Money Magic? The Bank Pays You

What your kid learns

• Interest is a thank-you

  Banks lend savers’ money to borrowers. So banks pay savers a small thank-you, called interest. It isn’t magic. Someone pays it for a reason.

• Cents for each dollar

  Interest is often shown as cents for each dollar, per year. Our pretend rate is 5¢ for each $1 a year. That’s much higher than most banks pay, picked for easy math. Real banks pay much less.

• More money, more time, more interest

  More money saved earns more interest. Money saved longer earns more, too. Some families add family interest: a grown-up’s bonus for leaving money in Save.

The story: The Case of the Growing Savings

In a bank lobby, Priya sees that a pretend $10 in savings grew to $10.50, and a banker explains interest.

1. Helper: A strange clue, detectives! Priya’s savings grew by themselves.
2. Priya: I saved a pretend $10. A year later, it says $10.50!
3. Priya: Is it magic?
4. Banker: No magic. We lend saved money to borrowers.
5. Banker: Borrowers pay us extra. So we pay savers a thank-you.
6. Banker: That thank-you is called interest.
7. Helper: Case closed! Saved money can earn money.

The game: Watch $10 Grow

Pick the money and the years. Pretend rate: 5¢ per $1 a year. That’s much higher than most banks pay, picked for easy math.

Games use pretend money and work with taps or a keyboard. Nothing is timed.

New words

interest

money paid for using money

rate

how much for each dollar

per year

for each year

Questions at the end

• What is interest on savings?
• Why does a bank pay interest?
• Pretend rate: 5¢ per $1 a year. How much does $20 earn in one year?

Remember this

Saved money can earn money.

Talk about it

Compare the pretend rate with today’s real rate together. Why are they so different?

Try it at home: Check the real rate

1. Ask a grown-up or teacher to check today’s real savings rate.
2. Is it more or less than our pretend rate? (Hint: much less!)

A grown-up or teacher looks up today’s real savings rate. They tell you if real banks pay more or less. (Much less!)

For grown-ups: live facts

• Typical savings rates today. They are much lower than the lesson’s pretend rate.

  Source: FDIC National Rates and Rate Caps(opens in a new tab)

School standards

• National Standards for Personal Financial Education: Saving
• Common Core Math 4.MD.A.2
• Common Core Math 4.OA.C.5