Inflation & Savings Scenarios

When teaching about the importance of saving money at an early age, many students don’t see the value in it at this stage of their lives. They think because they are teens they’ve got plenty of time to build their savings account and investment portfolio and it’s not something their inclined to do or worry about as young adults. This lesson introduces students to several “Inflation & Savings Scenarios” showing students the value of saving over time using a variety of investments from safe to higher risk.

Set

  • Show students a slide titled “Basket of Goods–1999” with pictures of the items below and hte question asking: What do you think the following items cost in 1999? The actual cost of items can be found in the speaker notes for both years.
    • Car
    • Gallon of Gas
    • Movie Ticket
    • Postage Stamp
    • Grand Total
  • Next, show students a slide titled “Basket of Goods 2019” with pictures of the same items and the same question asking: “What do you think the same items cost in 2019?”
  • Ask students what the illustration is representing?  The answer is inflation which is defined as a general increase in prices and fall in the purchasing value of money.The prices grew by 78% over 20 years which is a 3.88% average annual inflation increase.
  • Ask students what they think these same items will cost in 2039?  (If the current rate of inflation stays the same, the prices will approximately double.)

Materials

  • iPads or Laptops
  • Projector & Screen
  • Calculators (optional)

Activities

  • If this can happen with the price of goods, what do you think can happen when it comes to saving money for the future? Let’s find out…
  • Let’s suppose that right out of college you are making an average salary of $47,000 (according to inc.com).  While that might seem like a lot of money today, you are going to need even more than that in the future with inflation.
  • Let’s take a closer look at the potential growth of your savings to show how it might change over time.
  • Give students the scenarios and have them calculate their percentage contribution amount then go to the Future Value Calculator. Students plug the safe investment scenario information into the future value calculator and it does the math for them, giving them the calculation they need to plug into the Savings Scenario Chart.
  • Students repeat the process with the moderate risk investment scenario and the higher risk scenario, calculating numbers to plug into the Savings Scenario Chart.
  • Once the chart is complete, students answer the follow-up questions.
  • Depending on your class time, you can choose to discuss the activity and follow-up questions as a class or you can collect them for a grade and discuss them the next day.

Attachments

Photo by Pixabay from Pexels

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