The Savings Search An activity for the high school classroom Part 1 Content Standards and Benchmarks Voluntary National Standards Covered:
Lesson Description Time Required: Lesson 1. Assign students to define the following terms as they apply to savings and investing:
Discuss their answers. Suggested responses include:
2. Show the following example to illustrate the difference between simple and compound interest:
Ask students to identify some benefits of compound interest. (Possible answers: better return on investment, smarter use of money, etc.) Ask students to identify the benefits of simple interest. (Possible answer: some return on investment is better than no return at all.) Compare both types of interest. 3. Have students calculate simple and compound interest at varying principal amounts, interest rates, and length of time (e.g., $500 at 4% for 5 years, $2,000 at 7.56% for 20 years, etc.). 4. Ask students to identify reasons why savers would want to invest for different periods of time. (Possible answers: students might want to save for a shorter term if they plan for a purchase such as a car; their parents might choose to leave their money in for a longer time period for, say, their retirement.) 5. Referring back to the chart in step 2, discuss the concept of Rule of 72 and ask the students to calculate how long it would take to double the $100 principal amount saved if it earned interest at a 10% rate. (To illustrate this, you will apply the Rule of 72 as follows: 72 / 10 = 7.2, thus, it will take a little over 7 years for the $100 to grow to $200.) Have the students apply the rule of 72 with the principal amounts and interest rates they were assigned in step 3. 6. Recap the activity with your students, emphasizing the importance of interest rates in increasing their savings and investments over time. Part 2 Content Standards and Benchmarks Voluntary National Standards Covered:
Lesson Description Time Required Lesson 1. Explain that the students are going to use the information that they learned about interest rates to explore ways they can manage their money. 2. Depending upon class size, you may choose to do this as an individual or group activity. Assign each student (or group) a particular financial institution in your area. Their assignment is to research information about the various products available for saving and basic investing. Most of the research can be completed online; however, it may be necessary to contact the financial institution. For their assigned financial institution, the students will investigate these four basic product types: (1) checking accounts, (2) savings accounts, (3) money market accounts, and (4) certificates of deposit (CDs). For each product type, the students will gather and list the following information:
3. Have the students report on their findings. Use the following questions to generate discussion:
4. Next, provide the students with the following scenarios and have them determine how they would invest their money based on what they learned about each of the products. Indicate that they must decide how to invest and be able to explain why they made their decision. Provide all the scenarios to each student or group of students.
5. Review each scenario and have each student or group report the option they chose and why they chose it. Compare and discuss the different responses. Discuss how the amount of money, length of investment, rate of return, and access to the funds might affect their investment choice. 6. Based on the investment choice, have the students calculate the interest gained on their account over 10 years using the information they gathered from their assigned financial institution. 7. Finish the lesson by reviewing the different types of interest and accounts, emphasizing the importance of understanding the various ways to save and invest money. By Jackie Morgan, economic and financial education representative, Nashville Branch |
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