Student Handout — Interest (Week 13)
This handout summarizes what we learned in Week 13. Share it at home with a caregiver or trusted adult if you want.
What Is Interest?
Interest is extra money that gets added over time. It works in two directions:
Interest When You SAVE (Good for You!)
When you put money in a bank, the bank may pay you extra money as a thank-you for letting them hold it.
In our simple class model, you deposit $100 and the bank adds $5 each year. After 1 year: $100 + $5 = $105 After 2 years in the same simple model: $105 + $5 = $110
The main idea is that saving can make your money grow over time.
Interest When You BORROW (Costs You Money)
When you borrow money, you pay extra on top of what you borrowed.
In a simple class model, you borrow $100 and owe $10 extra each year. After 1 year: $100 + $10 = $110 After 2 years in the same simple model: $110 + $10 = $120
The main idea is that borrowing costs more over time.
Guided Extension: Growth on Top of Growth
Older or ready learners can compare a model where the extra money also earns interest.
You deposit $100. The bank pays 5% interest per year. After 1 year: $100 + $5 = $105 After 2 years: $105 + $5.25 = $110.25
This is one way money can grow on top of earlier growth.
How to Calculate Simple Interest
Interest = Amount × Rate
| Step | What to Do | Example |
|---|---|---|
| 1 | Start with your amount | $100 |
| 2 | Find the interest rate | 5% |
| 3 | Convert the rate to a decimal | 5% = 0.05 |
| 4 | Multiply: amount × rate | $100 × 0.05 = $5 |
| 5 | Add interest to the amount | $100 + $5 = $105 |
Guided Extension: Interest Comparison
This longer table is optional extension work for older or ready learners.
See how different rates change your money over time:
| Starting Amount | Rate | After 1 Year | After 3 Years | After 5 Years |
|---|---|---|---|---|
| $100 | 2% | $102 | $106.12 | $110.41 |
| $100 | 5% | $105 | $115.76 | $127.63 |
| $100 | 10% | $110 | $133.10 | $161.05 |
What do you notice? A higher rate makes a bigger difference — especially over more time.
Saving vs. Borrowing — The Big Idea
| Saving | Borrowing | |
|---|---|---|
| Interest helps or hurts? | Helps — you earn extra money | Hurts — you owe extra money |
| Time is your… | Friend — more time = more earnings | Enemy — more time = more cost |
| The smart move | Start saving as early as you can | Know the cost and make a plan to pay it back |
Key Vocabulary
| Word | Meaning |
|---|---|
| Interest (saving) | Extra money the bank pays you for keeping your money there |
| Interest (borrowing) | Extra money you owe on top of what you borrowed |
| Interest rate | The percentage used to calculate how much interest is added |
| Deposit | Putting money into an account |
| Loan | Money you borrow that you must pay back, usually with interest |
Talk About It at Home or With a Trusted Adult
Only share what feels comfortable. You can use a made-up example instead of a private family example.
- Where might someone earn interest on savings?
- Why does borrowing usually cost more over time?
- If you saved $5 per week for a year, how much would you have before interest? What if a bank or classroom model added a little extra?