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What is a bank?

Recommended for: Elementary School Students, Middle School Students

What is a bank?

Basically, banks borrow and lend money from everyday people like you and me.

When they borrow from you, they agree to make a payment to you for the money. This is called interest

Interest is the price you pay to borrow money or the cost you charge to lend money. Interest is most often reflected as an annual percentage of the amount of a loan.

How do banks make money?

You lend money $$$ to the bank.

The bank lends the money to someone else.

That other person pays the bank money a small percentage of interest in order to borrow from the bank.

You get the money back from the other person because they paid the bank.

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