AAA Spark Meeting of the Regions

From Brick to Tech: Enhancing Time Value of Money

• In Event: Roundtable Session III

Abstract

Time value of money concepts connect across many financial disciplines. It is essential to understand that a sum of money is worth more now than that same sum of money will be in the future, given the earnings potential. These concepts are critical in professional careers and making personal investment decisions, paying off student loans, and purchasing a home. Students struggle with the concept of time value of money being so nebulous.

With in-class activities, the nebulous concept became tangible by using Lego bricks to visualize the difference between simple interest and compound interest; even college students loved the excuse to play with Lego bricks. The Lego bricks physically showed that compound interest is more valuable than simple interest. After the students could visualize the difference between the types of interest on just a lump sum, the class moved to using present value and future value tables with the problems. These tables were used for both lump sum and annuity problems. The exercises provided real-world examples like deciding between two investments and determining the payment on a student loan. Finally, the lesson on time value of money concepts concluded using Excel with PV and NPV formulas. Here, the same exercises were completed using Excel. The students could see how to find the answer using two different methods. The feedback showed that the students understood what the formulas in Excel were trying to accomplish after seeing the bricks and the tables.

While technology is a valuable tool, making the classroom creative and fun allows the students to become more comfortable and open to learning. Using the tables and Excel to teach time value of money concepts is not new; however, engaging students in a classroom using Lego bricks is innovative. College students are not expecting interactive formats like this in accounting classes. To come full circle at the end of the lesson, citations showed that researchers found discontinued Lego sets are a better investment over time than gold. Interestingly, Dobrynskaya and Kishilova (2022) demonstrate that discontinued Lego sets appreciated 11 percent annually from 1987 to 2015 outperforming large stocks, bonds, gold, and alternative investments.

Author

• Ann Boyd Davis, Tennessee Tech University