Introduction to Earning Interest: Middle School Version
OBJECTIVE
Saving and investing money safely and wisely are critical skills for people of
all ages and backgrounds. Armed with the knowledge of how investments
work, savvy investors can make informed decisions and determine the best
investment choices available to them.
Students will:
00 Learn and use investment vocabulary
00 Discover the concept of compound interest and understand its
effect on savings
00 Compute simple and compound interest over a variety of
compounding periods.
TEACHING MATERIALS
00 Lesson plan
00 Teacher worksheet with precalculated examples
00 Now You Try student worksheet with solutions
00 Student assessment worksheet with solutions
LESSON ACTIVITY
1. Discuss vocabulary words principal, deposit, interest, term, APR
and APY.
2. Certificate of deposit (CD):
• Compounds annually.
• Work through precalculated examples of annual compounding
(see teacher worksheet, Examples 1 and 2).
• Now You Try student worksheet: practice annual interest
calculations (page 9).
3. Statement savings account:
• Compounds quarterly.
• Work through precalculated example of quarterly compounding
(see teacher worksheet, Example 3).
• Note: The calculations presented do not take into account that
different months have different numbers of days. Quarterly
calculations are done by computing annual interest, then
dividing by 4.
• Emphasize that annual interest paid quarterly > annual interest
paid annually.
• Define and demonstrate how to calculate APY.
• Now You Try student worksheet: practice quarterly interest
calculations (page 10).
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