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❤️ 15/15

Interest is really "rent on money"

You borrow a friend's drill for a week and buy them a bubble tea as thanks when you return it. Borrowing something costs a little something—that feels natural.

🔆An interest rate is "rent on borrowed money": using someone else's money for a while costs a proportional fee. Borrow 100 yuan and pay 5 yuan after a year, and the rate is 5%.

Flip it around: putting money in the bank is like "renting" your money to the bank to use, and the bank pays you interest. So an interest rate is both the cost of borrowing and the reward for saving.