FinanceSource: Banking fundamentals
An interest rate shows, as a percentage, how much extra money a bank may add to money you save in a year.
Example
You save $100 at 5% a year. After one year, the bank adds $5, giving you $105.
How it fits in
The displayed rate is a way to compare savings accounts. The amount you actually receive depends on how long the money stays there and how often interest is added. APR describes a borrowing rate, so it is not the right label for savings.
Where this is taught
Practise it on the platform
Related terms
Compound Interest
When the money you earn from saving starts earning its own money on top.
Simple Interest
Interest paid only on the original amount, never on the interest you have already earned.
Needs vs Wants
Needs are the things that keep you safe and well. Wants make life nicer. Mixing them up is what empties most budgets.