What is interest and how does it work? - Article flashcards

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Flashcards made from Khan Academy. The article is found in Unit 2, Lesson 3 of the Financial Literacy course.

Last updated 9:12 PM on 5/3/26

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Definition of interest

A reward the bank gives you for keeping your money in an account with them.

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How is interest calculated?

As a percentage of the total amount of money in a bank account.

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If you have $500 at 1% annual interest, how much do you earn in a year?

$5

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How can you make interest grow even faster?

By continuing to add more money to your account on top of the interest earned.