ELI5: How do banks work?

A bank is a safe place that takes care of people's money and uses it to help other people buy things they need right now.

Think of a bank like a giant, super-safe toy chest for money.

In everyday life, banks do three main jobs:

• Keeping money safe: Instead of hiding paper dollars under your bed where they could get lost, your parents put them in a bank account. The bank locks it in a giant vault and tracks it on computers.
• Letting people pay easily: When your family buys groceries, they usually do not carry huge bags of coins. Instead, they swipe a debit card. That plastic card tells the bank to move money from your family's account straight to the grocery store.
• Lending money to others: This is the bank's biggest secret. The bank does not just let the money sit in the dark vault. They use the money that many people saved to give loans to others. If your neighbor wants to buy a house, a car, or start an ice cream shop, they might not have enough cash today. The bank lets them borrow that money.

When people borrow money, they must pay it back little by little, plus a little bit extra as a "thank you" fee. That extra fee is called interest.

• The bank keeps part of that extra money to pay for its buildings, workers, and computers.
• The bank gives another part of that extra money back to the people who kept their savings there in the first place, as a reward for being patient.