Imagine you borrow $100 from a bank, and they charge you $120 to pay it back later. That extra $20 is how the bank makes money! When people take out loans, banks get more money than they give out, that’s how they become rich.
Examples
- A child borrows $10 from a piggy bank and pays back $12 later.
- You take out a loan to buy a toy, but you end up paying more than the toy costs.
- A bank gives you money for your birthday party, and you return it with some extra candies.
See also
- Why Do Prices Go Up So Much When There's a Shortage?
- Why Do We Use Money Instead of Bartering?
- Why Do We Have Different Kinds of Coins?
- Why Do We Have Different Kinds of Taxes?
- Why Do Prices Change So Much?