What is Interest and Interest Rate? A Simple Explanation for Kids and Beginners

What is Interest Rate? Banking 101: Easy Peasy Finance for Kids and Beginners

Introduction to Interest Rate for Kids and Teens

This video explains the concept of interest in a simple, concise way for kids and beginners. It could be used by kids & teens to learn about rate of interest, or used as a money & personal finance resource by parents and teachers as part of a Financial Literacy course or K-12 curriculum.

What is Interest and Interest Rate - A Simple Explanation for Kids Teens and Beginners
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Suitable for students from grade levels:

  • Kindergarten
  • Elementary School
  • Middle School
  • High School

The topics covered are:


What is Interest Rate - Infographic
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Infographic: Click Here to Download

Howdy Wall Street Willy! I’ve heard that the interest rates are really low right now. But…

What is interest anyway?

Interest and Interest Rate for Kids Teens and Beginners - A Simple Definition
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Well, you can think of interest like rent on your money, just like you pay rent for an apartment.

The people who rent it to you are letting you use the apartment for money (rent), and you let the bank use your money for extra money, which is called interest.


But how is the interest calculated?

Like, how do you know how much interest you’re supposed to get?

Well, it’s a percentage of what you keep put in the bank account, each year.

For example, if you keep $100 in your bank account at a 10% interest rate, that means you’ll get $10 at the end of the year.

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Does the rate of interest always stay the same?

Oh, that’s really good. But, is it always 10%?

No, it changes a little bit every day based on the economy and other factors.

Okay. Well, thank you very much for telling me what an interest rate is.

You’re welcome.

Remember, finance is your friend!

Video Featured in the Below Financial Literacy Course for Kids & Teens

Download Transcript: Ideal for Use by Teachers in their Lesson Plan to Teach Kids & Teens

Podcast: What is Interest and Interest Rate?

What is Interest Rate
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