# Compound Interest (For Kids!)New

Posted August 13, 2019

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How do you explain compound interest to kids? Well, we think we’ve figured out a way… A PlutoPoints way!

Imagine this scenario: your kid is saving up their PlutoPoints for something big. Something like a video game console or an American Girl® doll. It’s going to take a while, right?

But what if your child could earn more points without doing anything at all? All they have to do is leave the points in the “bank” and keep from doing anything that would cause them to lose any points.

“Aha!” says my 8-year-old. “If I can lose them, then I want to trade what I have now in for cash. I can’t lose the money once it’s not points anymore, right?” Right, but then you don’t earn interest either.

And that’s the magic. Once you can explain that redeeming points keeps you from earning as much – for doing absolutely nothing! – you’ve taught them how (and why) to save!

## For Example:

Let’s say you have 1000 PlutoPoints. You’ve set up PlutoPoints to “pay” your children 1% each day. (I’ll get to how you can set this up in a moment.)

The first few days, your child will earn 10 points each day. After 10 days, your child will have 1100 points, at which time the daily earnings jumps to 11 points. A few more weeks and they’ll be earning 15 points per day!

1000 points x 1% = 10 points
1000 points + 10 points = 1010 points

Now, let’s say your child wants to “redeem” 500 of the 1000 points for \$5.00. That brings their point total down to 500. They may have that \$5.00, but they’re only earning 5 “free” points each night. It’ll take that much longer to get back to where they started!

500 points x 1% = 5 points
500 points + 5 points = 505 points

My 8-year-old daughter is currently saving to see a Broadway-style show in a few months and this feature has kept the points in the “bank”!

## Setting Up PlutoPoints Interest Payments

Scroll down to the section labeled Interest. We’ll go through each option below.

Enable Interest: If you would like to enable this feature, check the box ✔

Interest Percentage: This is the part that will take some experimenting for your particular point-giving method. I’ve found that 1% works well for a daily schedule, 3% for a weekly schedule, and 10% for a monthly schedule. Your results may vary.

Interest Frequency: This one’s completely up to you. Whether you would like to award points on a daily basis or once a month is fine, you can make the call here. Note: You can decide what day of the week or day of the month you want it to run for you. Daily interest happens at midnight US Eastern time.

→ When you’re finished choosing your options, don’t forget to “Save!”

Once you’ve enabled interest point payments, you’ll also see that reflected on your dashboard.