Why do some accounts, like savings accounts at your local bank, earn interest?

Question

Group of answer choices

Because the bank pays you to use your money

Because of inflation

Because those accounts always have great interest rates

Because you deposit money, adding to your principal each month

Answer 1

The correct answer is:

Because the bank pays you to use your money

Interest is earned on savings accounts as a way for the bank to compensate you for allowing them to use your money for loans and investments. By keeping your money in a savings account, you are essentially allowing the bank to use that money to earn interest, and they in turn share a portion of that interest with you.