Kid 1: Hey, Erin! If I BORROWED $5 from you, how much money would I have to REPAY you?
Kid 2: HA! If you even REMEMBER to pay me back! But to answer your question... if you borrowed $5, I would expect $5 back!
Kid 1: Now... What if I BORROWED $100 from the bank or credit union? How much money would I have to REPAY?
Kid 2: Same as you borrowed: $100!
Kid 1: NOPE! I'd have to repay EVEN MORE!
Kid 2: What! Why?
Kid 1: Because of interest. Interest is the extra money you pay back, along with the money you borrowed. It's why they say, "It COSTS money to BORROW money!"
Kid 2: Hmm... In that case... I should CHARGE YOU INTEREST the next time you borrow $5!
Kid 1: I am NOT INTERESTED in that idea!
Interest is the price you pay for using someone else's money.
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