Compound Interest Lesson Plan
The Inspired to Save website is family friendly and we actively encourage schools to make use of its Compound Interest Calculator when teaching children about finance and saving.
To help you, below is a free Compound Interest Lesson Plan. Depending on your students age not all of the questions / tasks will be suitable, therefore we recommend you pick and choose the ones you think are appropriate.
Please feel free to copy and paste the contents of this Compound Interest Lesson Plan into a Microsoft Word document so that you can edit it and use it in your class.
Compound Interest Lesson Plan - Basic Questions
1) What are savings?
2) Why is it important to have savings?
3) Why is it generally a good idea to always spend less than you earn?
4) What is an ‘interest rate’? (Hint – check out the Help page)
5) What is 'compound interest'? – (Hint – check out the how it works page)
6) How much money will you have if you saved $200 initially and then $100 per month for 30 years with a 0% interest rate and a 0% inflation rate? Hint - use the homepage calculator for this.
What happens to this final amount if you increase the interest rate to:
7) How many years does it take to save a $100,000 if you initially save $500 and then additionally save $300 per month with a 0% interest rate and a 0% inflation rate? Hint - use the homepage calculator for this.
Now how many years does it take to save $100,000 if you increase the interest rate to:
8) To be happy how much money would you need to have when you are older?
How many years would it take you to save that amount? - Start with $100 as the amount initially saved and a 0% inflation rate (use the homepage calculator for this).
- Try different monthly saving amounts
- Try different interest rates
Once you have all that money what would you spend it on? Would you want to spend it all or would you still save some of it? Explain your answer.
Compound Interest Lesson Plan - Advanced Questions
9) How much money would you have if you invested $256 for 10 years at an interest rate of 7%? Calculate this using the formulas in the Compound Interest Formula section. Show your working.
10) How much money would you have if you invested $855 for 12 years at a quarterly interest rate of 9%. Calculate this using the formulas in the Compound Interest Formula section. Show your working.
11) What is Einstein's Rule of 72? Hint - check out the Compound Interest Formula section
12) An investment is something you expect to make a profit on in future. Name as many types of investments as you can?
13) What is the definition for ‘Inflation’? Hint – check out the Help page.
14) Write down a real life example of inflation? Hint - try to think of something that you used to buy when you were much younger but now costs more.
15.a) How much would you have if you saved $200 initially and then $100 each month for 30 years with an interest rate of 10% and an inflation rate of 0%? Hint - use the homepage calculator for this.
15.b) If you increase the inflation rate you will still have saved the same amount. However you will not be able to buy as much with that money. This is because of inflation.
To view an example of this set the inflation rate to:
You will see that an additional line has now appeared on the graph and the results table now contains another column. These both display the ‘Total saved including interest minus inflation’.
This tells you how much your savings will actually worth after 30 years time if you had that money today. What are those figures?
Return to the Compound Interest Calculator.