Great question danniella1588!
The suns light is made up of all the colors of the rainbow. When they are all mixed together they make yellowish-whitish light that we see. If we can split the light up again we see a rainbow. Water droplets high in the sky act like little lenses, or prisms, and scatter the different colors of light in different directions. We see this as rainbow!
The white light from the Sun hits water in the air. Different parts of the light are bounced off at different angles, this separates the colours of the light into what we see as a rainbow.
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