Purpose
To determine which type of account yields the most profit based on interest rate on a $50 balance. You can take this experiment one step further to determine which bank in your area offers the best annual interest rates on the same types of accounts.
Additional information
It is important for adults to know how much interest the money they keep in their checking and savings accounts is earning – they want to get the most bang for their buck! With this experiment, it is easy to find out.
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Required materials
- Parent or Guardian
- Local Banks that you can visit in person or call on the telephone to determine the interest rates.
- Journal or logbook
- Calculator
Estimated Experiment Time
A few hours.
Step-By-Step Procedure
- 1. Call the first local bank and ask them what the annual interest rate on their checking accounts is. Also ask them what the annual interest on their savings accounts is. Record this data in your journal.
- 2. Repeat step one with several other banks. Record the annual interest rate for both checking and savings accounts at these banks in your journal.
- 3. Calculate how much interest you would receive from the first bank if you deposited $50 into a checking account and left it alone for one year. Calculate how much interest you would receive from that same bank if you deposited $50 into a savings account and left it alone for one year.
- 4. Repeat step three with each of the different banks. Calculate and graph your results.
Note
You will need an adult’s help to research the different checking and savings interests at your local bank.
Observation
Which type of bank account had the highest annual interest rate – checking or savings? Was the result consistent from bank to bank, meaning did checking (or savings) always have a better annual interest rate? Did the banks have different interest rates? Which bank had the best interest rate overall?
Result
It is likely that savings accounts will yield the highest profit based on the interest rate. Using your research, with which bank and with which type of account would you receive the highest interest rate and therefore the most profit? With your calculations, how much profit would you have made if you deposited $50 and left it alone for one year? What do you think would happen if you deposited more money? How can this experiment help people invest their money wisely?
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