eli5 what is an interest rate?

Question

please ACTUALLY explain this like im 5 i genuinely cannot grasp this concept whatsoever. i’m opening a savings account and it says;

“The interest rate depends on your account balance. All rates are variable. 4.25% p.a. on balances less than $50,000. 4.25% p.a. on balances between $50,000 – $249,999.”

am i paying for my own savings account???? what??????? i am so confused i feel like im going crazy

In: 0

Answer 1

If you have an interest rate of 10%

And you have 100 money in your saving account

Then regularly (every month, or every year), you will get money equal to 10% of the money in your account.

So first time you get 10% of 100 which is 10. You now have 110.

Then 10% of 110 which is 11. You know have 121.

Then 10% of 121, et caetera, et caetera,…