Interest income is the money you earn from keeping your savings or investments in a bank or financial institution over a certain period. It’s like getting paid for allowing the bank to use your money for a while.
How interest income works
Imagine you have ₦100,000 in a savings account. The bank agrees to pay you 5% interest each year. After one year, the bank will pay you ₦5,000 as interest for keeping your money in their account. This ₦5,000 is called interest income because it’s money you earned just by saving your money.
Its Sources
Savings accounts: The bank pays you interest for keeping your money in a savings account.
Certificates of Deposit (CDs): You lock away your money for a set period, and the bank pays you interest during that time. Some of Nigeria’s top saving apps such as CowryWise, Kudi, ALAT, KoloPay, and PiggyVest offer this kind of interest income products on their apps.
Bonds or loans: If you lend money to a company or the government, they pay you interest until they pay back the loan.
The more money you save or invest, and the longer you leave it, the more interest income you can earn.