Compounding Candy

At the end of October, when stores discount their Halloween candy, it’s a great time to grab a bunch and teach students about simple and compound interest. Students with special needs benefit from visuals and a growing pile of candy makes a very strong point about the difference between these two types of interest while teaching a valuable financial literacy and transition skill.

How to Begin

1. Get 3 large transparent plastic jars. Label one “Principal,” one “Interest,” and the last one “Principal & Interest.” Make two signs. Label the first “Simple Interest” and the second “Compound Interest.” Set the “Principal” and “Interest” jars behind the “Simple Interest” sign. Put the “Principal & Interest” jar behind the “Compound Interest” sign.

2. Explain the concepts of each to the students. “The principal is the amount of money you put into the bank to save. The interest is a tiny fraction of that money that the bank pays you for saving your money with them. Interest pays you every year, or month, or in our case, every school day to save your money. In our example, simple interest will pay you 10% every school day on THE PRINCIPAL ONLY. Compound interest will pay you the same 10% every school day but will pay you ON THE PRINCIPAL AND THE INTEREST YOU RECEIVE. We’ll chart the amounts of money of each kind of interest for one month and then see how they’re different.”

3. Use a poster board to create a chart with three columns labeled “Date,” “Simple Interest Total,” and “Compound Interest Total.”

4. Count 30 pieces of candy into the “Principal” jar for the simple interest and “Principal & Interest” jar for the compound interest.

5. The next day, count the pieces of candy in the “Principal” jar and add 10% (or 3 pieces of candy) into the “Interest” jar for the simple interest. Do the same for the compound interest only put the 3 pieces in the same “Principal & Interest” jar. Count and add interest the next day and the next.

6. On the fourth day, you’ll note that the compound interest jar now had 42 pieces of candy in it. Therefore, it will get 4 pieces of candy interest while the simple interest jar still only gets interest on the 30 pieces of candy. Continue with this pattern until the end of the month. By the end of the month, students will be able to see how much more interest (and candy) their principal earned with compound interest.

7. Discuss what “real world implications” this has for savings.