How (And Why) Banks Handle Money

How (and why) banks handle money

- Megan Donnelly

When’s the last time someone gave you a lollipop? Maybe it’s been a while. But there’s a good chance it was at the bank. Right? You may have been waiting in line with your parent. You might even have your own bank account. But what exactly is a bank? People go to banks to deposit money (put it in) or withdraw money (take it out). But how does this really work? Where does your money go?

All the Money in the World

Check your pockets and look under the couch cushions. Maybe you score some change. How much money is really out there? A lot! If you only count American dollars, people around the world are exchanging approximately $1.70 trillion. Add in other currencies, and you’d get an even bigger number. It can be difficult to wrap our brains around numbers that large. But all that money isn’t in one place. It’s spread out among billions of people and their banks. Banks keep some of the money that customers deposit on site. But in the US, another portion of the money goes to the Federal Reserve Bank. This central bank acts a little like a bank for banks. It’s sort of like a warehouse that stores money safely until your local bank needs it.