Thinkabara

💰 Money Skills for Kids & Teens · Lesson 6 of 7

Banks and interest

Google Classroom

Accounts, debit cards, interest and compound interest in dollars.

What a bank does

A bank keeps money safe. In the US, deposits at an FDIC-insured bank (or NCUA-insured credit union) are protected up to $250,000. A checking account is for everyday spending; a savings account is for money you keep. Many banks offer accounts for kids and teens that a parent opens with them.

Debit card or credit card?

Debit cardTakes money straight from your checking account. Spend only what you have
Credit cardA short loan from the bank. Pay it back in full each month, or you pay interest — often over 20% a year
ATMTakes cash out of your account. Out-of-network ATMs charge fees

Interest

When you keep money in a savings account, the bank pays you a little extra called interest, because it uses your money to lend to others. When you borrow, you pay the interest. Example: $100 at 4% a year earns $4 in one year.

Compound interest

  1. Year 1: $100 + 4% = $104
  2. Year 2: 4% of $104 = $4.16 → $108.16
  3. Year 3: 4% of $108.16 ≈ $4.33 → $112.49
  4. The interest earns interest too. That is compound interest, and over many years it grows a lot

Tip

💡 Compound interest works against you on debt. A $500 credit card balance at 24% that you never pay grows to about $620 in one year.

✏️ Practice: your turn

  1. Ask a parent to show you a bank statement (with the account number covered)
  2. Work out: $200 at 5% a year — how much after one year? After two?
  3. Find out what the difference between a debit card and a credit card is in your family
  4. If you are ready, open a kids’ savings account together

✏️ Percentage calculator: work out sales, tips and savings

🧠 Quick quiz

Answer all 4 questions correctly to mark this lesson as done.

1. $100 at 5% interest for one year becomes…
2. What is compound interest?
3. A debit card takes money…
4. What happens if you don’t pay off a credit card each month?

0 of 4 correct

All lessons in Money Skills for Kids & Teens

  1. 🪙 1. What money is and where it comes fromBartering, dollars and cents, and how people earn money
  2. ⚖️ 2. Needs or wants?What you must have, what is nice to have, and how to decide
  3. 🫙 3. Allowance and a budgetThree jars: spend, save, give
  4. 🎯 4. Saving for a goalHow many weeks until I can buy it, with a full example
  5. 🛒 5. Smart shoppingComparing prices, unit price, and the tricks of sales and ads
  6. 🏦 6. Banks and interestAccounts, debit cards, interest and compound interest in dollars
  7. 🔐 7. Money online, safely — and a final projectIn-game purchases, scams, card details and a family budget