It’s Day 3 of Financial Literacy Month and today’s edition of Activity of the Day, What If You Invested That Latte?, teaches students the power of compound interest when saving even small amounts of money over long periods of time.  If your students aren’t coffee drinkers yet, ask them to come up with a small purchase that they make on a regular basis to substitute for the latte.

Once students have identified that item and its daily cost, the students use an interest calculator to determine how that daily purchase that they could do without can grow into a significant investment.  The next step is to determine how much of the investment growth after thirty years came from the money invested compared to the interest that compounded over time.  The activity ends with a bonus question that has students change some of their assumptions and also factor in the impact of inflation.

This activity is sure to have some “Aha” moments as students recognize that daily habit can translate into tens of thousands of dollars over time.  Now the hard part is getting them to sacrifice this immediate gratification for future wealth!

Enjoy!

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.