Compound interest is one of the most important financial concepts your students will ever learn. Here are five classroom activities to help students see compound interest in action — both when it works for them and when it works against them.
Activity 1: Apply the Compound Interest Formula to Savings Accounts
The activity MATH: Compound Interest in Savings Accounts is a perfect place to start teaching compound interest. Students are introduced to the compound interest formula, practice applying it to different savings accounts, and analyze how the frequency of compounding impacts the final amount.
Activity 2: Gamify Learning with Cat Insanity
Game time! In INTERACTIVE: Compounding Cat Insanity, your student will put their fast-clicking skills to the test as they try to feed their ever-growing hoard of hungry cats, all while building conceptual understanding of compound interest.
Each cat has a different “interest rate”, which students can compare in an additional bonus level after they’ve completed the game once. Budget about 5 minutes for the game, and be sure to check out the accompanying worksheet!
Activity 3: Discover the Cost of Compound Interest on Debt
A perfect pairing with Cat Insanity, MATH: The Cost of Compound Interest teaches students to calculate how compound interest will accrue on an unpaid credit card bill!
Students who are familiar with the compound interest formula can jump right into practicing with real-world problems. For students who need a refresher, the Edpuzzle video breaks down every step of using the compound interest formula, including common places where students trip up, like converting units and order of operations.
Activity 4: Compare Savings and Investing with a Calculator
How much difference does it make to start saving at 22 versus 52? What about putting money in a savings account versus investing in stocks?
In INTERACTIVE: The Power of Compounding, students use a compound interest calculator to compare three different savings and investing scenarios side by side. They explore how an early saver in a low-interest savings account stacks up against an early saver who invests in stocks — and then see what happens when someone waits until their 50s to start saving at all. After analyzing all three scenarios, students create their own custom scenario, run it through the calculator, and reflect on what they’ve learned.
Activity 5: Three Levels of Loan Interest
APPLICATION: Loans and the Compound Interest Formula is a differentiated problem set from NGPF’s Financial Algebra Course.
Students apply the compound interest formula at three levels of difficulty using real-world loan and credit card scenarios.
- Level 1 — The impact of compounding periods: Alonso buys a computer using his credit card. Students explore how the number of compounding periods (monthly, daily, etc.) affects the total amount owed over time.
- Level 2 — Compound interest over irregular periods: Kira takes out a $12,000 personal loan. Students calculate compound interest over non-standard time frames, building fluency with the formula in less straightforward situations.
- Level 3 — A growing loan balance: Maya is accumulating unsubsidized student loan debt. Students tackle the added complexity of a loan balance that continues to grow as more principal is added over time.
Extend the Personal Finance Learning:
If you’re a math teacher, consider using these resources to learn more about personal finance and continue making real-world connections in math!
For Your Learning
Check out NGPF’s free one-hour On-Demand Teacher PD modules about investing, credit, and using NGPF math resources. Plus, explore more NGPF activities on the NGPF Math page!
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