Money and Financial Mathematics

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Overview

Money plays an important role in our lives, from buying things we need and want to saving for the future. Understanding money and financial mathematics is essential. It can help you make informed decisions about how to use your money wisely. In this article, we will explore the concepts related to money that you will probably come across in year 5 maths.

Learning Outcomes

After you have read this article, you will:

• Realize why understanding money matters is important
• Know when to use exact answers and when approximations are appropriate in financial transactions
• Understand the concept of rounding up and down in financial calculations
• Know how to apply financial planning in real-life situations

Exact Answer or Approximation?

In real-life, calculations involving money more often than not involve decimal numbers – dollars and cents, and it is not always easy to do quick calculations involving decimals, especially when you don’t have a calculator with you! So, you want to think wisely. Do you always need to find an exact money amount? Not always. Let’s explore…

Think about this situation:

You have $40 with you, and you need to buy two books that cost $12.75 and $14.50. Do you have enough money to buy the books?

Look, even if you overestimated the prices and assumed them to be $13 and $15, respectively, they would add up to $28. And you have $40 with you. In this case, you wouldn’t really care if the prices added up to $27.90 or $27.50 or whatever. All that matters is the total is less than $28, and you have $40 in your pocket. An exact answer is not needed in this case.

However, if you need to calculate the change you would receive after making a payment, you would need an exact answer.

Rounding Up and Down

Money amounts, just like any other number, can be rounded. Sometimes you want to round up, and sometimes you want to round down. It depends on the situation.

Here’s an example where you will want to round up: You have $30 with you, and you want to buy pens that cost $2.75 for your school friends. How many pens can you buy?

Dividing 30 with 2.75 mentally may be a bit tricky. Here, you may want to round up the cost of each pen to $3.00 in order to simplify the calculation. As 30 \(\div\) 3 is 10, you know that you can buy about 10 pens.

In some other types of situations, you will want to round down a money amount. Here’s an example:

An ice cream parlour sold 60 ice creams in a day. If each ice cream was sold at $5.25, approximately how much money was collected on that day?

To find the amount collected, you need to multiply 60 and $5.25. If that sounds difficult to do mentally, you may round down $5.25 to $5. In that case, the total amount collected was 60 \(\times \)$5 = $300. Then, you could say about $300 was collected that day.

Financial Planning and Budgeting

Financial planning is important in real-life situations, such as creating a budget for a school fundraising event. Let’s say your school is organizing a bake sale to raise money for new equipment for the playground. You need to buy ingredients to make the baked goods, packaging, and decorations. You also need to pay for any permits or licenses required for the event. To create a budget, you would need to:

• Make a list of all the items needed to run the event, including their costs
• Determine how many baked goods need to be sold to break even and make a profit
• Set prices for the baked goods that are competitive but still make a profit
• Find ways to reduce costs, such as buying in bulk or using recycled materials for packaging and decorations

By creating a budget, you can ensure that the event is profitable and that you can achieve your fundraising goals.

Wrap Up

To summarize, understanding money and financial mathematics is essential as it can help you make informed decisions about how to use your money wisely. Knowing when to find the exact answer and when to approximate, when to round up and when to round down a money amount is a skill you want to master. If you want to understand these topics better or simply get some more practice, we are here to help!