How Understanding How Banks Work Changed My View About Finance

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Okay so first of all, let me just say that I’m not a financial expert or anything close to that, but recently I’ve been thinking a lot about money; like how money moves and how people become wealthy off of systems. One thing that really blew my mind was when I found out how banks actually make their money.

To be honest, I always thought banks were just a safe place to keep money. You drop your money there, they keep it for you, and when you need it, you just withdraw. Simple. But no o, it’s more than that. It wasn’t until I started reading random stuff online, listening to people’s podcasts and even from normal street gist that I realised that banks are actually one of the smartest businesses ever.

Here’s what shocked me the most: banks don’t just keep your money, they use it. That means when I go and deposit maybe 10k into my account, they don’t keep it in one box somewhere waiting for me. No. They take that same money and loan it out to people who need loans; maybe businesses, industries, or even foreigners who want to invest in something serious like agriculture or building some big infrastructure.

Then those people pay back the loan with interest. That’s how banks make serious money! And the best part? When I go to withdraw my 10k, they can easily give me from another person’s deposit who just dropped maybe 20k. So it’s like a flowing system. One person deposits, another person borrows, someone else comes to withdraw, and the money keeps rotating. Like this thing is too brilliant abeg.

When I understood this logic, I started thinking about my own financial life. I realised I’ve been too passive. I was just saving money and hoping it would grow by itself. But if banks are using the money I’m saving to make more money for themselves, shouldn’t I also find a way to be smart with my own finances?

So from that understanding, I started trying small small things. I opened a small thrift business. I gathered money from three of my close friends, told them to let me help them save small weekly contributions, and with that lump sum, I started a small reselling thing. I buy in bulk, sell at higher price, and at the end of the month, I still return their original money and keep the profit. That system is not perfect o, but it was inspired by how banks use other people’s money to work for them. It’s almost the same mindset.

And not just that, I also became more bold about investing. Before, I used to be so scared of parting with my money. But now I see money differently. If you keep it, it just sleeps. If you use it well, it multiplies.

Of course, I still dey learn. But one major takeaway for me is this: “if you can understand how the system works, you can start building your own small version of it.” I don’t have the resources of a bank, but I have the mindset. And that’s where it all begins.

So yeah, sometimes when I go to the bank and stand on the queue, I just look around and laugh small. Because if only people knew what was happening with their money behind the counter, they’d rethink how they use it.

Anyway, that’s just me sharing what I’ve learnt. If anyone else has similar experience or thoughts on this, feel free to share. Let’s grow together.

Of course there are many other ways the bank makes their money and this is one of them.