The current economic situation is generating questions for everyone from teenagers to senior citizens. But in order to answer them, you need to understand basic economic and mathematical concepts.

Jim Rubillo, executive director of the National Council of Teachers of Mathematics, and Joe Peri, chief operations officer, Council for Economic Education, offer a few real-life examples about personal finance.

How to be a Millionaire
A high school student wants to be a millionaire by the time she is 65. How much does she need in systematic savings and compound interest? The answers were calculated using compound interest simulators found on Illuminations and EconEdLink.

The student learned that by saving $400 every month and assuming she gets a five percent interest rate for 50 years, her savings would amount to $1,072,208 by the time she was 65. But she's worried about saving $400 per month now because she needs the money to help pay for college and get herself established. By doing some additional calculations, she learned that if she starts saving 10 years later, she can still reach her $1 million goal by changing her monthly savings to $675.

But, this 40-year savings option incurrssome costs. For example, her total contributions under the 50-year scenario would be $240,000, while they would be $324,000 for the 40-year period. This is the "opportunity cost" of going to college and establishing a professional career before beginning to save for retirement. Chances are good that this opportunity cost will be well worthwhile because investing in human capital pays off in the long run.

Losses vs. Gains
A senior citizen said, "The market dropped last week by 10% and went up this week by 15%, so, why is my portfolio only up 3.5% instead of being up 5%?" Let's see why this is the case. Suppose his portfolio was $10,000 at the start of this period. It lost 10% in the first week so its value dropped to $9,000. Then its value increased from its new $9,000 base by 15% adding $1,350 to the base for a total of $10,350. The portfolio lost 10% and then added 15%, so the investor expected his portfolio to yield a 5% gain. That is, he expected the portfolio to be worth $10,500 at the end of the two weeks. Unfortunately his early education with percentages focused on rules and procedures, but failed to provide practical applications. He had to learn, later in life, that you can't add percentages.

Examples like these help to demonstrate why students need to be financially literate and to understand how mathematical concepts learned today will be invaluable throughout their lifetime.

Try Real-Life Examples
"You and your students can see and experience these scenarios -- and many others -- using the lessons and interactives available on Thinkfinity.org from EconEdLink and Illuminations," said Patrick Gaston, president of the Verizon Foundation. "These resources bring math and finance concepts alive, helping students gain fundamental financial literacy skills that they'll benefit from for a lifetime."

Be Sure to Visit
Unravel and understand the economic and mathematical concepts in today's headlines and see the impact of savings, investments and credit cards on personal finances. Check out the great resources on:
EconEdLink: http://www.econedlink.org/personalfinance/
Illuminations: http://illuminations.nctm.org/