What happens to money after you deposit it? - I

What happens to a $10 bill after you deposit it in your savings account? Does the bank teller take it to a vault and put it into a separate compartment or cubbyhole marked with your name and account number? No. The bank begins by adding $10 to the amount that is already in your account (your existing balance).
Your $10 deposit and your new balance are then recorded in your bank book and in the bank’s computer system. The $10 bill you deposited is mixed in with all the other cash your bank receives that day. When you and other customers deposit money in a bank, the bank “puts most of it to work.”
Part of the money is set aside and held in reserve, but much of the rest is loaned to people who need to borrow money in order to buy a house or a car, expand a business, buy farm equipment, or do any of the other things that require people to borrow money.
Of course, banks do not lend money just to provide a service. They do it to make money. Here’s how it works.
 When you keep your savings in a bank, the bank pays you extra money, which is called interest. The interest is added to your account on a regular basis, usually once a month. Let’s say a bank pays its depositors interest of 3 percent a year on their savings. In simple terms, that means if you keep $100 in your savings account, the bank will add $3 to your account balance during the course of a year.