Simple interest

It is good for a child to open a bank account at a younger age because the child can start to understand how money works. The average bank interest rate for checking accounts in the United States was 0.06% in 2019. It is important to know how interest works in a bank account because a bank account is something many people use throughout their lifetime. Today we are going to learn about simple interest. Simple interest is a way of calculating the interest charge on loan or the amount of a savings account. It is important not to confuse simple interest with compound interest because simple interest and compound interest are different interests. In comparison, compound interest accumulates on the principal amount, while simple interest does not accumulate. The formula for simple interest is I = Prt.

Let’s try an example to find out how the formula works. In the future, you have created a savings account from the CuriouSTEM bank. The bank offers a 1.2% interest rate for the account, and you have made a deposit of 100 dollars. How much money will be in the account after three years? In this case, we can simply multiply the given three numbers, 0.12 x 100 x 3. This equals to 0.12 x 100 x 3 = 36. This means that, in the account, there will be 136 dollars. As said before, it is important to learn how money works because this can help you a lot in the future.