Interest

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Interest is the price you pay for borrowing money from somebody and it’s also your reward for saving it.

When you borrow money - through credit cards, loans and mortgages - the interest rate will tell you how much that will cost you. So if you borrow £1,000 at 5% interest per year, you’ll owe £1,050 after a year. The £50 is the interest and that’s how they make their money. 

When you save money - in savings accounts - the interest is what the bank pays you for letting them use your money. They lend that money out and make money by charging higher interest, so you’re doing them a favour. If you put £1,000 into a savings account at 3% interest, you’ll have £1,030 after a year. 

In an ideal world, you want the lowest interest rate on debts and the highest on savings.

Love Eleanor. xxx