New words for this lesson
Say them out loud. Then use one word in a sentence.
Would you lend me €100?
I borrow €100 from you today. In exactly one year I give you back — €100. Not one cent more.
🤔 Most people say no. Name three reasons why.
Show answer
1 · Time. You can't use your €100 for a whole year. That is an opportunity cost.
2 · Prices. In a year, €100 may buy less than today.
3 · Risk. Maybe I never pay you back.
Interest is the payment for exactly these three things.
You can be on either side
| You are the… | Interest is… |
|---|---|
| 💰 saver / lender | money you receive |
| 💸 borrower | money you pay |
Simple interest calculator
Type a principal, an interest rate and the number of years. This calculator uses simple interest — interest only on the starting amount. Next lesson we add the magic part.
Example numbers only. Real rates change all the time — always check the current ones.
Two people, two rates
The same bank can ask 4% from one borrower and 11% from another. Why?
🤔 What makes a bank ask for a higher rate?
Show answer
More risk for the bank: no steady income, no security, a long time period, or a borrower who has not paid back well before. More risk → higher rate.
This is the rule behind everything in Block 3 too: more risk, more return demanded.
🤔 Your savings pay 1% per year. A shop offers a payment plan at 12% per year. You have €600 saved and want a €600 laptop. What do the two numbers say?
Show answer
Paying cash costs you the interest you stop earning: about €6 a year. Using the payment plan costs about €72 a year in interest.
The maths is clear — but the decision is yours, and it also depends on your emergency fund. Explain your reasoning in the chat.
Zusatzwissen · extra knowledge
Where does the general level of rates come from? Central banks (for the euro: the European Central Bank) set a key rate. When that rate goes up, loans and savings usually get more expensive and more rewarding at the same time.