EconEdLink: A Penny Saved

In pairs or small groups discuss: What are som reasons people save money? Do you think saving even a small amount makes adifference? Why or why not?

Share ideas with the class. Write on the board key reasons including emergencies, education, retirement, travel, goals etc.

Go over Vocabulary Words as pairs. Create sentences using the words. For the class, each pair reads their sentences leaving the word out so the class guesses what it should be.

Vocabulary Words:

Savings – money set aside for future use.
Interest – the money earned from savings or paid on borrowed money.
Principal – the original amount of money deposited or invested.
Simple Interest – interest earned only on the principal.
Compound Interest – interest earned on both the principal and the accumulated interest.
Rate (Interest Rate) – the percentage of interest charged or earned.
Rule of 72 – a formula to estimate how long it takes money to double at a given interest rate.

Prior to lesson print A Penny Saved..Or have pairs work from the online booklet (post the URL)

Demonstrate how to calculate simple and compound interest using formulas and online tools.

Write the formula on the board, give the students the problem. As pairs students calculate the answers.

Simple Interest:
I = P × R × T  (I=interest, P=principal, R=rate, T=time)

Example: $1,000 at 5% for 3 years → 1000×0.05 × 3 = $150 interest 

Compound Interest:

A = P(1 + r/n)^(nt) (where A = final answer, P = principal, r = interest rate (as a decimal), n is the number of times the interest is compounded in a year, and t = number of years

Example: $1,000 at 5% compounded annually for 3 years → 1000(1+0.05)^3=$1,157.63

Step 2: Demonstrate Online Tools

Show learners how to use nerdwallet Compound Interest Calculator.
Together, calculate how $500 grows at 3% for 10 years.  = $671.96

Step 3: Introduce Rule of 72

Formula: 72÷interest rate=years to double 
Example: How long will it take to double your money at 6%? 72 ÷ 6 = 12 years to double your money at 6% interest.

As a class/pairs, students go through the booklet addressing pages 1-8. You may address more of the booklet at another lesson.

As pairs, students work on A Penny Saved Combined Worksheet (see documents, also answer key)

Gather as a class and check the answers. 

Use Final Assessment (see document) to see if students are understanding the topic or if a review is needed

Discuss how Savings can help in individual lives. Take the discussion home and return with more insights.