Savings accounts and interest

AngieIn You and Your Money, we saw how money comes to banks from many sources — the Treasury, businesses, and people. People use banks to keep their money safe, but they also use banks to earn even more money.

They use savings accounts, which banks set up for you so you can save your money.

So how do you make money through a bank? The good news is that many banks pay you to keep your money in the bank! That’s right! They pay you what’s called interest. In other words, you make money on your money. You’re paid a percentage of the amount that’s in your account.

Money moving to a bank as a deposit and coming out as interest

AngieBut banks also turn around and lend your money out in the form of loans. Remember: banks make money on your money when borrowers repay their loans with interest. So interest works either in your favor if you’re saving, or against you if you’re borrowing.

The amount of interest you can earn varies from bank to bank and depends both on the kind of savings account you have and also on how much money is in your account

Interest varies by:

  • Bank
  • Type of account
  • Savings balance

 
Click the Next button to learn about types of interest.