Real Life Money Puzzles | Teacher Resources | Financial Literacy | Khan Academy

We join this episode of real life money puzzles already in progress.

“Hey, Lizette.”
“Yeah, BR.”
“So I'm trying to work out these two offer letters.”
“I know, baby. I'm so proud of you! Everybody wants to work with my boyfriend.”
“Hey, no, but seriously, what should I choose? This job pays $50,000 a year and this one pays $25 an hour. How are the benefits about the same for each? Same amount of paid time off, similar health insurance coverage. I like the people each one about the same too, so it's down to the pay.”

“Yeah, work this out with me. $25 an hour time 40 hours per week equals $1,000 per week. Mhm. Four weeks in a month, so that's $4,000 per month, right? Multiply that by 12 months in a year and you get $48,000. So you should take the $50,000 job, right?”

“Wrong! Rant, too. Is that you've just committed one of the classic money blunders.”
“Kevin Seis Manky from Real Life Money Puzzles.”
“You got it.”
“What are you doing in our apartment hosting a show? Are we on television right now?”
“You sure are!”
“We didn't sign a release!”

“Audience, let's run that back again, shall we? Pause the video for a second and compare Brant's two job offers: $25 an hour versus $50,000 per year. Which one pays more?”
“We'll be right here as this soothing music plays.”
“I don't hear any music.”
“It goes in during post production.”

“Okay, audience, got your answers in mind? Brant, back to you.”
“How many weeks are there in a year?”
“52.”
“When you were doing your initial calculation, you said there were 4 weeks in a month, but it's actually closer to 4.3 weeks in a month on average. Only February is exactly 28 days or 4 weeks long, and even then you've got leap years to consider. But most months have 30 or 31 days, so 4 weeks plus a bit…”
“So you're saying…”
“I'm saying take another run of those numbers, kid!”

“All right, so it's $25 per hour time 40 hours per week time 52 weeks per year. There it is! And that comes to $52,000, which is $2,000 more than the other job. Nicely done, Brant!”
“Cool. Now, how did you get into our apartment, Lizette?”
“Let's turn to you.”
“I'm not looking for a job, though! There's another difference between the jobs. One job pays Brant bi-weekly; the other one pays him semi-monthly.”
“What's the difference?”
“Is there a difference?”

“Okay, like you said, there are 52 weeks in a year. So bi-weekly, every other Friday, is 52 divided by two. That means you get 26 paychecks per year.”
“Wait a minute, that means there might be some months where you get three paychecks?”
“Doing great so far! And there's 12 months in a year, so semi-monthly would be twice a month. So that's 12 times 2. Therefore, semi-monthly payment schedule means you get 24 paychecks per year.”

“Excellent work, Lizette! Let's take a look at the scores. What? At the end of our first round, we've got Brant with five points. He got half credit for figuring out the pay conversion. Remember that there's 52 weeks in a year when you're comparing salaries to hourly pay when those hourly jobs come with paid time off. That could make a heap of difference. But Lizette is in the lead with a commanding 10 because she sussed out the difference between bi-weekly and semi-monthly pay schedules. Still, it could be anyone's game.”
“Is this just our life now?”
“When we come back from the break, it's time for the mortgage round.”
“But we're renters, though!”
“All that and more, right after this lesson.”