📦strong box🧾paper slip📒big book🥖a loan for an oven
A bank keeps coins safe, and lends coins.
The big ideaA bank keeps coins safe, and lends coins that are paid back with a little extra.
How it works
In an old town in Italy, a banker sat at a long bench. A bench was called a banco, and that is where our word bank comes from.
Job one is keeping coins safe. The banker locks them in a strong box, writes the amount in a big book and gives a paper slip.
Job two is lending. To borrow means to take coins now and give them back later.
The extra coin Dario paid back is called interest. It is the price of borrowing, and the banker's pay.
Dario's loan.The two jobs of a bank.
Example 1: Keeping coins safe
Rosa's mother leaves her heavy sack at the bench.
The banker locks it in a strong box and writes the amount in a big book.
He gives her a paper slip.
A week later she shows the slip and gets back every coin.
Example 2: A loan
Dario the baker needs a new oven but has not saved enough coins.
He borrows 6 pretend coins.
He buys the oven, bakes bread and sells lots of it.
Soon he can pay the banker back.
Example 3: Paying back
Dario borrowed 6 coins.
He pays back 6 coins plus 1 more.
6 + 1 = 7
He pays back 7 coins, and the 1 extra coin is the interest.
Example 4: How much extra?
Dario paid back 7 coins and had borrowed 6.
7 − 6 = 1
The extra is 1 coin.
Words to know
banco
A bench, in the banker's language.
borrow
To take coins now and give them back later.
interest
The extra coin paid back on a loan. It is the price of borrowing.
loan
Coins lent to someone who pays them back.
Watch out
Interest is not a prize or a gift. The person who borrows pays it.
A bank has two jobs, not one: keeping coins safe and lending them.
A loan has to be paid back. You take coins now and give them back later.
Try it
What does a bank keep safe?
Dario borrows 6 coins and pays back 7. How many extra coins is that?
What is the extra coin called?
What are the two jobs of a bank?
Answers: 1. Coins · 2. 1 · 3. Interest · 4. Keeping coins safe, and lending them
Try at homeWith a grown-up, talk about what a bank does for them: keeping money safe, and lending it.
For grown-upsTalk about the two jobs of a bank, keeping money safe and lending it, and that borrowing costs a little extra called interest. Pretend coins are fine for practice.
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