𝗜𝗻𝘁𝗲𝗿𝗲𝘀𝘁 𝗥𝗮𝘁𝗲𝘀 𝗘𝘅𝗽𝗹𝗮𝗶𝗻𝗲𝗱 (𝗜𝗻 𝗣𝗹𝗮𝗶𝗻 𝗘𝗻𝗴𝗹𝗶𝘀𝗵)

We hear about “interest rates” constantly—on the news, in conversations, and anytime someone talks about mortgages or credit cards. But most people never get a simple explanation of what interest rates actually are.

𝗜𝗻𝘁𝗲𝗿𝗲𝘀𝘁 𝗥𝗮𝘁𝗲𝘀 = 𝗧𝗵𝗲 𝗣𝗿𝗶𝗰𝗲 𝗼𝗳 𝗠𝗼𝗻𝗲𝘆

• Borrowing? Interest is the cost you pay.

• Saving? Interest is the reward you earn.

Everything else builds on this idea.

𝗔 𝗤𝘂𝗶𝗰𝗸 𝗕𝗼𝗿𝗿𝗼𝘄𝗶𝗻𝗴 𝗘𝘅𝗮𝗺𝗽𝗹𝗲

Buy a $20,000 car at 6% with monthly payments over 4 years:

• Payments: $469.71/month

• Total paid: $22,546

• Added Interest cost: $2,546

𝗔 𝗤𝘂𝗶𝗰𝗸 𝗦𝗮𝘃𝗶𝗻𝗴 𝗘𝘅𝗮𝗺𝗽𝗹𝗲

Deposit $5,000 at 2.5% in your savings account:

• End of year balance: $5,125

• Earned interest: $125 for that year

𝗪𝗵𝗼 𝗔𝗰𝘁𝘂𝗮𝗹𝗹𝘆 𝗦𝗲𝘁𝘀 𝗜𝗻𝘁𝗲𝗿𝗲𝘀𝘁 𝗥𝗮𝘁𝗲𝘀?

• The Federal Reserve sets the base rate for banks.

• Banks and lenders set mortgage, auto, and credit card rates based on the Fed, competition, and your credit.

• Bond markets set long term rates through supply and demand.

Rates move every day because the economy moves every day.

𝗛𝗼𝘄 𝗜𝗻𝘁𝗲𝗿𝗲𝘀𝘁 𝗥𝗮𝘁𝗲𝘀 𝗔𝗳𝗳𝗲𝗰𝘁 𝗬𝗼𝘂

• Borrowing: Higher interest rates mean higher monthly payments for cars, homes, appliances—everything.

• Saving: Higher interest rates mean your savings account or money market fund 𝙥𝙖𝙮𝙨 𝙮𝙤𝙪 more each month.

• Jobs and wages: Higher rates slow the economy (fewer jobs). Lower rates speed it up (more jobs).

𝗜𝗻𝘁𝗲𝗿𝗲𝘀𝘁 𝗥𝗮𝘁𝗲𝘀 𝗔𝗿𝗲 𝘁𝗵𝗲 𝗘𝗰𝗼𝗻𝗼𝗺𝘆'𝘀 𝗧𝗵𝗲𝗿𝗺𝗼𝘀𝘁𝗮𝘁

The most watched interest rate is the 𝙏𝙚𝙣-𝙮𝙚𝙖𝙧 𝙐.𝙎. 𝙏𝙧𝙚𝙖𝙨𝙪𝙧𝙮 𝙍𝙖𝙩𝙚, which is 4.13% today. When it rises, borrowing gets more expensive. When it falls, borrowing gets cheaper.

This one number influences mortgages, business investment, and even the stock market.

𝙉𝙚𝙬𝙨 𝙤𝙪𝙩𝙡𝙚𝙩𝙨 𝙬𝙞𝙡𝙡 𝙧𝙚𝙥𝙤𝙧𝙩 𝙩𝙝𝙞𝙨 𝙧𝙖𝙩𝙚 𝙚𝙫𝙚𝙧𝙮 𝙚𝙫𝙚𝙣𝙞𝙣𝙜

𝗕𝗼𝘁𝘁𝗼𝗺 𝗟𝗶𝗻𝗲: “𝗕𝗼𝗿𝗿𝗼𝘄𝗲𝗿𝘀 𝘀𝗽𝗲𝗻𝗱 𝗺𝗼𝗻𝗲𝘆 – 𝗦𝗮𝘃𝗲𝗿𝘀 𝗲𝗮𝗿𝗻 𝗺𝗼𝗻𝗲𝘆”

Remember that while you are building wealth. You can’t grow wealth unless you are a net “SAVER”. You need to have some money in order to grow some money.

Once you understand interest rates, finance becomes a lot less intimidating.

𝗔𝗜 𝗣𝗿𝗼𝗺𝗽𝘁𝘀 𝘁𝗼 𝗘𝘅𝗽𝗹𝗼𝗿𝗲 𝗜𝗻𝘁𝗲𝗿𝗲𝘀𝘁 𝗥𝗮𝘁𝗲𝘀 𝗙𝘂𝗿𝘁𝗵𝗲𝗿:

 1. Why do interest rates move every day?

 2. Show a 3 year chart of interest rates.

 3. What does the Federal Reserve actually do?

 4. How do I calculate loan payments?