How to talk to kids about interest
Why it matters
Understanding how money grows in a savings account could motivate your child to save.
What is interest?
Explain that interest is money a bank pays you for keeping savings there. The bank sets interest rates—what it pays per dollar saved. Higher rates mean bigger payments.
How it works: Younger kids
Start with simple interest—money paid only on your child’s contributions. Give them a dime for every $1 they save. Keep the money in a clear jar so they can see it add up.
How it works: Older kids
Move on to compound interest. Explain that compound interest is what happens when your interest earns interest.
See how it grows...
Use savings account statements to show interest payments rising even when no new money is deposited. Here’s how interest payments add up on $100 earning 1%.*
...and grows
In 10 years, $100 grows to about $110.* You and your child can create more scenarios with this compound interest calculator.
Play the long game
Help your child develop good lifelong habits by:
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