Building on the first two lessons in the series, this lesson deals with savings and interest.
- Identify interest as a benefit of saving.
- Demonstrate expected costs and expected benefits of SAVING using a chart.
Savings is such an important component in future economic health, and yet it is a concept that many students are not introduced to at a young age. The student will do a drop and drag activity. This activity will be a cost-benefit chart about savings. This lesson explains how having a savings account has benefits.
The Grasshopper and the Ant: The Aesop fable about the grasshopper and the ant.
Interest Calculator: Students can experiment with the interest calculator in order to learn more about interest.
How ATM's Work: This is an article from howstuffworks on ATM's.
How do savings accounts work?: This is an article from howstuffworks on what savings accounts are and how they work.
Practice Checks: Students will use this worksheet to learn how to write a check.
Drag and Drop Activity: This interactive drag and drop activity is about the cost and benefits of saving money.
The Costs and Benefits of Saving
Allowance Room: An allowance page at will show students how long they will have to save to purchase listed items.
Banking on our Future: The main website for these lessons. In this section, the students get to learn how to fill in different banking forms.
[NOTE: The students will have to go through a free sign-up process in order to use the website. Here are the fields that students will be required to fill out: Name, Title, Gender, User Name, Password, Secret Question, How You Heard About the Site, and Why You Picked the Site.]
Learning to save is very important to our students' future. As teachers we need to be armed with knowledge about the benefits of saving. We need to let the students discover that there are rewards involved in saving their money.
What are those rewards? Well, if you save money in a bank you receive interest. This lesson is about interest. Since this is an introductory lesson on interest, the website uses a flat 10% interest rate for simplicity. Make sure you tell students that 10% is not a realistic interest rate for a savings account, but that 10% is going to be used because it is easy to figure.
In the Extension activity at the end of this lesson, there is an idea for comparing prices on this allowance room site to actual prices that can be found on the web.
Students may never have thought that there is an incentive to saving. To the students it may seem that asking them to save is more about costs than benefits. The students have to be given some sort of idea that there is an incentive to saving. That incentive is the INTEREST paid to them by the bank for saving money. Lead them through the lesson about what INTEREST is and how it is accumulated.
First of all, talk to the students about banks. Banks are financial institutions that help people save money and earn interest. How do they do that? Because they also let other people borrow money and those people pay the banks interest.
Interest is paid by a bank to a person that allows the bank to use their money. So when you put money in a savings account, that money is used by the bank to loan to other people. Since they are using YOUR money, the bank pays you for that privilege. That makes your money work to make more money!
Take $100. Say the student puts $100 in a savings account at their bank. The bank takes their money and uses it to loan to someone else. Since it is their money the bank is loaning, it pays them interest. Now their $100 is worth more than $100 - it has worked for them! In our website, the interest is 10% so their account would be worth $110. Their money made them more money!
Have the students read the Grasshopper and the Ant
story. The moral of the story is that the grasshopper should have been working for tomorrow instead of playing today. Who are you more like--the grasshopper or the ant?
When we save money we are being like the ant. We are putting away money for a time when we will need it. Or we can put money away for some specific thing we want. Is there something you would like to buy that costs more than your usual allowance? How do you go about getting that item? A good way to get that item is to save for it. How long will you have to save? Click on: The Allowance Room and see how long you will have to save your allowance to buy the items you have in mind.
How can a bank give the person more money than they put in? Well, a person who borrows FROM a bank has to pay the bank interest. So, the person who asked for a loan must pay back more than just what they asked for. They pay the bank interest, and the bank pays us interest! Have your students experiment with our interest rate calculator. They can insert different interest rates and amounts of time to see how that affects how much their money can grow over a certain length of time.
Interest gives us the INCENTIVE to save with a bank. An incentive is
any reward or benefit, such as money, advantage or good feeling, that motivates people to do something. Discuss what incentive the students have in saving. Take the definition of incentive and see how it applies to saving. Would you have a good feeling knowing that you have money in savings? What motivates people to save? Interest is an incentive to save, but are there other reasons to save?
A very interactive and motivational part of this lesson is learning about ATM machines and savings accounts. The students will also get a chance to practice writing checks. Direct students to the how stuff works website to learn more about ATM's and Savings Accounts . Lastly, they can print off the check worksheet to practice writing checks as well as recording their transactions in the check register.
Students will do a drag and drop activity called Save My Money, the activity is about the cost and benefits of saving money.
This lesson gave the student a look at the workings of ATM and checking accounts. This lesson also focused on finding out that interest is one benefit to saving your money in a bank.
In the Allowance Room website, many objects were found. The computer was listed at $2400. Could the students find a better buy in the Sunday newspaper ads? Could other prices be found on the internet? This is one way to extend this lesson by giving the students an opportunity to find other prices and compare it to the prices on this website.
The next lesson in Banking on Our Future is about credit. It can be found at the Banking on Our Future website.
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