Calculating Interest—A Financial Education Lesson Plan
Grade Level: 6-12
Rationale: Debt is a leading stressor in a majority of Americans’ lives. Understanding how loans can cost far more than the product being purchased, students benefit from experience in calculating interest. From 30 year mortgages to short term, high interest payday loans, students can become better decision makers when managing their money. A deeper understanding of the numbers and concepts that go into loans and interest can strengthen students’ financial future.
Illinois Learning Standards: SS.EC.FL.1.3. Describe the role of banks and other financial institutions in an economy. SS.EC.FL.2.3. Explain that when people borrow, they receive something of value now and agree to repay the lender over time. SS.EC.FL.1.4. Analyze how spending choices are influenced by price as well as many other factors (e.g., advertising, peer pressure, options). SS.EC.FL.1.5. Explain that interest is the price the borrower pays for using someone else’s money. Objectives: 1. Students will calculate simple interest using the formula I=P*R*T 2. Students will be calculate different aspects of “missing information” in I=P*R*T 3. Students will create their own scenarios that demonstrate understanding of simple interest.
Procedure: (approximate time in parenthesis) 1. Remind students that they will be needing their calculators today. 2. Take attendance. The seating chart is on my desk along with the attendance forms. (2 minutes) 3. Inform students that they will be practicing calculating simple interest. Ask students to explain why an individual would want to take out a loan when it would cost them more to pay off. (3 minutes) 4. Have students take out sheet from yesterday titled “Calculating Interest” There are a few extra on the desk. Have students work through the examples at the bottom. Work through examples with them. (10 minutes) 5. Once you are comfortable that they have the concept, hand out to students the sheet titled “Calculating Interest—Some more Practice”. Have students try the chart at the top. They may have difficulty working the second half of the chart. Explain that instead of multiplying, they take the interest, divide it by the years, then divide that by the principal. This may take them some time to get through. This portion will probably take about 15 minutes. Work through each equation with students. (15 minutes) 6. Move to the scenario near the bottom of “Calculating Interest—Some more practice”. Have them read and work through scenario. They may explain to one another and to the class which Bank, #1 or #2, they would suggest. Their answer depends on if they are interested in total payment or monthly cost. (10 minutes) 7. Have students write their own scenarios based off the model just completed. They may work with one another, if they stay to task. (10 minutes). 8. With any remaining time, they can describe their scenarios and have other students calculate their answers. (until end of class) 9. Inform students we will be talking about this tomorrow. They are expected to bring this sheet to class, with any questions. Dismiss students at proper time.