Savings Accounts: Making Your Money Grow
Materials Needed
- Notebook or lined paper
- Pencil or digital document
- Calculator
- Highlighter or colored pencils
- Copy of the reading passage and practice exercises
- Optional: spreadsheet app, sample bank account statements, or play money
- Optional: timer for the “Savings Account Challenge”
Lesson Overview
Grade/Age: 14 years old
Subject: Financial Literacy
Standard Focus: MA.912.FL.3.6 — Savings Accounts
Length: Two 40-minute lessons
Instructional Model: I Do, We Do, You Do
Learning Objectives
By the end of the two lessons, the learner will be able to:
- Define savings account, principal, interest, annual percentage yield (APY), minimum balance, and fee.
- Explain how money in a savings account can earn interest.
- Use the formula Interest = Principal × APY to estimate one year of interest when the APY is written as a decimal.
- Compare savings accounts by considering APY, minimum balance requirements, and fees.
- Apply savings-account concepts to realistic financial decisions.
Success Criteria
The learner is successful when they can:
- Correctly explain all six key terms in their own words.
- Complete at least 8 out of 10 practice exercises correctly.
- Show work when calculating interest.
- Explain why the account with the highest APY is not always the best choice.
- Use evidence from an account description to make a reasonable savings decision.
Key Vocabulary
- Savings account: A bank or credit union account used to store money and usually earn interest.
- Principal: The original amount of money deposited or invested.
- Interest: Money a bank pays you for keeping money in your account. Interest can also mean money you pay when borrowing.
- Annual Percentage Yield (APY): The percentage of money an account is expected to earn in one year, including the effect of compounding interest.
- Minimum balance: The smallest amount of money an account must contain to avoid a penalty or qualify for a benefit.
- Fee: A charge for a service or for failing to meet an account requirement.
Day 1: Understanding Savings Accounts
Introduction: Hook and Objectives — 5 Minutes
Hook: Ask the learner:
“Suppose you receive $200 as a gift. Would you rather keep it in a drawer, spend it immediately, or place it in an account where it could grow? What information would you want before choosing the account?”
Allow the learner to share an answer. Explain that today they will investigate how savings accounts work and learn the words banks use to describe them.
Briefly state the objectives: “Today we will define important savings-account terms and learn how interest can help money grow.”
I Do: Teacher or Parent Modeling — 10 Minutes
Read the passage below aloud while the learner follows along. Pause to underline or highlight each vocabulary word.
Reading Passage: “A Safe Place for Your Money”
Maya wants to save $300 for a bicycle. She could keep the money in a drawer, but she decides to open a savings account at a bank. A savings account is a place to store money safely while usually earning interest.
The first $300 Maya deposits is called the principal. The bank uses deposits to provide services and loans, so it may pay Maya for keeping her money in the account. The money the bank pays her is called interest.
Maya compares two accounts. Account A has an annual percentage yield, or APY, of 4%. APY estimates how much the account will earn in one year, including the effect of compounding interest. If Maya keeps $300 in the account for one year and the APY is 4%, she can estimate her interest by changing 4% to the decimal 0.04 and multiplying:
$300 × 0.04 = $12
Maya would have about $12 in interest after one year, assuming the rate remains the same and there are no withdrawals or fees. Her estimated balance would be $312.
Account A requires a minimum balance of $100. A minimum balance is the smallest amount that must remain in the account to avoid a penalty or receive a special benefit. If Maya’s balance falls below $100, the bank may charge a fee. A fee is money charged for a service or for not following an account rule.
Account B has an APY of 4.25%, but it charges a $5 monthly fee if the balance falls below $500. Although Account B has a higher APY, it might not be the better choice for Maya because she only has $300. A $5 monthly fee could cost her $60 in one year. Maya should compare the APY, minimum balance, and possible fees before choosing an account.
Teacher Think-Aloud
Model how to identify information in the passage:
- Find the amount originally deposited: $300 is the principal.
- Find the rate: 4% APY.
- Convert the percent to a decimal: 4% = 0.04.
- Multiply: $300 × 0.04 = $12.
- Compare possible fees before deciding which account is better.
Formative Check — 3 Minutes
Ask the learner to answer verbally or in writing:
- What is the principal in Maya’s example?
- What does APY help a customer estimate?
- Why might a higher APY not always mean a better account?
We Do: Guided Vocabulary Investigation — 12 Minutes
Work together to complete the following chart. The learner should explain each term in their own words and give an example from the passage.
| Term | Meaning in Your Own Words | Example from the Passage |
|---|---|---|
| Savings account | ||
| Principal | ||
| Interest | ||
| APY | ||
| Minimum balance | ||
| Fee |
Think-Pair-Share alternative: If working with a group, one learner explains a term, another gives an example, and a third creates a quick sketch or symbol for the term. For homeschool instruction, the learner can explain the term to a family member or record a short audio explanation.
You Do: Reading Questions — 8 Minutes
Answer the questions using complete sentences when appropriate.
- What is a savings account?
- What was Maya’s principal?
- Why might a bank pay interest to Maya?
- What does APY measure or estimate?
- What is the difference between APY and interest?
- What minimum balance does Account A require?
- What could happen if Maya’s balance falls below the required minimum balance?
- What is a fee?
- How much interest would $300 earn at a 4% APY for one year, before fees?
- Why could Account A be a better choice than Account B for Maya?
Day 1 Closure — 2 Minutes
Ask the learner to complete this exit statement:
“A savings account can help me because __________. Before choosing one, I should compare __________, __________, and __________.”
Day 2: Comparing Accounts and Applying the Concepts
Warm-Up Review — 5 Minutes
Use a quick “Vocabulary Lightning Round.” Read each clue and have the learner name the term:
- The original amount deposited: principal
- Money paid by the bank for keeping money in an account: interest
- The estimated yearly percentage earned, including compounding: APY
- The smallest required account balance: minimum balance
- A charge for a service or rule violation: fee
- An account used to store money and usually earn interest: savings account
I Do: Modeling an Interest Calculation — 8 Minutes
Explain that a simple one-year estimate can be found using:
Estimated Interest = Principal × APY written as a decimal
Model the example:
Principal: $500
APY: 3%
Convert: 3% = 0.03
Calculate: $500 × 0.03 = $15
Estimated balance: $500 + $15 = $515
Explain that this is an estimate. Actual earnings may differ because rates can change, interest may compound at different times, and fees or withdrawals can affect the balance.
We Do: Account Comparison Challenge — 10 Minutes
Work together to compare the accounts below.
| Account | APY | Minimum Balance | Fee |
|---|---|---|---|
| BrightStart | 3.00% | $25 | $0 monthly fee |
| SuperSaver | 4.00% | $500 | $6 monthly fee below $500 |
| FlexFund | 2.50% | $0 | $0 monthly fee |
Scenario: Jordan has $400 and wants to leave it in an account for one year.
- Which account has the highest APY?
- Which account has no minimum balance?
- Would Jordan meet SuperSaver’s minimum balance requirement?
- How much would the monthly fees cost Jordan in one year if charged every month?
- Which account would you recommend for Jordan? Explain your reasoning.
Expected discussion: SuperSaver has the highest APY, but Jordan does not meet the $500 minimum balance. The possible fees may be much greater than the extra interest. BrightStart may be a reasonable choice because it has a competitive APY, a low minimum balance, and no monthly fee.
You Do: Ten Practice Exercises — 12 Minutes
Show your work for calculation problems. Use a calculator when needed.
- Vocabulary: In your own words, define a savings account.
- Vocabulary: A student deposits $750 into a new account. What is the principal?
- Vocabulary: What is interest, and why might a bank pay it?
- APY Conversion: Write 5% as a decimal.
- Interest Calculation: Estimate the one-year interest on $200 at a 3% APY.
- Interest Calculation: Estimate the one-year interest on $1,000 at a 4.5% APY.
- Balance Calculation: If $600 earns $18 in interest during one year, what is the estimated ending balance before fees?
- Minimum Balance: An account requires a $100 minimum balance. A customer has $125 and withdraws $40. Is the customer below the minimum balance? By how much?
- Fees: An account charges $4 per month. How much would the fees cost over one year?
- Decision Making: Account X has a 4% APY, a $500 minimum balance, and a $7 monthly fee when the balance is below $500. Account Y has a 3.25% APY, no minimum balance, and no monthly fee. Which account might be better for someone saving $300? Explain why.
Application Activity: Design Your Savings Plan — 3 Minutes
Choose one scenario:
- Save $150 for a new game or hobby supplies.
- Save $500 for a bicycle or electronic device.
- Save $1,000 for an emergency fund or future education expense.
Create a mini savings plan that includes:
- Your savings goal
- Your starting principal
- The APY you would look for
- The highest minimum balance you could safely maintain
- A fee you would avoid
- One reason a savings account could help you reach the goal
Conclusion and Closure — 2 Minutes
Ask the learner to explain the following summary without looking at the vocabulary list:
A savings account stores money and may help it grow. The principal is the amount deposited. Interest is the money earned. APY estimates the yearly growth rate. A minimum balance is the amount that must remain in the account to avoid a penalty or receive a benefit. Fees are charges that can reduce savings.
Finish with the question: “What is one piece of information you would check before opening a savings account?”
Assessment Plan
Formative Assessments
- Responses to the opening hook
- Vocabulary chart
- Teacher or parent think-aloud questions
- Day 1 reading questions
- Account Comparison Challenge
- Verbal vocabulary review
Summative Assessment
Use the ten practice exercises and the savings-plan activity. A strong response should:
- Correctly define the six vocabulary terms.
- Convert percentages to decimals accurately.
- Calculate estimated interest using multiplication.
- Account for minimum balances and fees.
- Give a logical explanation supported by numbers.
Answer Key
Day 1 Reading Questions
- A savings account is an account used to store money and usually earn interest.
- Maya’s principal was $300.
- The bank may pay interest because Maya allows the bank to use her deposited money for banking services and loans.
- APY estimates how much an account earns in one year, including compounding.
- Interest is the money earned; APY is the yearly percentage used to describe the account’s earning potential.
- The minimum balance is $100.
- The bank may charge a fee or penalty.
- A fee is a charge for a service or for failing to meet an account rule.
- $300 × 0.04 = $12.
- Account A may be better because Maya has only $300 and could face large fees with Account B.
Practice Exercises
- A bank account used to store money and usually earn interest.
- $750.
- Interest is money paid by the bank for keeping money in the account.
- 0.05.
- $200 × 0.03 = $6.
- $1,000 × 0.045 = $45.
- $600 + $18 = $618.
- Yes. The new balance is $85, which is $15 below the $100 minimum.
- $4 × 12 = $48.
- Account Y is likely better because the $300 balance does not meet Account X’s minimum balance, and the monthly fees could total $84. Account Y has no minimum balance or monthly fee, even though its APY is lower.
Differentiation and Adaptations
Support for Learners Who Need More Guidance
- Provide a vocabulary word bank and sentence starters.
- Use a percent-to-decimal reminder: “Move the decimal two places left.”
- Complete the first two calculations together before independent practice.
- Allow the learner to explain answers orally instead of writing every response.
- Use play money or a spreadsheet to show deposits, interest, and fees.
Extensions for Advanced Learners
- Research the difference between APY and annual percentage rate (APR).
- Compare simple interest with compound interest.
- Use a spreadsheet to model monthly interest for one year.
- Investigate how frequently different accounts compound interest.
- Design a comparison chart for three real or fictional financial institutions.
Flexible Learning Options
- Homeschool: Discuss the passage with a parent or family member and create a personal savings plan.
- Classroom: Assign vocabulary roles, use pairs for the comparison challenge, and have groups defend their account recommendations.
- Digital or training setting: Use a shared document, calculator, poll, or spreadsheet for responses and account comparisons.