Interest and Compounding: Money That Grows
By the end of this lesson, you understand interest from both sides, as something that can grow savings and something that makes debt grow, and why time matters most.
The big idea
Interest is the price of using money. When you borrow, you pay it. When you save or lend, you can earn it.
Compounding means you earn interest on your interest too. Say $1,000 grows 5% a year:
| After 1 year | $1,050 |
| After 10 years | $1,629 |
| After 20 years | $2,653 |
| After 30 years | $4,322 |
No new money was added. Time did the work. That's why starting early matters more than starting big. (The 5% is only an example to show the math. Real growth goes up and down, and some years it's negative.)
Compounding works against you too. A credit card at 24% a year adds about $240 a year on a $1,000 balance you don't pay off, and next year you pay interest on that interest. The same force that builds savings can bury you in debt.
A shortcut called the Rule of 72: divide 72 by the yearly rate to get roughly how many years it takes money to double. At 6%, that's about 12 years.
3 stops in BERLO City
Tap "Go there" to fly straight to each stop. Answer the question before you move on.
1. The Treasury
- Look for
- The city's vault
2. West End homes
- Look for
- Residents buying homes with the city's down-payment help
3. The bot-built towers
- Look for
- New towers grow only when the bots win
3 quick questions
Your real-life task
Find the interest rate on one account or card you have. Is compounding working for you there, or against you?
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