People who borrow money from the bank pay it back with some extra, as a fee for being able to use that money. The bank then pays you, for letting the bank use your money to make these loans.

These payments are called interest. It's a little like paying rent on money. How much interest you earn depends on how much money you have in the bank. The interest rate is a fraction that the bank multiplies by how much money is in your account, to figure out how much to pay you.

The interest rate is usually the same whether you have $20 in your savings account, or $100. But if the interest rate is 3%, you will only earn 60 cents if you have $20 in your savings account. If you have $100, you'll earn $3.00! The more you save, the more you earn.