I have used this as an opener to a lesson on compound interest and students loved it!

Challenge your students by giving them a few minutes to come up with an answer.  You may need to get students started by talking them through how the penny doubling works (start with $0.01, double your money on day one, so now you have $0.02, double your money on day 2, so now you have $0.04…).  Before working through the solution, have students with a show of hands indicate their choice.  

Some will likely create a chart like this while others may just guess:

Day 1:  $0.02

Day 2:  $0.04

Day 3:  $0.08

Day 4:  $0.16

Day 5:  $0.32

Day 6:  $0.64

Day 7:  $1.28

By Day 30, they should get to $10,737,418.24.  

Challenge your more advanced math students to come up with a simpler way to calculate this…hint:  It involves exponents.  2 raised to the 30th power will come up with the same solution.

So, what’s the takeaway for students?

• Compounding interest over long time periods is tremendously powerful.  While it is not reasonable to expect to be able to double your money on a daily basis, if you can earn 7% every year investing, you will double your money every 10 years (rule of 72).    Carry that 7% example over 30 years and every $1 you invest would be worth $8 at the end of that period ($1 becomes $2 after year 10, $4 after year 20 and $8 after year 30).    

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.

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