
    1. Standard PI 01. Reasons for Individual Philanthropy