- Definition
An interest rate is the extra money you pay back when you borrow money, usually shown as a percentage of the amount you borrowed.
Borrowing $1,000 for a new computer at a 5% interest rate means you would pay $50 in interest for the first year.
How to teach this in 30 seconds
Try this analogy: An interest rate is like a 'borrowing fee' for money, where the fee is a percentage of the amount you borrowed.
Ask your child: Imagine you loan a friend $10. What would be a fair interest rate to charge?
Common mix-up: Kids may confuse the interest rate with a flat fee. The rate is a percentage, so the actual amount of interest paid depends on the size of the loan.
Examples
- A savings account that pays a 3% interest rate on a $200 balance will earn $6 in interest after one year.
- A credit card might charge a high interest rate, like 19%, on any money you have not paid back.
interest rate is a term used in Ontario’s Kindergarten to Grade 8 curriculum.
Where this shows up
The descriptions on this page are SmartStudy’s own original, plain-language writing — not the Ministry’s wording. They are aligned to the Ontario Curriculum, © King’s Printer for Ontario. For the Ministry’s official wording, see the source link below. SmartStudy is an independent service and is not affiliated with, endorsed by, or sponsored by the Government of Ontario or the Ministry of Education. Ontario Curriculum and Resources ↗
