why do some accounts, like savings accounts at your local bank, earn interest?

Savings accounts at local banks earn interest because the bank uses the deposited money to lend to borrowers or invest, generating income. The bank pays depositors a portion of this income as interest, allowing the deposited money to grow while still being accessible to the account holder. Interest is typically calculated daily and credited monthly, often with compounding, which means earning interest on both the initial deposit and the accumulated interest over time. This mechanism benefits depositors by helping their savings grow and benefits banks by providing them funds to support loans and investments, making it a mutually beneficial arrangement. The interest rate can vary based on economic conditions, the Federal Reserve's rates, and the bank's policies.