compound interest games for kids

Compound Interest Games for Kids

There are lessons we all look back on and wish we had learned at an earlier age. One of those biggest pieces will always be the financial side of adulthood. Looking back, I wish they had taught me more about money and less about all the different kinds of triangles. For example, I am willing to bet that you never even thought about looking for compound interest games until shortly before reading this article!

Not that there’s anything wrong with correctly identifying shapes. It’s just that I’ve had more run-ins with interest rates and mortgage terms than I ever did with isosceles triangles.

We’ve all made financial mistakes. Sometimes those mistakes are a credit card purchase, or perhaps a car we can’t afford. Some of us have bought a house that we could afford, but then couldn’t sell when life took us in another direction. And of course, almost everyone has made the mistake of thinking about money in the terms set by the banking establishment.


Live and Learn

Any way you look at it, life is full of learning experiences. I know I’ve grown. I’ve learned. I have absorbed each of my experiences and thought about how I would have done things differently.

The big question now is, “What can I pass along to parents and their children that might save them from a few financial missteps in their growing years?”

One of the keys is being open with your children. Talk to them about your finances. This doesn’t mean you have to get into the nitty-gritty with your first grader, but it is good on several levels to involve your children in the financial planning and thought that we face daily.

Talking to them about credit cards and mortgages might sound like a dumb idea, but in the end, you are planting seeds in their heads. It’s much better for them to know the type of world they are going to enter as adults!


Compound Interest: A Quick Rundown

In simple terms, compound interest is the reinvestment of your interest which in turn adds to the total amount that is earning interest. Compound interest increases your earning power exponentially over time.

One of the biggest variables in compound interest calculations is the interest rate. Ordinarily, we are conditioned to search out the lowest interest rates we can find. When interest is working for you, it’ obviously nice to have the rate be as high as possible. But even a lower interest can be incredibly powerful if it’s uninterrupted compounding, meaning you never reduce the amount earning interest.

Compound interest games are a great way to teach young children and teens about how the system works and how they can make it work for them.


Financial Games

In our technological age, some games cover everything.

The level and complexity of the games depend on the age of your children. For elementary-aged children, tactile games will have more of an effect.

There are multiple ways to introduce the idea of compound interest. Show your kids a video geared toward their age group. Play board games involving banking: Monopoly and Life are a couple of classics, but there are newer games like Banking and Brass: Birmingham to inspire an interest in the financial world. Older kids should try Robert Kiyosaki’s excellent Cashflow game, as well!


Marshmallow Game

This is one of the simplest games to illustrate compound interest. Just about every financial website mentions some form of it!

Simply give your child a marshmallow and two options: Eat it now, or hold it for a set amount of time and get two marshmallows. If they hold onto it, challenge them again with another time frame and a doubling.

The object of this game is to show your child that waiting can be a very good thing. After doubling to four marshmallows, they can eat one and then the remaining three can then double to six. They can eat two and then the remaining four can double to eight.

Of course you have to cut this off at some point or you’ll be filling shopping carts with marshmallows, but the lesson is quick to learn for kids!


Double or Nothing

Another variation of this game is less tactile and more geared for 4th or 5th graders.

Ask your kids if they would rather have a dollar that doubles every day for a month or a million dollars right now.

Most children are geared towards instant gratification and will take the million.

Do that parent eyebrow thing that tells them you know more than they do. Then sit down with them and with a pen and paper, demonstrate how doubling for a month leads to more than five times as much money.

Just be careful, some of you might have that kid who will ask for the million and try to double that every day.

Smart kid.


The Tech Savvy Tyke

Like it or not, modern kids instantly relate to games on their phones, consoles, or computers.

The good news is there are options for the screen child!

A game as simple as The Sims has a financial aspect that can teach a kid the importance of both work and proper money management. Just be careful not to sink too much of your own money into expansion content!

Slime Rancher is a game about resource management (another way to look at money) and making wise decisions to help grow your business.

Another sample from the massive gaming world is Animal Crossing. Like the games above, this video game hides valuable financial life lessons in a cute game about animal life.

There are many other games with resource management components. When your kids have interest in something like this, learn it yourself! Play together! Gaming is near and dear to my own heart, and it has taught me many things. (I have been known to turn any situation into a StarCraft metaphor.)


Learning Apps for Teens

Teens are a different animal from their cute, cuddly elementary counterparts. Their emotions have taken on an extra dimension and they may have started to smell a little funky. At some point, they are suddenly more aware of money and want to have it.

The teenage years are when you can expect the kids to start vying for odd jobs to line their pockets.

It’s also the perfect time to reinforce the importance of financial knowledge. Sit down with them and go over the monthly budget, show them the tax process, and start to discuss long-term planning for their financial future.

Multiple apps are geared toward teaching teens and young adults the importance of financial stewardship.

The top three at the moment are Acorns Early, Fidelity Youth Account, and the Greenlight App.

Each of these apps offers slightly different learning tools for your older kids.


Compound Interest Games Should Transition to Real Compound Interest

Unfortunately, much of the above can only take kids so far. The practices of central banking, fractional reserve banking, and of giving up the banking function in your life are all that people have ever known. Parents can’t teach their kids about things they don’t know themselves! So, take responsibility and start learning.

Retirement accounts, mortgages, car loans, credit card loans, home equity loans, and so much more of what is “normal” for the average American can be reduced or even completely avoided with some healthy financial discipline and understanding.

Use these compound interest games and other strategies to build some basic financial literacy. But eventually, you need to start them on the path of true uninterrupted compounding. You guessed it: the properly designed, dividend-paying whole life insurance policy from a mutual insurer. Once your system of policies is established, let your kids start taking policy loans from your policy. Even better, go ahead and start a small policy for them, that they can take ownership of when they are adults!

I love seeing parents that are passionate about seeing their kids succeed. Contact me here and I will help however I can!


Note: This post was primarily authored by Zach Winderl. I am sincerely thankful for his help!

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