4 ms·
The point of teaching kids about compound interest with exaggerated interest rates is so their attention doesn’t wander before they can learn the math lesson. I
by supertrope 2y ago
The point of teaching kids about compound interest with exaggerated interest rates is so their attention doesn’t wander before they can learn the math lesson. If they had to save up $1,000 by working, then wait a month for $3 of interest to credit, and then another month for $3.01 to credit they will probably ask who cares about the extra cent? (If the Federal Reserve ever does ZIRP again they will be waiting a long time for any interest to be credited on a $1,000 balance). This is like frictionless spherical cows in physics class. It’s not realistic. It’s a teaching model.
Compound growth exists in nature. A few bugs can quickly multiply into a swarm.
- anigbrowl 2y agothe story about the grains of rice on the chessboard works equally well. Compound growth exists in nature. A few bugs can quickly multiply into a swarm. I think a more effective kind of financial literacy would convey that any time you see wild overshoots in growth it tends to have devastating local effects followed by a crash.