Loans and Savings

Notes:

• In this lesson, students are learning about interest and how it applies to loans and saving money.  There is not a lot of time in this lesson for students to practice on their own.
• There will be opportunities in the next couple lessons for students to work on their own and to apply these skills by working on their College Project.

See my Do Now in my Strategy folder that explains my beginning of class routines.

Often, I create do nows that have problems that connect to the task that students will be working on that day.  Here, I want students to stretch what they know about percents.  If students struggle I will show them how they can set up the percent ruler to help them find a particular percent of a number.  If 100% of $100 is $100, then what would 50% of $100 equal?  What about 10% of $100?  It is important that I use specific language and always reference what amount of money I am talking about.  I ask students how percents connect with fractions and decimals.   When we are finding 50% of an amount, it is equal to ½ of that amount. 

I ask students to share out their thinking about problem 4.  I have students raise their hands to show which option they believe is better.  Students will be using these skills throughout the lesson.

I have students participate in a Think Write Pair Share.  I ask students to quickly share out their ideas and questions.  I find it beneficial to activate students’ prior knowledge.  This brainstorm will give me an idea of what students know, possibly including misconceptions or pressing questions.

I have students fill out the notes together.  I want students to understand that borrowing money costs money, and that you are responsible for paying it back.  I briefly explain the student loan debt I have.  I share that Sallie Mae will give me up to 25 years to pay off my loans.  A common question is what happens if you don’t pay off your loans.  Because of the large amount of material we need to cover today, I may not have time to get into default. 

I want students to understand that people take out loans for many things like going to school and buying a house.  Very few people have enough money to pay for college or a house up front.

I have a volunteer read about Hannah.  Students calculate how much more money she needs.  I explain that a 5% interest rate is pretty good.  Some student loans can have much higher interest rates.   

I want students to start calculating Hannah’s interest without using a calculator.  I start out by asking students what is 10% of $5,000.  Some students will quickly move the decimal point to get $500. Other students may divide $5,000 by 10.  I ask why this works?  When we find 50% of something, we don’t divide by 50.  I want students to see that there are 10 groups of 10% that make up 100%, or one whole.  Therefore, to find 10% or 1/10 we can divide by 10.  From there, how can we figure out what 5% of $5,000 is?  I show them the percent ruler and I have students share out ideas.  I don’t want to teach students one way to solve these problems, I want to use their number sense skills and show them there are many ways of figuring it out.

After the second year, Hannah owes $5,512.50.  From here I ask students how I could use a calculator to figure out 5% of this amount.  It is okay if students have me find 10% and then find 5% from there.  Some students may suggest multiplying the amount by 0.05.  If they offer that as an option I ask why that works.  I want students to see the connection between multiplying and dividing.   A common mistake is students think they can divide the amount by 5 to find 5%.  If this occurs, I make a drawing that shows splitting up a circle into fifths.  I ask if one piece is the same as 5%.

We have to address what to do when the amount of money goes past the hundredths.  Students are using MP6: Attend to precision.  Once we finish, most students are surprised how much money Hannah owes.  I explain that she will then get a number of years to pay that amount off, but with each year she will pay more interest.

Just like in the other brainstorming section, I ask students to quickly share out their ideas and questions.  I find it beneficial to activate students’ prior knowledge.  

We watch the video and students fill in the notes.  We will only be dealing with simple interest, so I stop the video after 2:30.  I make sure students realize that a 12% is an unbelievable interest rate!  I tell students that the typical interest rate for a savings account is only 0.10%.  I ask students how we would write this as a decimal.

I have a volunteer read about Tamara’s savings.  Again I briefly mention that most savings accounts have an interest rate that is 10 times smaller than 1%. 

We work together to calculate year 1 and year 2 together using the percent ruler and different strategies.  I make sure to ask if the interest is 20.2, how much money is that?  I want to make sure that students know that 0.2 is two tenths, which is equivalent to 0.20 or 20 hundredths. 

Like Hannah’s example, I have a calculator and have students tell me what to do with the last two years.  Students may seem disappointed that after four years she only gets about $80 in interest, but I remind them that that is $80 that is FREE!

If we have extra time, students can work on the extra practice problems.  I have a volunteer pass out calculators for students to use.

 For Closure I ask my students for some advice.  I have student loans that are accumulating interest.  What is the better option in the long run: for me to pay the minimum amount and pay my loans off over 25 years, or for me to pay more than the minimum payment and pay them off in 10 years?  I have students participate in a Think Pair Share.  I want students to realize that I will save thousands of dollars by paying my loans off sooner.  The longer I take, the more interest I will pay.  I ask students to share out things they have learned from this lesson.  In the past, students have shared that they want to start saving money immediately, and that makes me so happy!  I want students to start to understand the power of saving money early.

There will probably be students who have unanswered questions (either during the Closure or at an earlier point in this lesson).  I give these students post-its to post their question on the Project Parking Lot.

I pass out the Ticket to Go and students complete it independently.  I pass out the HW Loans and Savings at the end of class.