Understanding Interest

Directions: The following lesson plan may be used by parents, volunteers, or professional educators to supplement or substitute the skills introduced, assessed, and applied in the fourth segmented portion of MoneyIsland.

Objective

Students will be able to identify what interest is. Students will be able to explain how banks can give people interest on their money. Students will be able to identify approximately how long compound interest takes to double a sum.

Jump$tart Knowledge Statements

(4th & 8th Grade Levels) People can earn income from rent and interest. anks, savings and loan associations, and credit unions are places people B can invest money and earn interest. ompound interest is money earned on both principal and previously C earned interest. he Rule of 72 is a tool for estimating the time or rate of return required to T double a sum of money.

Game Screenshot: Sherman explains how money earns interest in a savings account.

Jump$tart Standards
(4th & 8th Grade Levels)

Financial Responsibility & Decision Making

Standard 1: Take responsibility for financial decisions dentify ways to be a financially responsible young I adult Standard 4: Make financial decisions by systematically considering alternatives and consequences Evaluate the results of a financial decision

Materials & Set-Up

Writing utensil Warm-up sheet Chart Paper/Marker Storyboard Template Markers Group 1 and Group 2 Directions for Storyboard Activity

Income and Careers

Standard 2: Identify sources of personal income efine gift, rent, interest, dividend, capital gain, tip, D commission, and business profit income

Saving and Investing

Standard 1: Discuss how saving contributes to financial well-being ive examples of how saving money can improve G financial well-being Standard 2: Explain how investing builds wealth and helps meet financial goals efine the time value of money and explain how D small amounts of money invested regularly over time grow exponentially se the Rule of 72 to estimate the time or interest U rate needed to double an amount of money

Procedure
Warm-Up
Off-Line: Give students a warm-up sheet with the following T-chart and directions on it. Have students fill out the T-chart.

Benefits of Mattress Saving

Disadvantages of Mattress Saving

Teacher Lesson Plan

Directions - Many years ago, some people were afraid of what might happen to their savings and did not trust their money with anyone. If these people saved money, they worried that something would happen to it, so they kept their money in the mattress where they slept. In the T-chart above, write some ideas about what was good about mattress saving and what was not so good about it. Guiding Questions Was the money that the people kept in the mattress safe? Did the people saving the money feel that their money was safe in the mattress? Did the people who stored their money in their mattress earn any interest? Did the people who put their money in their mattress have anyone else to help them with their finances? D iscuss what students wrote as benefits and disadvantages of mattress saving and record their ideas as a class on a class T-chart. Have students keep their warm-up sheets for the wrap-up.

Presentation
MoneyIsland.com: If available to them, your students should next play MoneyIsland and complete the quest to Big Ben where the character Sherman Holmes will teach them about earning interest in a bank or credit union account, compound interest, and how long it takes to double a sum with compound interest through a presentation of clues at Big Ben. Off-Line: You may view or present the video on Compound Interest that appears in MoneyIsland with your students by going to Videos in the More Fun & Games section of your MoneyIsland site, then clicking on An Interesting Adventure.

Assessment
Off-Line: Divide students into two groups. Label one group Where Interest Comes From. Label the other group How Interest Grows. Give each student in both groups a storyboard like the one below. G ive each group their assessment directions sheet/guiding points, writing utensils, and markers. The directions for each group are below. Read the directions with each group and have them begin. Group 1: Where Interest Comes From Directions - You are going to create a storyboard that describes where interest comes from. A storyboard is like a comic book. It tells a story using pictures and text. In each box, you will draw a picture of something from your topic. Below each box, you will describe what is happening in your topic. In your storyboard, make sure to include the following topics:
Show people giving money to a bank. Show how banks use peoples money to make money. how how banks share the money the bank has earned with people in the form of interest. S

D ont worry if your pictures are not perfect. Stick figures are OK. Dont worry if you dont use every box on your storyboard. Its OK if you need an extra sheet for your storyboard. If you have time after creating storyboard, color your storyboard until time is up. Group 2: How Interest Grows Directions - You are going to create a storyboard that describes how interest grows. A storyboard is like a comic book. It tells a story using pictures and text. In each box, you will draw a picture of something from your topic. Below each box, you will describe what is happening in your topic.

Teacher Lesson Plan

I n your storyboard, make sure to include the following topics:

Show people giving money to a bank. Show how $100 at the beginning of the year becomes $110 from interest. how how $110 at the end of the first year becomes $121 at the end of the second year. S how how at the end of the 7th year, there will be $200, double of what you started with. S

Story Board

D ont worry if your pictures are not perfect. Stick figures are OK. Dont worry if you dont use every box on your storyboard. Its OK if you need an extra sheet for your storyboard. If you have time after creating storyboard, color your storyboard until time is up. W hen the storyboards are complete, choose one or two students who did well with the activity from each group to present their storyboards. At the end of each presentation, summarize how each student used the guiding topics included in the directions. MoneyIsland.com: In the MoneyIsland online world, your student(s) will answer 8-12 interactive questions testing his or her understanding of the financial content. Their scores are available to you through your parent/ teacher login.

Application
Off-Line: Split students into groups so that there are three students per group. Tell the students that they will be creating a skit about todays lesson. Announce that in each group there will be a student who is the Dollar, a student who is the Banker, and a student who is the Interest Magician. If one of the groups does not have exactly three people, more than one student can be a Dollar. Ask students to create a short skit (around a minute) that involves the following.
A dollar is earned through earned or passive income. That dollar is given to the banker. he banker gives the dollar to businesses in loans. The businesses give the dollar back to the bank, plus some extra money. T The bank gives the dollar to the persons account, plus some of the extra money as interest. he interest magician makes the amount of interest grow each year until after 7 years the dollar is twice as much as what he/she started with. T

Encourage the students to be creative. Invite them to come up with an interesting way that the dollar was earned. Encourage them to use animated gestures like on a cartoon to get their message across in their skit. Invite them to have the banker give the money to an interesting business for the loan. Have the interest magician act like a magician. Have the groups present their skits after some time to create the skits. MoneyIsland.com: In the MoneyIsland online world, your student(s) will be required to to have their passports stamped and complete the quest.

Wrap-Up
Off-Line: Hand out the Warm-Up Activity Sheet again. Have students change or add to their warm up sheets. Have a discussion with the group on what changes the students made and why the students made those changes. Guide the discussion to the idea that mattress saving might have seemed safer, but no interest was being made on the mattress money, so it was not a smart choice.

Teacher Lesson Plan