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Money Is a Special Decimal

If you know how to multiply decimals, you can do multiplication with money. More than anything else, you will be figuring out how much tax you need to pay when you buy things. Money is special because it only has two places after the decimal point. Fifty cents is 0.50, thirty-eight cents is 0.38, and so on. Interest uses a few more decimal places. Local tax on your clothes might be 9.25%. It usually doesn't get much crazier than three decimal places.

A World of Coins and Paper

We explain more about money in the addition and subtraction sections, but let's do a quick review. In the United States, a cent is one hundredth of a dollar. One hundred cents makes one dollar. For example, $23.07 means you have twenty-three dollars and seven cents. Interest and taxes are not real money values. You cannot have 8.25% in your pocket. You can only have real money in your pocket. Taxes and interest will almost always increase the amount you have to pay. Sometimes there will be sales at stores and you will multiply decimals. Those sales often use words like "15% off". You will then multiply your amount of real money by the percentage.

What Is a Percentage?

We didn't really need to talk about percentages in addition and subtraction. When it comes to multiplication and money, you will use percentages all of the time. A percentage is a fraction of a whole number. It's very similar to a decimal.

50% = 0.50
15% = 0.15
8.25% = 0.0825

Do you see how they are connected? When you divide a percentage by one hundred, you get the decimal version. The suffix "cent" is used in many other words, such as century or centipede. "Cent" means one hundred. A per-cent means "out of one hundred".

So...
Fifty percent (or 50%)
Fifty out of one hundred
50 out of 100
50/100 (A percent can be written as a fraction too!)
0.50

Yes, we did some division there. When you see "out of", it means you need to do some division. Fifteen percent means 15 divided by one hundred (0.15).

Bring on Some Multiplication

Let's try one example. You know about multiplying harder decimals than these, so it shouldn't be a problem.

Example:
Mary runs down to the store and buys a book for school. The book costs $5.25. When she is at the cash register, she has to pay sales tax on the books. The local sales tax is 8.25%. How much does she have to pay for her book?

Steps to Solve:
Price of book * Sales tax = Tax on book
$5.25 * 8.25% = 5.25 * 0.0825 = 0.433125

Now you need to add the tax to the price of the book.
$5.25 + 0.433125 = $5.683125

Since you can't give money with more than two decimal points, we need to round off. Because the third place after the decimal is 3, we can round down.

Answer:
Mary needs to pay $5.68 for her book.

Remember that, even if you have a zero at the end of your answer, when you write out values for money you always need two places to the right of the decimal point. You can't write that something costs $16.7 dollars. You should write $16.70 so that people understand what you mean.

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