Why does interest in money exist?

Question

What is it for and why? I found a lot of questions on interest rate but not what interest itself is

Thanks in advance 🙂

Edit: Thank you for all the replies i am now a financial god of wisdom, i’m not going to reply to unless something is unclear to me but comments will all be read

In: 9

Answer 1

Interest is the fee for using somebody else’s money. You want to buy a house or car and don’t have all the money to pay the entire amount, a bank will lend you the money but charges interest in return for borrowing their money. Same when a business or government entity issues bonds… the investor gives their money to be used today, collects interest paying for duration of bond, and then gets their money back in the end. Of if you have a savings account, you get paid interest for letting bank hold your money (they then lend it to other customers and charge them a higher interest rate than they pay you, with that spread in rates their revenue).