Interest is a percentage that the bank pays when you deposit money in your bank account annually. The more you invest in the bank, the more interest you earn over time.
What are the benefits of investing in an account that earns interest rather than sticking it in a box under the bed?
When sticking your money under you bed, your money stays the same. But with interest, you can increase how much money you get over time according to how much you invest. In the end, it adds up to a lot of money.
Let's use $1200 as a base number. If you keep it under your bed, you will just have the same amount of money. Now, let's have 5% interest. You put your $1200 inside you bank account with interest. 5% of 1200 is 60. You have 1260 dollars as your total.
If you do not withdraw your money, each year you earn more saving than the year before. Why?
Because the next year's interest adds on to not only the principal amount, but with the added interest amount. Each year, it will get bigger and bigger.
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