Ep35. Teaching Kids about Money-2 教孩子理财-2

Function of Bank

My kids always thought banks are the most powerful places on the planet since they own tons of money there. I had to tell the that the money in the banks doesn’t necessarily belong to the banks. People put their money in the banks (and earn some interest, which will be covered later). Banks pool all the money and lend them to those who need the funds (and banks earn interest too by lending money). 

What is Interest

We earn interest when we put money in banks, and banks earn interest when they lend money out. So what exactly is interest? Here is how I explained to my kids: “Imagine you lend $10 to your friend for a year. During the year, you will not see the $10 and will not be able to use it; you also have the risk that your friend will not return the money after a year. Do you feel comfortable lending out $10 for a year? Probably not. What if your friends will pay you an extra $2 interest, and return you $12 after a year? Now it’s probably a better deal?” (I hope they won’t go out, lend money and charge interest from their friends after hearing this!)

Do We Keep All The Money We Earn

This brings up another important topic in financial education. Do we keep all the money we earn? The answer is no, we need to pay our shares to the government in the form of tax, and the government will use this tax income to open schools, hospitals, libraries, etc. Usually, tax is a percentage of our income. Paying taxes is an obligation of citizens, so we are also called ‘taxpayers’.

To be continued…




当我们把钱存入银行时,我们会赚取利息,而银行在放贷时也会赚取利息。那么究竟什么是利息呢?以下是我向孩子们解释的方式:“想象一下,你借给你的朋友10块钱,借一年。在这一年中,您将看不到这10块钱,也无法使用它;你还面临着您的朋友一年后不还钱的风险。你愿意借出10块钱吗?可能不会?如果你的朋友会额外付给你2块钱的利息,一年后还给你12块呢?现在它可能是一个更好的交易?” (希望他们不要听了就出去跟朋友借钱收利息!)





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