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# Encouraging Kids To Save – The POSB Way

(13)
Tuition given in the topic of Miss Loi the Tutor from the desk of at 11:55 am (Singapore time)

Today’s question deals with Simple & Compound Interests, a topic that manages to keep its place within the new E-Maths 2008 syllabus.

This simple question is inspired by a true story, and Miss Loi believes that everyone (yes, even those of you who are not students anymore) should be able to solve this, though a long spreadsheet might help save some time for Part 2.

So in true Jφss Sticks fashion …

As a result of a wider effort to “instil the discipline and importance of saving” to children, a cute little boy cheerfully received a piggy bank distributed by POSB in his school.

With great diligence and discipline, he managed to fill his piggy bank to the brim with \$86.60 worth of coins from his own pocket money. Thus, it was with a great sense of achievement that he walked into his favourite POSB branch, accompanied by his proud mother, to deposit the coins that he had so painstakenly saved up.

His spirits were high as he waited in the queue, comforted by the warm, caring smile of the POSB Girl giving kids a respite from the rain, in a scene that was played over and over again on a TV screen high above.

When his turn came, he was told, to his utter disbelief, by the bank that, except for the first 200 coins, there would a charge of \$1.50 for every 100 coins deposited. As such, a total of \$4.50 was promptly deducted from his POSB account.

1. Calculate the percentage decrease in the cute little boy’s savings as a result of these charges.
2. Assuming that:
• The bank pays an attractive compound interest rate of 0.25% per annum (valid as of 6 Dec 2007), and credits this interest monthly
• This rate won’t change in the foreseeable future
• The cute little boy was too distraught to make any further transaction with the bank

Calculate how long does it take for the cute little boy to recover his \$4.50 through the bank’s interest.

After this incident, Miss Loi is confident that this cute little boy will ace his Simple & Compound Interests topic in time to come. At the same time she hopes that he has learnt a lesson that, beyond the warm, caring smiles, things in life aren’t always as straightforward as they seem.

### Revision Exercise

To show that you have understood what Miss Loi just taught you from the centre, you must:

1. Cris commented in tuition class

2007
Dec
7
Fri
12:20pm

1

Miss Loi, POSB bank where got so gd give so high interest at 0.25%? If got, please tell me leh.

That poor kid must wait 20 .7 years to recover his \$4.50 back, the bank cheat his money.

2. Miss Loi Friend Miss Loi on Facebook @MissLoi commented in tuition class

2007
Dec
7
Fri
12:59pm

2

Cris, you can checkout POSB's latest rates online.

Assuming you meant it literally, is 0.25% (=quarter of a percent) really that appealing to the businessman in you?

Also do be careful when using the word 'cheat'. Afterall the onus is for the cute little boy to thoroughly read and understand the carefully-worded terms in his contract fully.

3. Cris commented in tuition class

2007
Dec
7
Fri
1:05pm

3

Oops! I shall be careful with my words. Actually, 0.25% is really pathetic for me. For the poor kid, he really need to wait for 20.7 years leh. Sibei Jialat!

4. Lim Ee Hai commented in tuition class

2007
Dec
8
Sat
3:03am

4

This is a sure way of making math learning exciting - the story telling way. Real life application does allow students to appreciate math. I like the layout of your blog too. Very well done.

5. FoxTwo commented in tuition class

2007
Dec
8
Sat
1:45pm

5

Ok, seeing the pathetic rates given by POSB, I think I shall invest my money in loansharks then. At least they give better returns, and they have "Recovery Agents" to ensure the money isn't swindled.

6. Miss Loi Friend Miss Loi on Facebook @MissLoi commented in tuition class

2007
Dec
9
Sun
12:50am

6

Welcome back to Jφss Sticks Teacher Lim!

As we all know math mastery is about practice and practice. What better practice than to experience/feel/hear/see something for yourself in real life, as our poor cute little boy did, and remember it for life?

Anyway, this was an easy story to tell coz it's a true story as seen in our Straits Times Forum page on 6 Dec 🙂

7. Miss Loi Friend Miss Loi on Facebook @MissLoi commented in tuition class

2007
Dec
9
Sun
1:08am

7

FoxTwo,

Miss Loi can see that you're now comparing the rates of returns of different loansharks in the business.

And yes, they all have their own “Recovery Agents” to ensure that not a single dollar will disappear 🙂

8. Horny Ang Moh commented in tuition class

2007
Dec
9
Sun
4:14pm

8

Problem with me is how to save?? No piggy bank! I broke open the pig long long time ago!! Can milo tin can be use to store my coins??? He! He! Have a nice day!

9. Miss Loi Friend Miss Loi on Facebook @MissLoi commented in tuition class

2007
Dec
9
Sun
9:03pm

9

HAM,

Oh dear what did you do to the poor piggy that caused it to break prematurely?! Don't tell Miss Loi what you did began with a letter 'P'???!!!

10. FoxTwo commented in tuition class

2007
Dec
10
Mon
11:43am

10

Yeah I bet he P-unched it.

It begins with letter P... right? right?

11. eastcoastlife commented in tuition class

2007
Dec
10
Mon
4:14pm

11

The piggy also has a FaceBook acount! It got P-oked! haha....

12. Miss Loi Friend Miss Loi on Facebook @MissLoi commented in tuition class

2007
Dec
10
Mon
9:10pm

12

Aiyoh ECL, you actually made Miss Loi search Facebook for a profile called 'POSB Piggy'!

13. mathslover commented in tuition class

2009
Apr
21
Tue
11:52am

13

Percentage decrease = \$4.50/\$86.60*100% = 5.196% ~ 5.2%

Amount deposited after deduction = \$86.60-\$4.50=\$82.10

Interest compounded annually, but credited monthly.

1st year:
Interest credited per month = 0.25%/12*\$82.10 = \$0.0171
Total interest in 1st year = \$0.0171*12 = \$0.2052 ~ \$0.21 (really wonder if POSB will round UP.. )

Capital in 2nd year = \$82.10+\$0.21=\$82.31

*and using excel...*

End of 21 years and 5 months, the total in his bank account would be \$86.61 (finally get back the \$4.50).

I got a killer question.

'...except for the first 200 coins, there would a charge of \$1.50 for every 100 coins deposited. As such, a total of \$4.50 was promptly deducted...'

Means he deposited 500 coins. What are their denominations?

*p.s. i also not sure if it can be done...* 🙂

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* Please refer to the relevant Ten-Year Series for the questions of these suggested solutions.