Reserve currency

A reserve currency is like a special kind of money that is used by many countries all around the world. It's like the boss of all the other currencies. Just like you have a favorite toy that you keep safe, countries keep a certain amount of this special money, known as reserves, in case they need it later for important things.

For example, let's say your parents give you some pocket money to buy candy, toys, or ice cream. But you don't want to spend all your money at once, right? You want to save some for later when you really need it. In the same way, countries also save money for a rainy day or when they need to buy things from other countries.

The most popular reserve currency is the US dollar, which is used by many countries in their international transactions. This means that when other countries want to buy or trade goods with each other, they use US dollars to make the transaction. Why? Because the US dollar is super trusted and accepted all around the world.

So, just like your favorite toy that you treasure and keep safe, countries treasure and keep safe their reserve currency because it's really important for their financial security.