How do Banks Work? (Explanation)

How Do Banks Work? (Explanation)

 Do you know how a bank works and what it is? A bank is a  place that stores your money and keeps the money safe in vaults. I bet you all have a piggy bank, right? Banks are like piggy banks but it is larger and safer. It is also a place where you can lend and borrow money from the bank and others. For Example, people can borrow money from you but they have to give it back to you and the bank. That is called interest. But you only get 2% of the interest and the bank gets 5% of the interest. Have you ever wondered how a bank works and how the whole system in a bank works? Well, I’m going to tell you how.

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When you open a bank account, you deposit some money to the bank. This means that you give some of your money to the bank so that they can keep it safe for future purposes or needs. Lots of people put their trust into banks and deposit their money to the bank. In other words, everyone trusts banks to keep their money safe and prevent it from being stolen.  

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As I mentioned, people can borrow money from you and you can borrow money from others too. But the person that borrows money has to pay it back a year later. For example, I deposit 500 dollars that I get on my birthday into my bank account. I get the 2% interest but I also get an additional 2 dollars each year! Isn’t that great?  Who knew you could get such a big profit from just depositing money into the bank. 

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When you have a bank account, you will have a savings account. After opening it, you can start saving up money and put it into your savings account. For example, you could purchase cheaper items instead of the more expensive ones you may have bought in the past. Or, you could save money by not buying things that aren’t so necessary if you really want to save money.

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I hope you have learnt something about how banks work and will use this knowledge in the future. Banks are in pretty much every place in the world and you can store your money in them when you need to. With the help of a bank near you, you can store your money and keep it safe. And don’t worry, it won’t get stolen.