How to Teach Kids Compound Interest



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http://www.kidnexions.com A hands-on lesson that teaches kids the power of compound interest and the importance of getting in the habit of saving.

Compound interest is money that grows on itself. I like to tell students that it’s free money. And it is. We call it passive income…income we receive for doing the work once and then letting the compounding take over.

This super easy lesson is a great, hands-on way to get kids to really see the value in saving their money and what can happen to it over time.

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15 Responses

  1. Jai Gokul says:

    you have not mentioned service charges banks normally apply, i.e., 0.75%
    figures tally with that included
    thanks.

  2. Jai Gokul says:

    I must say, what a gem of a presentation.
    A graph could not give the feel as much as the 'yarn'.

    Just to share some feedback, i can recall the day my teacher took up Compound Interest. I think it was in class 8. The period ended in a blur. Now after watching your video i can explain why.

    My questions (THEN) would have been if compound interest is to be learn't why did she teach us simple interest? Which one is important? Why should money borrowed be at compound interest? Let the banks stick with SI. Let them increase the rate in SI so that nobody has to calculate values of 'decimal numbers to the power of n periods'. Such were my feelings.

    Luckily we went on to geometry next day. My teacher never took up the CI problem again. She must have 'sensed' something. In turn, I put CI out of my mind. I knew then that I would have to skip the CI question during exams.
    -xx-

    Today, allow me to share the importance of the CI formula with other younger viewers. It's not just the burden that borrowed money carries with it. It also applies when calculating rent or buy decisions. Like if I buy a house; what would be its 'net present value' 10 years from now after I pay off the mortgage assuming cost of real estate increases by 5% per annum.

    Not to mention that the CI formula in different forms is indispensable in higher math and engineering.

    i am a retired engineer, working as a teacher now
    thanks.
    Jai
    (Chennai, India)

  3. Sandra Roshak says:

    Excellent! Even after 5 years educators are still using this! My 8th graders will be able to understand this much better with this hands-on activity & visual. Not to mention, I really appreciate that you included an age of starting to invest (18) & compared it to an older age (25). Thank you!

  4. Family Math Night says:

    Hi Bindu! The interest is just a percentage of the total amount so it doesn't matter what the currency is.

  5. bindu azhakesan says:

    is interest different in matter of rupees frm dollars ??

  6. Family Math Night says:

    Too funny @JustAnotherRandomTV! I'd love to know how much you end up with. Sounds like you have time on your side!

  7. Lau GS says:

    I really want to save my money now:) Guess i'll pop up when i'm 65 telling you how much money I have!

  8. Family Math Night says:

    Hi ellenbengland,

    Thanks for your response. What I was doing (and I can see where it would be confusing) was measuring the green yarn on the ruler. I went down the front side (12 inches) and then up the back side to the number '4' which would represent an additional 8 inches. Together that would be 20 inches. I apologize for the confusion!
    Karyn

  9. Family Math Night says:

    @junrebs Investing money and leaving it to grow will yield better results than having the money in a regular savings account. And if young kids invest in a Roth IRA, they don't need to worry about the taxes later on. True, inflation plays a role, but typically these types of investments beat inflation.

  10. junrebs says:

    the problem with savings such as this is the effect of inflation and taxes.

  11. AussieAussieAussie says:

    I wonder how much that $56,400 made for the bank in which it was invested. If they're willing to pay the investor $256,787 for 'borrowing' that money, they must have made ten times that for themselves !!! Maybe we should all just skip the middle man and put all of our money high risk investments !!!… anyone ?

  12. Marlaine Cover says:

    Love this Karen! Great example of how a little information can go a long way to expanding personal goals and improving teens' present and future lives. Thank you for sharing with fellow Life Skills Educators in our Parenting 2.0 group on LinkedIN. I will tweet and post it in our Parenting 2.0 group on Facebook as well, confident your P20 siblings will be "sharing" forward also. Hugs!!

  13. alyssajs16 says:

    Great job 🙂 i'm in high school and were doing this for our i.t class but in programming. Thanks

  14. Kathleen Burns Kingsbury says:

    Love this video. So professional. Now you have inspired me to take my you tube videos up a notch!

  15. MpLMx says:

    Good job Karyn…

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