A bank is a business. It takes in deposits and makes loans. A bank keeps people's money safe until they want to use it. It also lends some of the money people put in to other people. Banks combine many people's savings into one pool. They lend that money to people who want to borrow.

Putting money into a bank is called making a deposit. You can take your money out of a bank when you need it. Taking money out is called a withdrawal. An ATM is a machine. People can take money out of their bank account there.

A checking account is for everyday spending. It can pay for groceries or lunch. When someone pays with a debit card, the money comes out of their checking account almost right away. Direct deposit sends a paycheck electronically into a person's bank account.

A savings account is a bank account for setting money aside. The bank pays interest on it. Money kept in a jar at home does not earn extra money. Money in a bank savings account can.

Interest works in two directions. A bank pays 3 percent interest a year. That adds $3 to $100 kept in a savings account for a year. Someone who borrows from a bank pays interest too. Interest is the price of using someone else's money. Borrowers pay the bank interest. The bank passes a small part of what it earns to savers.

Money kept at home can be lost to a fire or a burglar. The FDIC is a United States government agency. It protects people's money in banks if a bank fails. Deposit insurance is automatic. Customers do not buy it or sign up for it.

FDIC insurance covers at least $250,000 per depositor, per insured bank, for each ownership category (as of November 2026). Since the FDIC was founded in 1933, no depositor has lost a penny of FDIC-insured funds (as of November 2026). A bank is a business, so it can fail like other businesses. Bank failures are unlikely, but they do happen.

A credit union is a financial group owned by its members. The members pool their savings. They make loans to one another.

The Federal Reserve is called the Fed. It is the central bank of the United States. The Fed is a bank for other banks. It is also a bank for the United States government. Congress created the Federal Reserve in 1913. The Federal Reserve Act was signed on December 23, 1913. The Federal Reserve System has 12 Federal Reserve Banks. Each one serves its own district.

Words to know

• deposit: putting money in
• interest: extra money
• depositor: person who deposits
• district: area served