In the banking family, there are local banks, and their parent banks. The grandaddy of all banks is the Federal Reserve Bank. Parent banks - or headquarter banks - manage the money from their many local banks, just like parents take care of children. The Federal Reserve Bank manages the money from all of the parent banks.

When you go inside a big parent bank, it will look a lot like a local bank, with many cash machines and bank tellers. But big banks hold a lot more money than local banks. That's because big banks serve many more customers as well as big and small businesses.

Inside a big bank you will see many security guards, because big banks are careful to keep their money safe. They also keep money sent to them by their local banks for safekeeping, just like parents hold children's money for them. The money is stored inside a vault that's protected by a security guard.

Not only is your money safe, but it also grows in a parent bank, just as it does in a local bank. Parent banks work hard to earn money so that they can pay their customers interest on their money. Some parent banks have a trading floor where traders buy and sell money! That's one of the ways banks make a profit. Another way banks make money is to give out loans. When people buy a house or expand a business, they borrow money from the bank. Banks charge interest to people who borrow money.

Parent banks also offer credit cards to their customers, and when customers don't pay their whole credit card bill, the bank charges them interest on the amount of the bill they haven't paid. See lesson 15 (put link here) for information on using a credit card.