How finance folk use it
Interest is basically the cost of borrowing money. Any time somebody lends money, they expose themselves to the risk of not being paid back. Interest is offered as a reward for taking on the risk.
Is it good or bad?
It depends on which side you’re on. It’s good if you’re the lender because you get to grow your money. It’s bad if you’re the borrower because if you’re borrowing money to buy something, you end up having to pay the interest on top of the principal.
What it means for you
Interest is in almost everything in finance – spending (credit cards), borrowing (loans), saving (bank accounts), and investing (time deposits and bonds). If you’re able to minimize spending and borrowing and maximize saving and investing, then you’re on a good track to financial freedom.
