This is a GREAT project—I hope that you will enjoy it and us it with you classes.
Several years ago I brainstormed ways to teach my students about the value of budgeting and investing. In the process, I developed this IRA project and it has become one of my favorite projects. I usually use it just before Christmas break. Traditionally this is the time we begin to discuss rates, ratios, proportions, and percents. So the project provides a nice application and helps my students to become comfortable using a calculator.
I have revised the packet over the years to make it easier to grade and provide students with multiple “check points” (I call them ‘audits’) where they can check their work.
My favorite part of the project is the introduction. Here, I explain the project and the fact that will be simulating and investment in which we contribute $5000 per year for 50 years compounded at an average of 7% per year. I give the students a few minutes to make and educated “guess” as to how much money they will have in their account at the end of 50 years. Then, they are on their honor to write this number down an CANNOT CHANGE IT. We share our guesses and I offer a prize at the end of the project to the student with the closest guess. It is so rewarding to hear their guesses ($11,000, $250,000, $289,000, . . . ), then watch as they “discover” the power of compounding interest.
My general workflow for this project is as follows:
I introduce the project, we all write down our “guesses” as to how much we think that we will earn over 50 years, and I walk the students through the first 4 years of calculations. When filling in the chart, we always round the nearest dollar. I usually assign them years 5 – 7 for homework. (Note: they are not allowed to go on past year 7 on this day.)
We check (and correct if needed) our answers for years 5 – 7. On day 2, I explain the concept of an “audit” and tell the students that I will audit their work on years 7, 20, 30, 43, and 50 (these are the “grey” years on the chart). This makes the project manageable for classroom of 30 students. The students are required to have me audit their work (or sign off) at the end of each grey year. This way, if they make a mistake, we can catch it early on. PLUS, I do not have 30 students coming up and asking me to check every single year!
I pass out graph paper and we set up our bar graphs. We spend about 20 minutes (as a class) discussing how to set up our graph, determining how much each interval should represent, and starting with the first 20 years or so of data.
Here are a couple of tips to help this flow smoothly:
1. Require EVERY student to have the EXACT same graph. This will make your life much easier when it comes to grading the project. It is well worth the investment of time to ensure that every one sets the graph up with the exact same intervals. This way, you can take my sample graph (or your own) an make a “template” to use when grading. By doing this, it will only take seconds to check a student’s graph for accuracy.
2. In my experience, this project works best when you graph only every other year. Graphing all 50 years is tedious work. If you graph the even years only, then it is very manageable and will still yield a beautiful exponential curve. For students who really get into the project, I let them extend their calculations and graph through year 60 for extra credit.
3. This is just personal preference, but I have the students graph the first 12 years with a single bar graph. After that, we graph years 14 through 50 using stacked bar graphs. I feel like this gives a nice visual representation of how the interest grows in contrast to the principle.
We finish the graph and answer the questionnaire.
Files included in this packet:
1. IRA Worksheet (key included)
2. IRA Questionaire
3. Sample Graph
3. Sample Graph (with exponential curve - hint: cut the graph along the curve and use it for grading)
4. Sample Student Work (completed projects)