Kindly break it down as if I were a five year old: When you put your money into a bank account and it gains interest, where does this interest come from? Where does the bank get the money (3.25% if you're lucky nowadays) to place into your account?
by 
Adz3r0
ANSWERS: 3
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The Bank earns money by lending deposited funds (your money) to others. They earn more interest than they pay to you.
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Banks use the money you deposit to make loans to other people and businesses. They try to get a higher interest rate on the loans, than the interest they are paying the depositors, for example if they are paying the depositors 3.25 as in your example, they might try to lend for 6, 8, 10 percent or higher. The money they earn is the difference between what they make from interest on the loans and what they pay back the depositors. However, recently some banks have gone bankrupt, because people did not make payments on the loans they received.
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thats simple, they on loan your money at a greater rate, to probably a slightly more risky business venture, what they get paid back, they give you a small dividend of................
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