Fermi estimate
A rough answer to a question that seems impossible to measure, built by breaking it into a few steps you can estimate and multiplying them together.
In plain English
How many jelly beans in a jar? Volume of the jar, times the share of it filled by beans, divided by the volume of one bean. None of the steps needs to be exact. Some errors push the answer up and others push it down, so they partly cancel, and the result is usually much closer than a single gut guess. The method is named after the physicist Enrico Fermi, who liked to ask students questions like this.
Uncle Gary explains
Uncle Gary counted the jelly beans on the side of the jar, doubled it and guessed 300. Mia measured one bean in a jug of water, assumed 65% packing and guessed 760. There were 774.
Why it matters for your money
Breaking a money question into checkable steps (price, rate, years, costs) gives you an answer you can defend and shows which assumption matters most.
Where we tested it
Related terms
All glossary terms. Educational content, not financial advice.