by John Reynolds Gardiner
Lesson plan by Mary Anne Pettit
Description: In this lesson, students use the book, Stone Fox, to understand income, capital, saving, taxes, and credit. Stone Fox tells the story of Little Willy, a ten year old who enters a challenging dog-sled race in hopes of winning money to pay the back taxes on his grandfather's farm.
Personal Finance Concepts: income, capital, saving, taxes, credit
Related Subject Areas: reading, social studies, math, English
Instructional Objectives: (Students will be able to:)
1. explain that people receive income for doing work and use this income to buy goods and services.
2. define capital as the tools, equipment, and buildings used by businesses to produce goods and services.
3. define credit as the ability to buy goods and services now and pay for them later.
4. appreciate the importance of being a good "credit risk."
Time Required: five to ten class periods
copy of Stone Fox for each student (or read chapters aloud to class)
copy of Activities 1 for each student
copies of brochures or pages from college catalogs containing tuition data and/or Internet access to
locate college and university web sites with tuition data
- Assign the first two chapters of the book. Or, read the assignment together as a class.
- Write "income" on the board. Explain that most people or families receive income, in the form of money, for doing work. Define income as money earned for work. The income is then used to buy goods and services, such as hamburgers and haircuts, that family members want. Ask the class what Willy and his grandfather do to earn income. (They grow potatoes on a small farm in Wyoming.)
- Emphasize that although the farm is a home for grandfather and little Willy, it is also a business. They use the resources on the farm — land, buildings and tools, and their own hard work — to grow potatoes. Little Willy's grandfather then sells the potatoes to someone (Mr. Leeks), who then resells the potatoes to grocery stores or to factories for canning. The money Grandfather and Willy receive when they sell the crop to Mr. Leeks is their income.
- Briefly review Willy's dilemma at the end of the first chapter. Because grandfather refuses to get out of bed (presumably due to a yet unexplained depression over tax problems), Willy must take over the farm business.
- Ask students to identify little Willy's main concern when he takes control of the farm in the beginning of the second chapter. (It's almost time to harvest the potato crop. The crop was planted in early June, and it is now the middle of September. Willy worries that an early freeze will ruin the crop if it's not harvested soon.)
- Explain that before Willy can harvest the potatoes, there is a lot of work. Write "capital equipment" on the board. Define capital as the tools, equipment, and buildings that a business uses to produce a good or service — in this case, potatoes. Emphasize that capital can be used over and over again to produce (or grow) a good or service. It is not "used up" in the production. If Willy does not have the necessary capital, he will not be able to harvest the potatoes.
- Have students think of examples of capital that Willy will use to grow and harvest the potato crop. Record student responses on the board under the heading "Capital Equipment." (Note: Be sure to stress that money is not "capital." A farmer might use money to buy a tractor or build a new chicken coop, but the tractor and building are capital — the money is not. (Grandfather and Willy's capital equipment includes an underground shed to store the potatoes until they are sold, potato sacks, plow, and even the horse. Technically, the horse is a natural resource, however, the horse and the plow are used repeatedly so they could be considered as a capital resource. This means that Searchlight, harnessed to the plow, can also be considered a capital resource.)
- Assign chapters 3, 4 and 5.
- Explain that much of the income that families earn for doing work is used to buy goods and services, but not all is used for this reason. Ask what Grandfather would do every month with the money little Willy earned working on the farm. (He deposited it in a savings account at the bank. The account now has $50.)
- Write "saving" on the board, Explain that when people choose to not spend income and set it aside instead (it doesn't matter where — a savings account, a piggy bank, or under a mattress), this is called saving. Ask why Grandfather was saving little Willy's earnings. (Grandfather was saving money to pay for little Willy's college education.) Emphasize that when people want to buy something in the future, especially something with a high price tag, such as a car, house, or a new bicycle, they must save. Saving means spending less now to be able to spend in the future.
- Have students identify to whom Grandfather owes $500 and why. (Grandfather owes $500 to the state of Wyoming for ten years of taxes on the farm.) Write "taxes" on the board. Define taxes as required payments to the government. In Grandfather and little Willy's case, they owe the taxes to their state government. Take a moment to talk with the class about their specific state taxes. Remind students that their parents or other relatives must also use some of their income to pay state taxes. The state then uses the taxes collected to build and maintain highways and schools (especially colleges like Willy's grandfather wants him to attend) and to provide housing and medical care for needy people.
- Summarize the discussion by writing the heading "income" on the board. Under income, list "spending, saving, and taxes." Emphasize that when families earn income, some will be used to pay taxes. Most families will not avoid paying taxes for ten years by hiding collection letters under the floor boards!
- Write "credit" on the board, and define credit as the ability to buy goods and services now and pay for them later. Engage students in a brief discussion about credit cards. What kinds have they seen family members use? Emphasize that when a credit card is used, people take the item home now, and the bank (or store) keeps track of what has been purchased and sends a bill at the end of the month. Point out that paying credit card bills on time is the same as paying back money that was borrowed.
- Refer students back to chapter two. Ask how little Willy was able to buy the things he and Grandfather needed at Lester's General Store after Grandfather took sick. (He bought them on credit against this year's crop. Willy would have to use some money from selling the crop to Mr. Leeks to pay the bills from Lester's General Store.)
- Divide the class into groups of 4-5 students, and give a copy of Activity 1 to each student. Read the introduction with the class, and go over the instructions. Assign each group a different business and/or allow them to generate their own ideas. Have them complete the activity as a group. When finished, have each group share its list of needed capital and its plan for repaying the loan. (Examples: rakes and garbage barrels for yard work; games and toys for entertaining preschoolers; brooms, sponges, garbage barrels for cleaning garages; sponges, hoses, and buckets for washing cars; leashes, brushes, and pet toys for pet care)
- Assign chapters 6 and 7. Discuss the following.
- How much is the entrance fee for the race Willy wants to enter? ($50)
- Where does Willy get the money for the fee? (from his college savings account)
- Remind students that Willy had to see Doc Smith for medicine for Grandfather. What does Doc Smith think of Willy's decision to use his college money for the entrance fee? (She thinks he is a "darn fool" for using the money.) Encourage discussion. (Mr. Foster most likely would not have loaned Willy the money. Because Stone Fox has never lost a race, Willy would probably be considered as a poor "credit risk" with no way of repaying the loan.)
- Why must Willy save for college anyway, aren't schools free? (Answers will vary.) Engage students in a discussion about the cost of their education. If you teach in a public school, make sure students understand that some of the taxes their parents pay to the state and local governments are used to provide and maintain schools. If you teach in a private or parochial school, do students know how much they must pay to attend? Explain that there are both private and public colleges; however, there are no "free" public colleges that are totally supported by taxes. Students (and/or their parents) must also make payments for their college education. This is why Willy is saving for college.
- Distribute copies of brochures or pages from college catalogs that will give students current college tuition fees. Use the data to determine the yearly and total cost of an undergraduate education at various (public and private, if available) colleges and universities. Point out that tuition can vary widely among colleges and there are many other costs, such as room and board and books. Emphasize again why it was so important for Willy (as it is for most people) to save for college.
- Assign chapters 8, 9, and 10.
Closure: Discuss the following.
- What is income? (money earned for work)
- How did Grandfather and Willy earn income? (They sold the potato crop that they grew.)
- Grandfather and Willy used capital to grow potatoes. What is capital, and which capital resources did they use? (Capital is tools, equipment, and buildings that a business uses to produce a good or service. Grand father and Willy used an underground shed to store the potatoes until they were sold, potato sacks, and the plow harnessed to a horse.)
- What is saving? (not spending income and setting it aside instead)
- What are taxes? For what are they used? (Taxes are required payments to the government. Governments use taxes to pay for things such as building and maintaining highways and schools and providing housing and medical care for needy people.)
- What is credit? (the ability to buy goods and services now and pay for them later)
- Why would someone want to be a good credit risk? (to be able to borrow money when necessary)
Assessment: Read the following scenario to the class about what might have happened to Willy and his grandfather. Then use the questions for assessment. You may want to write the questions on the board before reading the selection to encourage active listening. Remind students that this is not "what really happened," these are just your thoughts.