Lesson on Money – Taxes, Rates, Shares, Dividends & Conversion for Primary 6

Hello, young economists! Today, we’re going to dive into the fascinating world of Money. By the end of our lesson, you’ll understand various important concepts like Taxes, Rates, Shares, Dividends, and Conversion of Currency. You’ll also learn how to calculate them using simple formulas. Understanding money is crucial for everyone. It helps us make informed decisions, manage our finances, and contribute to our community’s economic well-being. By learning about money, you will gain valuable skills that will help you throughout your life.

Meaning of Money

Money is any item or verifiable record that is generally accepted as payment for goods and services. It includes coins, paper money, and digital currency. Understanding how money works and the different financial terms is essential in our daily lives.

Taxes

Taxes are the money that citizens pay to the government. This money is used to build roads, schools, hospitals, and provide other important services. For example, in Nigeria, we have the Value Added Tax (VAT) which is added to goods and services. If you buy a notebook for 500 Naira and the VAT is 7.5%, you would pay an extra 37.5 Naira in tax.

How to Calculate Tax

SHORTCODE0 Example: For a 500 Naira notebook with a VAT of 7.5%, SHORTCODE1

How to Find the Tax Rate

$$\text{Tax Rate} = \frac{\text{Tax Amount}}{\text{Price}}$$ Example: If you paid 37.5 Naira in tax for a 500 Naira notebook, SHORTCODE2

How to Find Taxable Income from Tax Paid and Rate

SHORTCODE3 Example: If you paid 37.5 Naira in tax and the rate is 7.5%, SHORTCODE4

Example Problem

Mary bought a dress for 1,000 Naira with a VAT of 7.5%. How much tax did she pay, and what was her total cost?

1. Calculate the tax amount: SHORTCODE5
2. Calculate the total cost: SHORTCODE6

Importance and Benefits: Understanding taxes helps us see how our contributions support public services. It also ensures we pay the right amount and can budget effectively.

Rates

Rates are amounts of money that are set for specific services. For instance, your parents might pay a certain rate for electricity each month. Let’s say the rate is 20 Naira per kilowatt-hour (kWh) and your household uses 150 kWh in a month. The electricity bill would be: SHORTCODE7

Contrast: While taxes are mandatory payments to the government, rates are payments for specific services that you use. Taxes support public infrastructure and services, whereas rates are directly related to the consumption of a particular service.

How to Calculate Total Cost Using Rates

SHORTCODE8 Example: For 150 kWh at 20 Naira per kWh, SHORTCODE9

Example Problem

If the water rate is 15 Naira per cubic meter and your household used 50 cubic meters in a month, what is the total water bill? SHORTCODE10

Importance and Benefits: Knowing how to calculate rates helps manage household expenses. It also ensures that you understand what you’re paying for and can look for ways to save money.

Shares and Dividends

Shares represent ownership in a company. If you own a share in Dangote Cement, you own a part of that company. Dividends are the part of the company’s profits that are paid to shareholders. For example, if you own 10 shares of a company and they declare a dividend of 5 Naira per share, you would receive: SHORTCODE11

How to Calculate Dividends

SHORTCODE12 Example: For 10 shares with a 5 Naira dividend, SHORTCODE13

Contrast: While rates are payments you make for consuming a service, dividends are payments you receive for owning a part of a company. Rates are expenses, whereas dividends are income.

Example Problem

John owns 20 shares of a company, and the company declares a dividend of 4 Naira per share. How much will John receive in dividends? [ 500 \times 0.075 = 37.5 \text{ Naira} ]4

Importance and Benefits: Investing in shares and understanding dividends can grow your wealth over time. It also teaches you how companies work and the benefits of saving and investing.

Conversion of Currency

Currency conversion is changing money from one country’s currency to another. For example, if you’re traveling to United States of America and need to convert Nigerian Naira to US Dollar, you would use the exchange rate. If the exchange rate is 410 Naira = 1 US Dollar, and you have 50,000 Naira, you would get: 50,000/410=1121.95US Dollar.

The figure below is a conversion table for popular currencies, with the Nigerian Naira (NGN) at the top:

How to Calculate Currency Conversion:

From Foreign Currency to Local Currency:

1. Identify the amount in the foreign currency that you want to convert.
2. Find out the exchange rate for the local currency from the provided table.
3. Multiply the amount by the exchange rate to get the equivalent amount in the local currency.

For example, if you want to convert 100 USD to Nigerian Naira (NGN): SHORTCODE15 SHORTCODE16

From Local Currency to Foreign Currency:

1. Identify the amount in the local currency that you want to convert.
2. Find out the exchange rate for the foreign currency from the provided table.
3. Divide the amount by the exchange rate to get the equivalent amount in the foreign currency.

For example, if you want to convert 50,000 Nigerian Naira (NGN) to US Dollars (USD): SHORTCODE17 SHORTCODE18

So, you would get approximately $121.95 USD.

Contrast with Shares and Dividends: While shares and dividends are related to owning part of a company and receiving profits, currency conversion deals with exchanging one type of money for another, often necessary for travel or international trade.

Importance and Benefits: Knowing how to convert currency is essential for travel and understanding global economics. It helps you make informed decisions when dealing with foreign money.

Conclusion

Understanding these aspects of money – taxes, rates, shares, dividends, and currency conversion – will help you make smarter financial decisions. Keep practicing these calculations, and soon, you’ll be a money master! Remember, whether it’s understanding your electricity bill or converting money for a trip, these skills are invaluable.

Sources

1. Investopedia – Taxes
2. Khan Academy – Rates and Ratios
3. The Motley Fool – Shares and Dividends
4. XE – Currency Converter

Quiz & Evaluation

Let’s see how much you’ve learned, complete this quiz to test your knowledge.