Banking · Concept · HTML Lesson
What Is Interest? — Introduction to Interest Rates
An online lesson and video introducing interest — what it is, how you earn it, and how it applies to both savings and borrowing. The lesson and video are free. An accompanying worksheet is available with Full Membership.
What Students Learn
Learning objectives
- What interest is — the cost of borrowing money or the return received for saving money
- How interest rates work — expressed as an annual percentage of the principal amount
- How to earn interest by depositing money in an interest-bearing savings account
- How banks use deposits to make loans and pay interest back to account holders
- How compound interest works — interest earned on top of previously earned interest
- How interest applies to loans — what borrowers repay and why lenders charge it
Video Lesson
Watch: What Is Interest?
For Teachers
How to use this lesson
Distribute the worksheet before playing the video so students have a structure to follow. After viewing, hold a class discussion on where interest appears in everyday life — savings accounts, car loans, student loans — and review worksheet answers together. The lesson page includes a written explanation covering interest definitions, the earning process, compound interest, and loan repayment examples.
Discussion prompt: Ask students whether interest is currently working for them or against them — or neither yet. This grounds the concept in real personal finance decisions students will face soon.
Best used after covering savings accounts and earning interest, and before introducing the simple interest formula. Pairs naturally with the Simple Interest and Compound Interest lessons in this hub. Works for Grades 7–12 and reinforces both financial literacy and math reasoning.
Lesson Plan
Understanding interest — full lesson plan
Objective
Students will learn what interest is, how you earn interest, and the basics of interest rates and compound interest, and understand how interest relates to saving and borrowing.
Materials needed
- The “What Is Interest?” video (above)
- The printable worksheet (below)
Procedure
Introduction. Define interest as the cost of borrowing money or the amount you receive for lending it, usually expressed as an annual percentage — the interest rate.
Video presentation. Show the “What Is Interest?” video and have students take notes.
Discussion. Discuss how you earn interest on savings, how interest is charged on loans, and how keeping earned interest in an account leads to compound interest — interest earned on your interest.
Worksheet. Students complete the worksheet, then review the questions together.
The lesson content and video above are free to use. The printable worksheet below is available with Full Membership.
Printable Worksheet · Full Membership
What Is Interest? — Worksheet & Answer Key
A printable worksheet on interest — how you earn it, interest rates, and the basics of compound interest — with an answer key for teacher use.
Related Topics
More banking and interest resources
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