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KS3 · Year 9 · Lesson plan

Compound interest in action — why time beats rate

A classroom-ready 55 minutes lesson plan with starter, main, plenary, differentiation, SEND adaptations, EAL support and assessment criteria. Free to use, no login.

Key Stage
KS3
Year group
Year 9
Age range
13–14
Duration
55 minutes
Subject
Maths / PSHE / Citizenship
Cost
Free

Learning aim

Pupils can calculate compound interest using the formula A = P(1 + r/100)^n and explain why starting to save early matters more than the interest rate.

CURRICULUM National Curriculum links

RESOURCES What you'll need

LESSON Lesson structure (55 minutes)

Opening
HOOK
Pose this classic: "Would you rather have £1 a day for 30 days, OR 1p doubled every day for 30 days?" Take votes. Most pick £1/day = £30 total. Reveal: doubling 1p for 30 days = £5,368,709.12 (over five million pounds). That's what compounding does. Compound interest works the same way — just slower.
Direct teach
TEACH
Define and contrast: Simple interest = interest only on the original deposit; Compound interest = interest on the original PLUS interest already earned. Show the formula: A = P × (1 + r/100)n, where A = final amount, P = principal (starting amount), r = rate (%), n = number of years. Worked example on the board: £100 at 5% for 10 years = £100 × 1.0510 = £162.89. Same money at simple interest = £150. Difference: £12.89 — and it grows each year.
Pupils apply
GUIDED
Pupils calculate compound interest for £1,000 at 5% over 5, 10, 20, and 30 years using their calculators. Record on the worksheet. Then plot the results on graph paper: years on x-axis, amount on y-axis. They'll see the curve — slow at first, then accelerating. Discuss: when does the growth really take off? (Years 20+.)
Stretch / depth
CHALLENGE
The most important real-world scenario: "Sarah starts saving £100/month at age 18 and STOPS at age 28 (10 years of saving, then nothing more). Tom starts saving £100/month at age 30 and saves until 65 (35 years of saving). Both earn 7% average return per year. Who has more at age 65?" Pupils calculate. Reveal: Sarah's earlier 10 years of saving (£12,000 in total) BEATS Tom's 35 years (£42,000 in total). Sarah ≈ £200,000 at 65, Tom ≈ £170,000. Build the insight: starting early matters more than saving longer.
Close
PLENARY
Each pupil uses the formula to write a prediction: "If I started saving £20/month at age 18 at 5% interest, by age 60 I would have approximately ___." Share three answers. Final reflection: "Why don't more people start saving at 18?"

DIFFERENTIATION Adapting for all learners

Support (working below ARE)

Use round numbers (£100 starting at 10% for 5 years) and a calculator throughout. Provide a worked example to copy. Focus on understanding the curve shape rather than calculation precision.

Stretch (working above ARE)

Pupils derive the formula themselves from first principles. Calculate a 50-year compound. Then: "What happens if the interest rate is 0%? Negative?" Discuss real-world cases (savings accounts paying below inflation = real loss).

SEND SEND adaptations

For pupils with dyscalculia: pre-fill the table with the calculator results, pupils identify the pattern visually. For pupils with autism: provide the formula as a step-by-step "recipe" — fill in each variable in order. For visually impaired pupils: use audio-described graph examples.

EAL EAL support

Vocabulary: "interest", "compound", "principal", "rate", "annual", "deposit", "exponential". Sentence frame: "After ___ years, my £___ at ___% interest becomes £___."

ASSESSMENT Assessment criteria

Pupils can: (1) calculate compound interest on £100 at 5% for 10 years using the formula; (2) explain in their own words why compound interest grows faster than simple interest; (3) identify why starting to save early matters more than the interest rate; (4) plot a compound-interest curve.

HOME Homework pack

Four activities to deepen understanding of compound interest. ~30 minutes.

Calculate it

What pupils do: Work out the value of £100 after 5 years at 4% per year compound interest. Show your working (multiply by 1.04 five times, or use 100 × 1.04⁵).

Expected output: Step-by-step calculation showing each year's ending balance.

Marking guidance: 1 mark per year-end balance (5 marks), 1 mark for a correct final answer (~£121.67).

Simple vs compound

What pupils do: Compare £1,000 at 5% over 10 years using (a) simple interest and (b) compound interest. Show both totals. What is the difference?

Expected output: Two final totals plus the difference.

Marking guidance: 2 marks each for correct simple (£1,500) and compound (~£1,628.89), 2 marks for the difference.

The doubling time

What pupils do: Use the "Rule of 72" to find how long it takes money to double at: 4%, 6%, 8%, 12%. (Rule: 72 / rate = approximate years.)

Expected output: A 4-row table with rate and doubling time.

Marking guidance: 1 mark per accurate answer (18, 12, 9, 6 years). 4 marks total.

Extension (optional)

What pupils do: A teenager invests £50 a month from age 18 to 65 at 7% average return. Estimate the final value using an online compound interest calculator. Why is starting early so powerful?

Expected output: A final value plus a 3-sentence explanation.

Marking guidance: Up to 5 marks for accurate calculation and clear reasoning.

Family discussion prompt (safeguarding-aware)

Ask a grown-up: "Have you ever earned interest on savings? Did it grow faster or slower than you expected?"

SAFEGUARDING Classroom safeguarding

Note for teachers: Use fictional savers (Sarah, Tom) throughout. Do not ask pupils about their family's savings or whether they themselves have a savings account. Be aware some pupils may have no savings — frame the lesson as "what compound interest can do when you have money to save".

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