Financial Literacy: Compound Interest
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This high school financial literacy lesson will show students why compound interest is so helpful to investors!
The first page walks students through how to calculate compound interest step-by-step (year-by-year). Students need a basic understanding of writing percent as a decimal and multiplying to find the "percent of" a number.
Students will be given an initial investment and a yearly interest rate. Each student in the class can have different values so they have to do their own work and so comparisons can be made. This allows for easy differentiation as well- give students who are struggling an easier interest rate (10%, 1%) and students who need a challenge a trickier one (6%, 4.5%)
Students carefully calculate the amount of compound interest they would earn over ten years. They check their work using the compound interest formula. Then they can use the formula to calculate compound interest for longer periods of time.
Your class can compare their results. I would recommend having a class discussion (prompt questions are included). Make sure to point out how compound interest is great for investing and saving and terrible for borrowing money. It works against you when you have a loan.
Finally, students reflect on their learning by writing a paragraph after the lesson, and hopefully leave class wanting to start a saving account!
This step-by-step lesson clearly shows students how compound interest works. They get practice doing calculations with precents written as decimals, exponents, and order of operations. It is the kind of math lesson that will stay with students long after the year is complete!
Also check out my Financial Literacy Interest Rates: Lending and Borrowing Money Lesson!
A total of 6 pages:
- Instructions for Calculating Compound Interest
- 2 page worksheet
- Reflection Paragraph
- Sample Answer Key