Financial Literacy | 5th Grade Math

Financial Literacy Notes - Grade 5

1. Income and Payroll Taxes: Understanding Pay Stubs

Pay Stub: A pay stub shows how much you earned and how much was deducted for taxes and other expenses.
Gross income: The total amount earned before deductions.
Net income: The amount you get after all deductions ("take home pay").
Deductions: Money taken out for taxes (federal, state, social security), insurance, retirement, etc.
Formula: \( \text{Net Income} = \text{Gross Income} - \text{Deductions} \)

Example:

  • Gross income = $400; Deductions = $85; Net income = $400 − $85 = $315

2. Income and Payroll Taxes: Word Problems

Read pay stubs carefully! Pay attention to gross pay, net pay, and list all deductions for taxes.

Example:

  • John earned $650 with $120 deductions. What was his net income? $650 − $120 = $530

3. Sales and Property Taxes: Word Problems

Sales tax: Extra money added when you buy things.
Property tax: Money charged each year for owning property (like a house).
\( \text{Total cost with tax} = \text{Cost} + (\text{Cost} \times \text{Tax Rate}) \)

Sales Tax Example:

  • Cost = $50, Tax Rate = 8%
    Tax = $50 × 0.08 = $4
    Total cost = $54

Property Tax Example:

  • Home value = $200,000, Tax Rate = 1.5%
    Tax = $200,000 × 0.015 = $3,000 per year

4. Identify Types of Taxes

TypeWhat Is Taxed?
Income taxMoney you earn (salary, wages)
Sales taxThings you buy
Property taxHomes, land, buildings
Payroll taxYour paycheck
Other (VAT, excise, etc.)Special goods & services

5. Understand Gross and Net Income

Gross Income: Total you earn before anything is taken out.
Net Income: Money you actually get after deductions.
Formula: \( \text{Net Income} = \text{Gross Income} − \text{Deductions} \)
  • Gross = $900, Deductions = $210, Net = $690

6. Calculate Gross and Net Income

Use subtraction for deductions. Check each line (tax, insurance, etc.) for the total deductions.
  • Gross = $1300; Taxes = $100; Other deductions = $60; Net = $1300 − ($100 + $60) = $1140

7. Identify Advantages and Disadvantages of Payment Methods

Cash: Easy, but you can lose it.
Check: Good for records, but may take time to clear.
Debit Card: Fast and safe, but may incur fees.
Credit Card: Buy now/pay later. Can build credit. Watch out for interest and debt.
Online: Convenient, but requires access and security.
Use safe payment methods. Keep track of your spending.

8. Evaluate Payment Methods

  • Is it fast/convenient?
  • Is it secure?
  • Might it involve fees or interest?
  • Does it help track spending?
  • Could you overspend?

9. Reading and Keeping Financial Records

Financial Records: Written record of your earning, spending, saving, and taxes paid. Examples: pay stubs, receipts, bank statements.
Why keep records? To track money, prove what you paid, avoid mistakes, and help budget.
  • Keep your pay stubs for each job
  • Save receipts for big purchases
  • Check your monthly bank statement

10. Balance a Budget

What is a Budget? A plan for income and spending.
Balanced Budget Formula: \( \text{Income} = \text{Expenses} \)
If spending is less than income, you can save.
If spending is more, you need to adjust your expenses.

Balancing Budget Example:

  • Income = $50, Expenses = $45, Balance = $5 saved
  • Income = $60, Expenses = $60, Balance = $0 (balanced)
  • Income = $40, Expenses = $45, Balance = Adjust expenses by −$5

11. Adjust a Budget

If you have extra expenses, cut spending elsewhere or earn more to keep your budget balanced.
  • If you add a $20 expense, reduce spending by $20 elsewhere, or earn $20 more.

📚 Quick Reference Financial Literacy Formulas

Net Income: \( \text{Net Income} = \text{Gross Income} − \text{Deductions} \)
Total Cost with Sales Tax: \( \text{Total Cost} = \text{Item Cost} + (\text{Item Cost} \times \text{Tax Rate}) \)
Balanced Budget: \( \text{Income} = \text{Expenses} \)