Emergency Funds and Compound Interest
Aligned to JS:SS-6 — Jump$tart National Standards in K-12 Personal Finance Education & Advance CTE Career Clusters.
What this lesson teaches
An emergency fund is money set aside for the thing you did not plan for — a car repair, a lost shift. Without one, every surprise turns into debt. Money left alone also earns interest on its own interest, which is why starting early beats starting big.
Worked examples
Example 1
Saving $25 a month for a year gives you $300 — enough to cover a car battery and a tow instead of putting them on a credit card.
Example 2
$1,000 at 5% grows to $1,050 in a year. The next year it earns 5% on $1,050, not $1,000. That extra $2.50 is compounding.
Example 3
Start at 20 and save $100 a month to 65 at 7% and you end near $380,000. Start the same amount at 35 and it is near $120,000. The 15 years cost far more than the money did.
Practice questions
- How much is an emergency fund of 3 months at $900/month in expenses?
- Calculate 2 years of 5% interest on $500, compounded yearly.
- Explain in your own words why starting early matters so much.
Watch the lesson
Every lesson comes with a video taught in English and Spanish — the same video the QR code in the printed workbook opens.
▶ Watch this lessonEn español
Fondo de emergencia e interés compuesto
Un fondo de emergencia es dinero apartado para lo que no planeaste — una reparación del coche, un turno perdido. Sin él, cada sorpresa se convierte en deuda. El dinero que dejas quieto también gana interés sobre su propio interés, por eso empezar temprano gana a empezar en grande.
Ejemplo 1: Ahorrar $25 al mes durante un año te da $300 — suficiente para una batería y una grúa en vez de ponerlos en una tarjeta de crédito.
Ejemplo 2: $1,000 al 5% crecen a $1,050 en un año. Al siguiente año gana 5% sobre $1,050, no sobre $1,000. Esos $2.50 extra son el interés compuesto.
Ejemplo 3: Empieza a los 20 ahorrando $100 al mes hasta los 65 al 7% y terminas cerca de $380,000. Empieza lo mismo a los 35 y quedas cerca de $120,000. Los 15 años costaron mucho más que el dinero.
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