How Do Banks Work? [EXCERPT]

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How Do Banks Works? [EXCERPT]

View the complete article at saltmoney.org.

Today marks the beginning of financial literacy month, and this blog won’t be the only place you can find fresh financial content from SALT™.

We constantly update saltmoney.org with great, FREE content to help you master the basics, like this article about how banks work. Check out the excerpt below and click through to read the full thing.

The oldest operating bank in the world can be found in Siena–a smallish city in the Tuscan hills of Italy, known for its wealth, prosperity and being in what is essentially the middle of nowhere. Its name is Monte dei Paschi di Siena, and it has been operating continuously since 1472. You might think that in more than 500 years the banking world would have been through some great changes, but the truth is, it’s remarkably unchanged. In fact, the banking business model is pretty much the same as it was when it originated: 2,000 years ago during the Roman Empire.

So what is a bank, aside from being a place to deposit your paycheck? And how do banks earn money, aside from charging you crazy fees when you try to withdraw cash from an unaffiliated ATM? For the most part, a bank is a business like any other. It has shareholders, who expect to see profits, and it has customers, without whom the bank couldn’t exist.

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