Bank reserves

Imagine you have a piggy bank where you keep all your pocket change. This piggy bank is like a bank reserves for a big bank. A bank reserves is a place where banks keep some of their money, just like how you keep your money in your piggy bank.

When people put their money in the bank, the bank uses some of that money to make loans to other people or businesses who need it. However, they need to make sure they always have enough money in case people want to take their own money out of the bank.

This is why the bank keeps some of the money in their "piggy bank" - the bank reserves. It's like their emergency fund, so they have enough money to keep everything running smoothly.

When banks need more money, they can borrow from other banks or even from the government to make sure they have enough in their bank reserves. This way, they can keep lending money to people who need it.

Overall, bank reserves are like piggy banks for big banks, where they keep money to make sure they can always pay people back and keep everything running smoothly.