About This Lesson
Learning goals
• Distinguish money deposited from interest earned.
• Model how a steady interest rate and regular deposits affect a balance over time.
• Explain why a result is an estimate when real savings rates can change.
Activity (about 25 minutes)
1. Ask students to predict what happens to $1,000 saved for 10 years at 5% annual interest, compounded monthly.
2. Open the linked calculator. Choose USD; enter a $1,000 starting balance, $0 monthly contribution, 5% annual rate, 10 years, and monthly compounding. Record the final balance and interest earned.
3. Repeat with a $50 contribution at the end of each month. Record the final balance, total paid in, and interest earned.
4. Compare the results. Total deposits in the second case are $1,000 + (120 × $50) = $7,000. Discuss how much of the final balance came from deposits and how much from interest.
5. Change one input at a time (rate, contribution, or years). Describe each effect and support the explanation with the displayed results.
Discussion
• Why does the monthly-deposit scenario finish with more money?
• Which matters more in this comparison: amount deposited, rate, or time? What evidence supports your answer?
• Why should a projection not be treated as a promise? Rates can change, and the estimate excludes taxes and inflation.
Assessment: Submit both result sets, show the total-deposit calculation, and write a short explanation separating contributions from interest. Extension: Test a different savings target and identify which inputs could realistically change.
Teacher check (monthly compounding; monthly deposits added at month end; results rounded to cents): with no monthly deposit, the balance is $1,647.01 and interest earned is $647.01. With $50 deposited monthly, the balance is $9,411.12, total paid in is $7,000.00, and interest earned is $2,411.12.
