Compound Interest: Money That Earns Money
🎯 Today's mission briefing
We are learning how compound interest actually works — as repeated multiplication, not a magic formula — so we can compare investments and sense-check any figure a bank shows us.
You'll know you've got it when:
- I can explain the difference between simple and compound interest and why it grows over time
- I can calculate compound interest with the per-period multiplier, both step by step and with the formula A = P(1 + i)^n
- I can build the year-by-year story in a spreadsheet and use the rule of 72 to estimate before I calculate
The two bank accounts
Connects to what your guest already knows and makes them curious. Activating prior knowledge is one of the strongest predictors of new learning.
You've saved $4,000 from your part-time job — genuinely hard-earned. Two banks want it. Bank A offers 5% simple interest per year. Bank B offers 5% compound interest per year. Same rate, same money, and after ten years one account holds over $500 more than the other. Nobody rang you to explain why. Today you find out exactly where that $500 comes from — and why the same mechanism that builds your savings is also how a credit card debt gets away from people.