What are variable rates?

A variable rate is like the price of your favorite candy that changes every week.

Imagine you have a piggy bank where you save money to buy candy. Most of the time, the candy costs $1 each. But sometimes, it might cost $2 or even 50 cents, and you never know when that will happen. That’s what a variable rate is: a price that can go up or down over time.

Think of a variable rate like a roller coaster. One minute, you're going up, the price goes higher. The next minute, you're going down, the price gets lower. It's fun and exciting, but sometimes it can be tricky to know how much you’ll pay when you get to the top.

When you borrow money from a bank or save money in an account, the rate is like the amount of extra money you might have to give back (or earn) over time. If it's a variable rate, that number can change, just like your candy price, depending on what’s happening in the world around you.