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Monday, July 7, 2014

Two Good Explanations of Compound Interest

Compound interest can be a wonderful thing if you're saving money. How compound interest works is a concept that every middle school or high school student should learn as it helps them see the value of saving money in a bank account.  The following videos do a nice job of explaining how compound interest works.

The Common Craft video below (click here if you're reading this in email or RSS) does a nice job of explaining the concept in a way that middle school and high school students can understand.


Investopedia offers a slightly different explanation of compound interest vs. simple interest.

Applications for Education
Extend the lessons of these videos by having students look for current interest rates offered by banks and credit unions. Ask them to calculate how much money they could save by the time they finish high school or college if they started saving ten dollars a week right now.