In this day and age, money seems to be the thing that makes the world go 'round. Money can get you food, transportation, entertainment, and higher education, among other things. You've probably already heard plenty about how mathematics can be used when earning or spending money. But what about the process of saving money? How can math be used on money that isn't going anywhere?
The answer lies in budgeting and investing. A budget is a plan that people use to limit the amount of money they can spend on various things. For example, you might limit yourself to spending only $30 per month on eating out, or you may use sales and coupons to ensure that your monthly grocery bill doesn't go above $300. Budgets can also be drawn up in the form of percentages. Suppose that 60% of your monthly income goes toward necessary expenses, such as a power bill or a car payment. Then you have 40% of your income left to budget toward expenses with flexible costs.
A good way to save money (and to gain a little extra in the process!) is by putting some in a savings account. Savings accounts are typically associated with an interest rate, or a percentage of the total money that gets added back in over regular intervals. Some savings accounts have interest that is compounded biweekly or monthly, while others are compounded continuously. Mathematics can help you calculate the amount of money that you can earn by keeping your money in a savings account. For example, if you invest $100 in a savings account that earns 5% interest compounded monthly, then your account will have $105 in it one month after your initial deposit.
Be smart with mathematics to be smart about money! For more information about savings accounts and compounded interest, click here.
Great topic! So many students do not understand the concept of percentages or interest rates. Even in an honors Algebra II class students were having difficulty with calcultions on interest. They were dealing with the continuous interest formula and had basic math mistakes. They also did not understand what they were trying to caclulate. We all need to save money when we can and using math to help you determine what is best is the way to go.
ReplyDeleteI agree that this is a difficult concept, even for adults. This is something that the Boy Scouts ask their members to do. They have to follow their spending and savings for a period of time and are asked to open a bank account. It is a great lesson to learn at any age! I jsut wish those interest percentages were higher!
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