Chapter 5 : Interest Helps Your Money Grow

It was Saturday morning and Penny, Buck and Bill had all agreed to meet in the park to play. Buck was pushing Bill on the swing when Penny walked up with her mother.

"Hi," said Penny. "I'm not going to be able to play in the park today. I've got to go to the bank with my mom to deposit the money my grandparents gave me for my birthday."

"That sounds like fun!" said Bill "Can we come?" Penny's mother agreed so they all walked to the bank. Inside the bank, Penny's mother handed her a little green book and her money.

"What's that book?" asked Bill.

"It's my savings passbook," replied Penny. "It keeps track of all the deposits you make."

"What's a deposit?" asked Bill.

"A deposit," said Buck "Is when you put money into the bank. Today Penny is going to deposit money into her savings account. When she puts the money in, the bank will add her deposit to the money she already has in her account. See that lady over there? She's a bank teller. Penny will give her money to the teller and the teller will add up all the numbers."

Penny walked up to the bank teller and handed her the savings passbook and the money. The teller worked for a minute and then handed the passbook back to Penny.

"All done." said Penny and she showed Bill her passbook. There were lots of numbers inside. Penny pointed to the place in the book were her $5 deposit was made. "See? Here's where they added $5 to my account. And here's the other $5 deposit I made last month. And over there is the total of all my money."

"The teller took your $5.00 and added it to the $5.00 that was already in your account. So five plus five equals ten. Now you have a total of $10.00!" said Buck

"Actually, I have $10.10," said Penny.

"Where did the extra money come from?" asked Bill.

"The extra money is the interest earned on my account," said Penny.

"What's interest?" asked Bill.

"When you keep money in the bank, the bank pays you for letting them keep your money," said Penny. The amount that the bank pays you is called interest. The more money you put in your account, the more your money will earn interest."

"That means," added Buck, "That if Penny had $100 in the bank, and the bank pays her 2% interest she would have $102 at the end of the year. But if she had $1000 in the bank, she would have $1020 at the end of the year. She earns more because she has more money in the bank. Do you understand?"

"I understand and I think it's very INTERESTing!" joked Bill and everyone laughed. One the way back to the park, they talked about interest and how to figure out how much interest you can earn. Can you help the FrontenacKids find out how much interest they could make?

1. Penny has deposited $10.00 in her FrontenacKids Club savings account. She earns 5% interest. How much interest will she earn after one year?
2. Bill has deposited $100.00 in his FrontenacKids Club savings account. He also earns 5% interest. How much interest will he earn after one year?
3. Buck has deposited $5.00 into his FrontenacKids Club savings account every month for the last 12 months. How much money does he have?
4. Penny wants to save $15 a month for 6 months. How much money will she save?

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