Hey, your dad's been watching TV shows closely, and he's right! The Federal Reserve Banking System is the central bank of the United States. "The Fed" sets the rules for banks, and tells them what interest rate banks have to pay the Fed for money they might borrow. That has a lot to do with controlling the economy of our whole country, interest rates keep the prices of things under control.

The Fed makes sure banks play by the same rules so that the rights of customers are protected. The Fed does not loan out money to people, they only lend money to the banks themselves. The Fed receives new money, coins and paper money from the Bureau of Engraving and Printing and gives it to banks. When banks take in money from customers that has worn out, they send it to the Fed which grinds it up. Darn, eh?

Before the Fed was created in 1913, there were over 30,000 types of money in the U.S. Even drug stores made their own money. That was nuts!! Some currencies were worth more than others; some were backed by gold and silver and others were not, so the Fed smoothed out our money system. It's working pretty well now.

Did You Know?

Our money used to be backed by gold and silver. It isn't any longer, but it is backed by the strength of the federal government. It will make sure your money is always good!