Imagine you have 100 candies, and someone says you’ll get 3% annual interest, that means every year, you get 3 more candies for having those 100.
What is "annual"?
"Annual" just means it happens once a year. Like how you might get a birthday present every year on your special day.
What is "percent"?
"Percent" means per hundred. So 3% is like saying 3 out of 100, which is why if you have 100 candies, you get 3 more each year. If you had 200 candies, you’d get 6 candies every year because 3% of 200 is 6.
It’s like getting a little treat every year just for keeping your candies safe in a jar, no magic needed, just fair sharing!
Examples
- A bank offers 3% annual interest, so if you save $100, after one year you’ll have $103.
- If your parents invest in a bond with a 3% interest rate, their savings will grow slowly but steadily.
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See also
- What is 7% interest every year?
- How is interest calculated on the current balance?
- How Do ‘Savings Accounts’ Help People Grow Their Money Over Time?
- How Does Compounding Interest Work?
- What is interest?