Rethinking Approaches to Teaching Simple and Compound Interest in Secondary Mathematics Classes

• In Event: Problematizing the Relationship(s) Between Financial Literacy and Mathematics in Multiple Educational Spaces

Abstract

In Canadian provinces, financial concepts are integrated into the mathematics in various ways (Author 1, 2020). Among the concepts explored in mathematics, simple and compound interest (SCI) figures as one of the most ubiquitous. Such an importance, we argue, stems from the realization that many financial products and services consumed in everyday life have an underlying component of interest (either as a debt or an investment). Making sure individuals have a proper understanding of this concept is paramount to making sound financial decisions on a personal level, and developing a critical stance toward financial products, the financial system, and financial policies on a societal level.
Financial interest refers to the payment from a borrower to a lender of an amount above repayment of the principal sum, at a particular rate over a period of time. SCI is determined based on how the rate is calculated over time: a rate that is always calculated on the principal sum is defined as simple interest; a rate calculated on the sum accumulated in the previous time period is defined as compound interest (also called interest over interest).
SCI is taught within the broader context of financial numeracy, i.e., the ways in which mathematical concepts and processes are produced, mobilized, and perceived by different social groups in everyday financial activities (Author 1, 2020). This definition is informed by contemporary understandings of numeracy as a practice shared by members of a social group (Yasukawa, Jackson, Kane & Coben, 2018). Numeracy can involve formal mathematics (typically learned in school) or informal practices. It includes activities such as quantifying, comparing, measuring, and predicting.
In this presentation, we discuss secondary mathematics teachers’ own conceptualizations of SCI and how they perceive the teaching of it in their classrooms. To do so, we draw on data collected in the form of online surveys, individual interviews and video recorded classes. Although data analysis is still ongoing, preliminary results show that SCI tends to be taught from a deterministic and algebraic angle. Our participants stressed the importance of teaching SCI as a way to prevent financial distress and improve individual financial well-being. While the examples varied between contexts of debt and investment, the participants’ conceptualizations of SCI included situations that do not involve payment from a borrower to a lender (for example, stocks or inflation). These ideas reveal opportunities to broaden financial numeracy education to include time-value of money as an umbrella notion. In the presentation, we will share examples of these conceptualizations and what learning situations can be designed to respond to them. We will also reflect on possibilities of teaching SCI beyond determinism, individualism, and algebraic approaches.

Authors

• Alexandre Cavalcante, University of Toronto

• Jin A Jung, University of Toronto - OISE