Imagine planting a money tree that grows more dollars while you sleep — that’s basically what interest does for your savings. Interest is a reward you earn just for keeping your money in the bank. The longer your money stays put, the more it grows!
What Is Interest?
Interest is a percentage of your money that the bank pays you for keeping your savings with them. It’s like a thank-you gift from the bank for letting them use your money (don’t worry, it’s still yours!).
There are two types of interest:
- Simple Interest – Earned only on the original amount you deposit.
- Compound Interest – Earned on your original deposit and the interest you’ve already earned. This is how your money starts to snowball over time!
Example: If you save $100 with 5% interest, you’ll have $105 after one year. With compound interest, that extra $5 starts earning money too!
Where You Can Earn Interest
- Savings Accounts – Most banks offer interest, even if it’s a small amount.
- High-Yield Savings Accounts – Offered by online banks, these pay more interest than regular savings.
- Certificates of Deposit (CDs) – You agree to leave your money in the bank for a set time, and in return, you earn more interest.
Why Starting Early Matters
The earlier you start saving, the more time interest has to grow your money. Even $5 or $10 a week can turn into something big down the line thanks to compound interest.
TL;DR:
Interest is free money your savings earn just by sitting in the bank — and compound interest means that money earns more money over time. Start saving early, and let your cash do the work for you!
Up next? Why every girl needs an emergency fund — yes, even you!
Her Financial Future 