Lesson 2: Under the Bed or in the Bank?

How banks function is at the core of Lesson 2, with students using straightforward computation to learn about savings, simple interest, and more.

Students will learn about savings, simple interest, compound interest, and the function of banks.

Student Worksheet 2, pen or pencil, calculator


1. Distribute a copy of Student Worksheet 2 to each student.

2. Tell students that after they purchase the mountain bike, they have money left over from their weekly paycheck.

3. Have students solve question 1 and share answers with the class. Ask the class: "What would be a better way to save money than putting it in a box under your bed?" (Answers: put it in a bank; invest; buy real estate.)

4. Ask students why it's a good idea for them to put money in a bank. Explain to students that putting money in the bank means that they can earn interest. Interest is an amount of money the bank will pay you for letting it hold your money. The amount of interest you earn depends on the bank and the amount of money you put in the bank.

5. Complete question 2 as a class to help students understand how to compute interest. Depending on your students' experience you may need to review decimals and how they relate to percentages.

6. Once students are comfortable calculating interest, direct them to question 3. Explain that the factors to consider when saving money in a bank are: how much money you put in, how long you leave it there, and the interest rate. Have students determine how much interest they would earn from each bank.

7. Tell students there is something called compound interest, where a bank pays interest on the money you started with and on the interest you've earned. So if Bank D pays 1% interest every month, you will have $1,020.10 after two months. Next month, the bank will pay interest on $1,020.10. This means that the amount earned from interest will go up every month!

8. Have students review question 4 and complete the problem. Encourage students to work in pairs if they need help solving the problem. Once they have finished, ask students to complete Part II of the worksheet. When they are done, have students visit http://www2.scholastic.com/browse/article.jsp?id=3755415 to continue their financial adventures through an online game!


Answer Key for Student Worksheet 2: Under the Bed or in the Bank?
Q1: $244.12 - $125.79 = $118.33 saved per week x
4 weeks = $473.32 total saved.
Q2: $1,000 x .01 = $10 interest + $1,000 = $1,010.
Q3: Bank A: $1,000 x .005 = $5; Bank B: $1,000 x .02
= $20; Bank C: $1,000 x .015 = $15.
Q4: At the end of one year, students would have $1,126.83 in their account.
Review: Interest is an amount of money that a bank will pay you for letting it hold your money. Banks pay interest to you because they use your money to make their own investments. It's like they're "renting" your money.


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