How to teach compound interest to a 9 year old (with a simple jar experiment!)

Compound interest has a reputation problem. Say the words to most adults and you'll get a slightly glazed look, never mind trying it on a nine-year-old. But the idea underneath it isn't actually complicated at all, it's just usually taught the wrong way round. We start with the formula and hope the understanding follows. Flip that order, give a child a real pot of money to watch grow instead of a graph to look at, and the penny (quite literally) drops a lot faster.

Here's the exact system I use at home, along with the Maths it quietly teaches along the way.

The £20 jar system

It starts simple. Your child gets £20 in a jar, real notes and coins (ideally start with 20 £1 coins), somewhere they can see it. Then, once a month, you add interest, 10% of whatever is currently sitting in the jar. The £20 could be theirs that they have saved through pocket money or you could choose to use £20 of your own. I'd suggest that if you use their money they keep everything at the end of 12 months. If you use your own £20 then you could take that back out and you child can keep the rest.

That's the whole rule. Spend nothing, and the jar grows every month because it's earning interest on last month's interest, not just on the original £20. Spend some of it, and next month's 10% is calculated on the smaller amount left behind, so the growth slows down too. Nothing is explained with a formula. It's just watched, month after month.

Here's what a completely untouched £20 does over a year:

Month: Balance
Start: £20.00
1. £22.00
2. £24.20
3. £26.62
4. £29. 28
5. £32.21
6. £35.43
7. £38.97
8. £42.87
9. £47.16
10. £51.87
11. £57.06
12. £62.77

Twenty pounds becomes nearly sixty-three, without a single extra penny being added by anyone. That's compound interest, in a jar, with no algebra required.

The breakthrough moment

The real lesson isn't the final number, it's what happens somewhere in the middle of the year. Once the jar has grown enough, the monthly interest payment itself becomes worth having. At month 9, for instance, that month's interest is over £4, more than a fifth of the original starting amount, just for leaving it alone.

This is often where the breakthrough happens. Some children realise they can spend the interest each month and leave the original money exactly where it is, so the jar keeps paying out the same amount again next month. That's the difference between spending your savings and spending what your savings earn, a genuinely sophisticated idea that most adults arrive at far later than nine.

If your child doesn't get there, that's completely fine. It isn't a failing of the experiment or of your child, just a sign that everyone learns in their own way. You can keep the jar going past 12 months, or nudge them with a question like "What would happen if you only spent the interest?" Or simply let them take away whatever they took away. The experiment has done its job either way.

Spend the capital instead, and the lesson runs the other way. Take out £10 in month 3, and every month after that, the 10% is calculated on a smaller pot, so the interest payments shrink too. No lecture required, they can see it happening in the jar itself.

The Maths hiding inside it

This isn't just a money lesson, there's a fair amount of the primary maths curriculum sitting quietly inside it too.

Dividing by 10. Working out 10% of an amount is the same as dividing by 10, which children are introduced to formally in Year 4 (multiplying and dividing whole numbers, and numbers with decimals, by 10, 100 and 1,000) and then build on through Years 5 and 6. There are two ways to let your child actually do this bit themselves rather than you doing it for them:

• The physical method: tip the jar out and share it into 10 equal piles. Whatever's in one pile is the 10%. It's slow the first few times and genuinely fast once they've got the hang of it, and it makes the "divide by 10" rule feel like a fact about the real world rather than a rule from a textbook.

• The written method: once they're confident, move to short division, or simply ask them to move the decimal point one place to the left. Either way, they're practising exactly the skill their school is already teaching them, just with real consequences attached to getting it right.

Percentages. The per cent symbol and the idea that percentages are "parts per hundred" is introduced in Year 5, and by Year 6 children are expected to move comfortably between fractions, decimals and percentages, and to calculate percentages of amounts. Ten per cent is the easiest possible percentage to start with because it's just one division, which makes the jar a genuinely useful way to build confidence before school tackles trickier ones like 15% or 60%.

Multiplication and growth. Older or more confident children can go one step further and work out why 1.1 is the magic number, multiplying by 110% is the same as adding 10%, which is a nice bridge into multiplying decimals and understanding percentage increase, both Year 6 topics.

What it costs you as a parent

This is deliberately cheap to set up and deliberately cheap to start.

• An empty jar and £20 in cash to get going. (or £20 of your child's pocket money savings)

• Around £2 in month one (10% of £20), rising gradually as the jar grows, roughly £42 in total interest paid out across a full untouched year.

• Five minutes a month: sit down together, work out the 10%, add it to the jar, and talk about what's happened.

That's genuinely it. No app, no subscription, no spreadsheet. Just a jar, a conversation, and a habit that compounds right alongside the money.

Want the full plan?

This is one piece of a much bigger picture, what to teach, and when, from age 0 right through to 18. If you'd like the complete breakdown, grab the free 0–18 Money Roadmap here and I'll walk you through exactly what to cover at every age, in an order that actually works.