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In this lesson, we're going to
be talking about finance. And

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one of the most important aspects
of finance is interest.

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When I go to a bank or some
other lending institution

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to borrow money, the bank is happy
to give me that money. But then I'm

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going to be paying the bank for the
privilege of using their money. And that

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amount of money that I pay the bank is
called interest. Likewise, if I put money

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in a savings account or I purchase a
certificate of deposit, the bank just

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doesn't put my money in a little box
and leave it there until later. They take

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my money and lend it to someone
else. So they are using my money.

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The bank has to pay me for the privilege
of using my money.

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Now what makes banks
profitable is the rate

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that they charge people to use the bank's
money is higher than the rate that they

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pay people like me to use my money. The
amount of interest that a person pays or

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earns is dependent on three things. It's
dependent on how much money is involved.

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It's dependent upon the rate of interest
being paid or the rate of interest being

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charged. And it's also dependent upon
how much time is involved. If I have

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a loan and I want to decrease the amount
of interest that I'm going to pay, then

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I'm either going to have to decrease how
much money I borrow, I'm going to have

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to borrow the money over a shorter period
of time, or I'm going to have to find a

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lending institution that charges a lower
interest rate. On the other hand, if I

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want to earn more interest on my
investment, I'm going to have to invest

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more money, leave the money in the
account for a longer period of time, or

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find an institution that will pay
me a higher interest rate.