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8th grade · Math · Unit 15 of 15

Loans, Interest & College

Cost of credit, investing and college

What your child practices

Personal financial literacy: your child sees how the interest rate and the length of a loan change the cost of credit, works out what a loan or credit card balance really costs, watches regular investing grow, compares simple and compound interest and ways to pay, and estimates college costs with a savings plan.

Texas Essential Knowledge and Skills (TEKS) teks student expectation: 8.12(A); 8.12(B); 8.12(C); 8.12(D); 8.12(E); 8.12(F); 8.12(G) · the cost of credit, investing over time, simple and compound interest, ways to pay, and saving for college

How we explain it

Children can open this short lesson before they practice.

  1. A higher interest rate or a longer loan makes credit cost more.
  2. Simple interest: I = Prt. Compound interest adds each year's interest to the balance.
  3. To plan for college, find the cost, subtract what you have, and divide by the time left.

Example: You borrow $2,000 at 5% simple interest for 3 years. What do you repay in all? Interest: 2,000 × 0.05 × 3 = 300. Total: 2,000 + 300 = 2,300. Answer: $2,300

Loans, Interest & College in Texas

In the Texas Essential Knowledge and Skills (TEKS), this is unit 15 of 15 in 8th grade Math, after Variables on Both Sides.

Gradelings describes a child's practice on this unit as Beginning, Approaching, Meeting or Exceeding (Four practice steps). That reflects practice, not a report-card mark: the teacher decides the mark.

Source: Texas Education Agency (TEA)

Sample questions

A taste of this unit. In the app, questions change every time and get easier or harder to match your child.

  1. Question 1

    Who will likely have more at age 65 if both invest $100 a month at the same rate?

    • someone who starts at 25
    • someone who starts at 45
    • they will have the same

  2. Question 2

    College costs $40,000. The family can give $10,000. How much more is needed?

    • $30,000
    • $50,000
    • $40,000
    • $10,000

  3. Question 3

    A family needs $6,000 more for college in 4 years. About how much is that per month?

    • $500
    • $250
    • $125
    • $1,500

  4. Question 4

    What is one benefit of financial responsibility?

    • a worse credit report
    • higher interest rates
    • more late fees
    • less debt and more choices later

  5. Question 5

    A $5,000 car loan is at 4% simple interest. How much more interest is a 5-year loan than a 3-year loan?

    • $1,000
    • $200
    • $400
    • $600

  6. Question 6

    A $400 phone is bought on a card at 24% a year, paid off after 1 year. How much does it really cost?

    • $960
    • $400
    • $424
    • $496

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