The student determines the costs and benefits of a spending, saving, or borrowing decision.

(Watch School House Rock “Dollars & Sense” & $”7.50 Once a Week”...)

Spending

• Cost: Johnny really wanted bubble gum & ice cream bars, but it cost him almost all of his allowance.

• Benefits: He really enjoyed the bubble gum & ice cream bars.

Saving

• Cost: You won’t get the bubble gum & ice cream bars.

• Benefits: You will have that $ to spend later, maybe on something better.

Borrowing

• Cost: You will owe the lender and not be able to buy other things until you pay them back.

• Benefits: You can use $ that you don’t have right now.

Opportunity Cost• Opportunity cost is the cost of passing up the next best

alternative when making a decision. • For example, if you play video games for three hours, the

opportunity cost of that choice is the money you could have earned by working instead, or the enjoyment you could have received from an alternate activity such as biking in the park.

• Busy people often have to turn down offers and requests because the opportunity cost of accepting is high. Donald Trump would probably turn down a speaking engagement that paid him a mere $10,000. It isn’t worth his time to accept. He has many better alternatives to choose from, including much more lucrative speaking engagements.