money question?

Question

I have a money question,ok can someone explain to me how interest works when it comes to saving money in the bank.I dont understand how the money you have,the bank gives you money.I hope I made my question clear enough.thanks:)

Answer 1

When you put money in a savings account at a bank, you are "loaning" the money to the bank. The bank turns around and loans that money to another person, and charges them interest for the use of that money.
Then the bank has to pay you interest for the privilege of using your money.

Banks make a lot of money at this, because they can do this on a very large scale, and because they charge their customers a much higher interest rate than they pay you for the same amount of money. For example, you might earn 3% interest on your savings, but the bank will charge 6% interest on a loan to someone else for the same amount. The bank keeps the 3% difference.

Answer 2

You put your money in the bank. The bank loans this money out to people who want a mortgage, bank loans, etc. Those people are charged interest for borrowing money, because there is a risk that they won't pay. Banks are businesses and they want to make money. The bank takes a cut of the interest from the loan, and gives you a small portion since it was your money they used to begin with.

Answer 3

When you BORROW money, the lender requires a certain percent of the balance as interest to pay them for not having access to the money. In the case of a savings account, YOU loan money to the bank. The interest is what the bank pays you to let them use your money.

Answer 4

When money sits in your account in the bank over time you develope interest on that money, meaning the bank will add a very small percentage of your savings to your account each month.

Answer 5

You deposit 1000 dollars. The bank is allowed to loan out 10 times their deposits. So they will make a 10,000 dollar loan with your 1,000 dollar deposit at 15% interest and give you like 1% interest on your 1000 dollars. So they make 1500 dollars per year from your 1,000 deposit and pay you 10$ per year in interest netting them 1490 dollars.