How will rising or falling interest rates affect your budget? Let's find out.The material provided on this website is for informational use only and is not intended for financial or investment advice. Khan Academy assumes no liability for any loss or damage resulting from one’s reliance on the material provided. Please also note that such material is not updated regularly and that some of the information may not therefore be current. Consult with your own financial professional when making decisions regarding your financial or investment options.Khan Academy doesn’t provide legal, tax or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.
Log in Jaden 2 years agoPosted 2 years ago. Direct link to Jaden's post “does it change over time,...” does it change over time, if so how long would it take to have higer rates • (11 votes) Dvortygirl 24 days agoPosted 24 days ago. Direct link to Dvortygirl's post “It's not like that, and a...” It's not like that, and a proper answer gets into economics and how money works. Very briefly, the Federal Reserve sets something called the prime rate, which is the interest rate banks use to lend to one another, and indirectly, the rates banks use to lend money to people and businesses. They set it higher if they're trying to cool down inflation and lower if they're trying to get the economy going during a slowdown or recession. They're basically making it more or less expensive to borrow money. If interest rates are higher and you're getting a loan to buy a house, that loan will cost more in interest than it would when interest rates are lower. That, in turn, should tend to increase or decrease demand for houses and the pace at which houses sell. (1 vote) JONASS 2 years agoPosted 2 years ago. Direct link to JONASS's post “is it bad to have low int...” is it bad to have low interest rates for a long time? • (8 votes) Ahmad a year agoPosted a year ago. Direct link to Ahmad's post “Not for you as a person b...” Not for you as a person but might be troublesome for the economy as a whole because when there is a lower interest rate there will be a much higher borrowing which might result in inflation. Moreover, people will take much more loans than they can afford to pay which will result in more defaults. As people continue to take out loans the State will have to print more money because no one would want to keep his money in the bank because of the low interest rates this will result in a surplus of Dollars which will drop the value of the Dollar as a whole result in huge inflation. cmen1286 4 years agoPosted 4 years ago. Direct link to cmen1286's post “What are the effects of l...” What are the effects of low interest rates. • (4 votes) Yuya Fujikawa 3 years agoPosted 3 years ago. Direct link to Yuya Fujikawa's post “The fed may lower the int...” The fed may lower the interest rate if the economy is stagnant. This is to bring about an economic stimulus. Lower interest rate means that it's easier for borrowers to take loans or borrow money. For example, a manufacturing company may decide to borrow money (and perhaps issue bonds) to expand their production lines. This would create more jobs, decreasing unemployment, and in turn encouraging more spending. On the other hand, if inflation is on the rise and economy is becoming overheated, they could raise the interest rate to cool down the economy to avoid rampant inflation. The fed lowering or raising interest rate is part of what is known as monetary policy - as opposed to fiscal policy which is associated with regulating government income and spending. (9 votes) Xy H a year agoPosted a year ago. Direct link to Xy H's post “Can someone explain the $...” Can someone explain the $5,000 credit card balance table? • (6 votes) David Alexander a year agoPosted a year ago. Direct link to David Alexander's post “I will try.Start with t...” I will try. Start with the $5000. This is the amount of money you owe the bank because you have used your credit card to buy that much stuff. Every month, the bank asks you to pay back the full amount, but allows you, instead, to pay back just 1% of it, plus some interest on the amount you do not pay back. (6 votes) Gage Rottum 8 months agoPosted 8 months ago. Direct link to Gage Rottum's post “What’s the point of a sav...” What’s the point of a savings account • (5 votes) David Alexander 8 months agoPosted 8 months ago. Direct link to David Alexander's post “This is a fair question. ...” This is a fair question. "Earning interest on your deposit" is NOT the point, because savings accounts don't keep up with inflation. (4 votes) antoinelouis974 2 years agoPosted 2 years ago. Direct link to antoinelouis974's post “how I manage my car loan” how I manage my car loan • (3 votes) prplwater a year agoPosted a year ago. Direct link to prplwater's post “They tell you the minimum...” They tell you the minimum and the interest. when paying each month you would pay the minimum and if you can pay extra, because the faster you pay, the less interest you'll have to pay, but the longer you take to pay it off, the more you'll have to pay. Also, if your late you'll have to pay late fees. In short, its better to not borrow money. (4 votes) Jonathan 2 years agoPosted 2 years ago. Direct link to Jonathan's post “Are private loans effecti...” Are private loans effective? • (4 votes) sespi4382 2 years agoPosted 2 years ago. Direct link to sespi4382's post “What type of loans are go...” What type of loans are good for when interest rates are low? • (4 votes) coulterka35 a year agoPosted a year ago. Direct link to coulterka35's post “How do interest rates cha...” How do interest rates change prices, and how? • (3 votes) David Alexander a year agoPosted a year ago. Direct link to David Alexander's post “When a farmer wants to gr...” When a farmer wants to grow a field of soybeans, she needs seeds. To buy those seeds, she borrows money and pays interest on the loan. When the crop is harvested, she hopes to get back at least enough money to pay off the loan and the interest on it. If the rate is high, she has to pay more for the use of the money. She, then, asks for more money for her harvest. Prices go up. (2 votes) escobarandy0301 a year agoPosted a year ago. Direct link to escobarandy0301's post “what causes interest rate...” what causes interest rates to fall and rise? • (3 votes) David Alexander a year agoPosted a year ago. Direct link to David Alexander's post “Insecurity about the futu...” Insecurity about the future generally has an effect, one way or the other, on interest rates. (2 votes)Want to join the conversation?
If your annual interest rate is 13%, the minimum monthly payment will be $104.57, and it will take you 21 years and 8 months to pay back the $5,000. If the interest rate is 18%, the minimum monthly payment will be $125, and it will take 22 years and 8 months to pay back the $5,000.
Perhaps a savings account is useful because it keeps your resources more secure than if they are kept under the mattress of your bed or in a jar buried in your back yard.
Perhaps a savings account is good because if you have an ATM card associated with it, you can get cash from an automatic teller machine even when you are away from home. Perhaps a savings account is good for you because by having to go GET your money might keep you from spending it and help you to save something. Perhaps by having a savings account and maintaining a steady record of adding to it, rather than spending it all whenever you accumulate a hunk of cash, you contribute to a good credit score.
Consider these "perhaps" statements, and make your decision.
