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# Earning Interest, Paying Interest

Lesson 14 of 19

## Objective: SWBAT understand how interest works in a financial context, as they continue to work on the Spending & Saving Project.

## Big Idea: Whether you're opening a bank account or receiving a rubric from a teacher, don't forget to read the small print!

*40 minutes*

The opener leads us into a very informal mini-lesson in which I introduce some of the terminology about interest and how banks work. I use these slides to guide the lesson, which really just consists of me standing at the front of the room and leading a conversation. Because kids are a week deep in a project about spending and saving money, and because a lot of them just want to know how this stuff works, this piece is high-engagement despite its lack of pedagogical bells and whistles.

I start with the question, "How does a bank make money?" and I keep the answer pretty simple: "people like you and me can deposit money in a bank account, where it will earn interest." Often a student will mention ATM fees and other charges, and I acknowledge that this is true, but that for now, we're not going to focus on that. "With our money in the account, other people can go to the bank and take out a loan. The bank *charges* interest on these loans, and that's where the earned interest comes from. Of course, banks have to charge a higher interest rate to borrowers than they can pay out to people with savings. That's how they make money and stay in business."

Next, I note that no one should expect to earn interest at the rates described in today's opener. As often happens in math class, it can help to look at an example that's not *exactly* realistic, as a way to illustrate how certain concepts work.

Then we run through the vocabulary and formulas for savings and debt. For now, I'm not even concerned about using examples, although I have an activity prepared for anyone who is completely up to date on the Spending & Saving Project. With this mini-lesson, my goal was to introduce some terminology, which will give us a head start when we get to tomorrow's lesson and the third part of the project.

#### Resources

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#### Project Checklist

*5 min*

Before giving the students the rest of the class to work on their projects, I distribute the Spending & Saving Project Checklist and Rubric. These are two sides of the same handout.

The checklist lists all parts of the project, including Part 3, which we'll start working on tomorrow. In bold are what I consider the minimum that everyone should accomplish. I leave the checklist on the board for the rest of class, where it serves as a roadmap for what students should accomplish today.

As for the rubric, it's wordy. I still haven't figured out how to avoid this. But since we're talking about banks and bank accounts, I draw a comparison. "Do you all know what *small print* is?" I ask. "How many people read the small print when they open a bank account or buy something?" Students answer that not many people do. "Is there every anything important in that small print?" I continue. Now we go back to talking about some of the hidden fees that banks might charge. "If it's in the small print, you can't argue with it," I say. "If you want to dispute a charge from your bank, they're going to say, *We told you so...*whether we like or not, there's important stuff in the small print, and there are good reasons to pay attention to it. So if you want to know how I'm going to grade you, read the rubric carefully. I know that it's small print, and that it might take some effort to read through it. But if you do, you'll know exactly what to expect when I grade your work."

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#### Project Work Time

*20 min*

**Work Time Continues from Previous Lessons**

For the rest of class, students have time to work on the Spending & Saving Project, which I've introduced over the last four lessons. Please use the links here to learn about each part of the project.

- Part 1a: Saving Money
- Part 1b: Value Up, Value Down
- Part 2: Four Graphs
- Part 2: Changing the Parameters

Now that kids have their checklist and rubric, work time really drives itself. It's likely that I'll spend another class period or two just giving kids a chance to work. At this point, almost all of my students buy into getting this project done, and I think it's valuable to show them that I'm willing give them time as long as they continue to use it well. I continue my work of urging students to think about what the numbers mean in context, and I check in to see if they've read - or plan on reading - the rubric.

I should also note that, because it's February in Massachusetts, it's likely that snow will affect us in someway - either shortening or canceling a day of school here or there. (Update: It's February 2014, and there have been three snow days since I started this project!) I'll provide time and adjust the due date accordingly.

**Extension: What is Interest?**

For anyone who is completely up to date on the project, I've prepared a few copies of a great resource shared by my fellow Master Teacher, Tiffany Dawdy. In the second section of Tiffany's Credit Card Investigation: What is Interest?, there's a great exploration of credit card interest and how it works. Check it out, and thanks Tiffany!

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- UNIT 1: Number Tricks, Patterns, and Abstractions
- UNIT 2: The Number Line Project
- UNIT 3: Solving Linear Equations
- UNIT 4: Creating Linear Equations
- UNIT 5: Statistics
- UNIT 6: Mini Unit: Patterns, Programs, and Math Without Words
- UNIT 7: Lines
- UNIT 8: Linear and Exponential Functions
- UNIT 9: Systems of Equations
- UNIT 10: Quadratic Functions
- UNIT 11: Functions and Modeling

- LESSON 1: How Will Your Salary Grow?
- LESSON 2: Sequences, Spreadsheets, and Graphs
- LESSON 3: Sequences Gallery Walk (Day 1 of 2)
- LESSON 4: Sequences Gallery Walk (Day 2 of 2)
- LESSON 5: Graphing Stories
- LESSON 6: More Graphing Stories
- LESSON 7: Parameters on Desmos
- LESSON 8: Functions: When One Representation Sheds Light on Another
- LESSON 9: Using Points to Determine the Shape of a Graph
- LESSON 10: Introduction to the Spending & Saving Project
- LESSON 11: Spending & Saving, and Function Notation
- LESSON 12: The Spending & Saving Project, Day 3
- LESSON 13: The Spending & Saving Project, Day 4
- LESSON 14: Earning Interest, Paying Interest
- LESSON 15: The Cost of Debt (Part 3 of the Spending & Saving Project)
- LESSON 16: Finishing Up the Spending & Saving Project, With Extensions
- LESSON 17: Tying a Bow on Unit 4 (Review Day 1 of 2)
- LESSON 18: Tying a Bow on Unit 4 (Review Day 2 of 2)
- LESSON 19: Unit 4 Exam