What are nominal rates?

A nominal rate is like the price tag on something you buy at the store, it's what you see before you get any discounts or special offers.

Imagine you have a piggy bank, and every time you save up enough money, you can put it in the bank. The nominal rate is how much extra money the bank gives you for keeping your piggy bank full. It’s like saying, "For every dollar you save, I'll give you 10 cents as a thank-you note."

Think of the bank as a friend who promises to add some candy to your collection every month if you leave your candies in their jar.

• If the nominal rate is 5%, that means for every $100 you save, the bank adds $5 worth of candy (or money) each year.
• This is like getting a bonus from your friend just for being good at saving!

But here’s the thing, this rate doesn’t always mean you’ll get exactly that amount. Sometimes there are other things going on, like inflation or special deals. But the nominal rate is where it all starts! A nominal rate is like the price tag on something you buy at the store, it's what you see before you get any discounts or special offers.

Imagine you have a piggy bank, and every time you save up enough money, you can put it in the bank. The nominal rate is how much extra money the bank gives you for keeping your piggy bank full. It’s like saying, "For every dollar you save, I'll give you 10 cents as a thank-you note."