Grade 8 · Financial Literacy · Financial Planning and Interest
Plan Money Across Time
A long-term financial plan accounts for income, fixed and variable expenses, taxes, exchange costs, saving, and how interest changes money over time.
The big idea
Small assumptions compound into large differences
Simple interest grows by a constant amount based on the original principal. Compound interest adds interest to the balance, so later growth is calculated on a changing amount.
Work it through
Compare one year of 5% simple and compound interest on $1,000
- 1. Simple interest for one year: 1000 × 0.05 = $50.
- 2. The simple-interest balance is $1,050.
- 3. With annual compounding for one year, the calculation is also 1000 × 1.05 = $1,050.
- 4. Over additional periods, compound interest grows faster because interest is added to the balance.