Savings Banks, Corner Stone of Investment

JOHN B. STANTON April 1 1909

Savings Banks, Corner Stone of Investment

JOHN B. STANTON April 1 1909

Savings Banks, Corner Stone of Investment


From Pearson’s Magazine

SIX young men were lined up in the private office of a New York merchant. One vacancy in his establishment was to be filled. The merchant asked:

“How many of you young men have savings bank accounts?”

Only one replied that he had.

“I’ll take you,” said the merchant. When some one asked the employer why his choice had been influenced he answered : “A boy who saves and has a savings bank account is sure to have some other good quality. At any rate, he has early seen the advantage of thrift.”

Few people stop to realize the value and significance of saving and the part it plays in the whole big scheme of success, nor do they appreciate the fact that the first aid to saving is at their very door-step in the shape of a savings bank. Saving is the instrument of man’s independence and by saving alone can the workingman, for example, ever become rich.

Russell Sage used to say that it was easy to make money after you had the first thousand. But the first thousand looms up big and forbidding to many persons, and for this reason they never make a start to get it. The simple formula for this thousand is to save and to begin at once. Behind the matter of saving is a larger meaning because all investment begins with

saving, and thus the savings bank is the first step towards comfort and competency in old age. Investment is putting your money out to work so that it will earn more money. The investing power of any nation is the aggregate of small savings, for this is its real financial strength. Despite the fact that our resources of every kind are greater, France has a wider investing power than the United States. The explanation is not difficult. The French people are thrifty and economical; they aspire to ownership of their government bonds which are issued in very small denominations. They know that they cannot own these bonds without saving. The result is that they are the best savers in the world.

When you stop to realize the extents to which small sums, put aside systematically, grow, you get a new appreciation of the value of money. One dollar deposited in a savings bank which pays four per cent, interest will amount to $2.19 in twenty years. This is simple compound interest. But one dollar deposited every year will amount to $30.97 in twenty years. Most people can save one dollar a week. This sum, deposited in a savings bank each week, will aggregate $1,612 in twenty years. A man who has deposited $5 a week in a savings

bank can, after twentv years, draw out six dollars a week and still leave to his wife and children at his death all the money that he originally deposited and quite a little surplus besides.

Take another phase of this same kind of saving. The price of a fivecent cigar, put into a savings bank every day, will amount to $182.50 in ten years. At four per cent, it will earn $40 interest. Thus the total amount represented by this simply putting aside of a nickel a day is $222.56. Ten cents a day, put aside in this way and employed in a savings bank will mean $445.36 in ten years, while fifteen cents a day will reach a total of $668.18. Twenty-five cents a day will amass the somewhat imposing sum of $1,113.75, while one dollar a day will mean $4,455.75.

There is eloquent speech in these figures and it conveys a message to every man and woman. Summed up, it means just what is expressed in a very trite and old adage ; it is not what you earn, but what you save, that makes you wealthy.

The savings banks are the first and best bulwarks of the people’s money and a knowledge of what they accomplish is a liberal education in thrift. You can start an account in any of the great savings banks of New York City with one dollar and no sum is too insignificant to be enrolled on the books. It costs nothing to become a depositor. For the convenience of those who may live in sections remote from savings bank centres a system of entering deposits by mail has been perfected. Thus the bank is brought to the doors of the depositor. Hence there is no excuse for the average citizen not to have a savings bank account.

A savings bank is generally regarded as a public institution and most States have laws safeguarding them. It is important for the depositor (who is likewise a prospective investor), to put his money in a bank that is located in a State having proper savings bank

laws. Peace of mind about the securas

ity of deposit is a first requirement in the accumulation of money.

Some States have more stringent savings bank laws than others. As a rule, the best laws are in the Eastern States. New York laws are the most rigid. The savings banks of that State permit the bank officials to invest their funds only in three ways: in government bonds, which include the bonds of the United States government, States, cities, towns, villages and school districts ; certain very high class railroad bonds and mortgages on real estate. The Massachusetts laws follow closely after those of New. York.

The growth of the American savings bank furnishes an impressive lesson. The total deposits to-day aggregate $3,690,078,945, which is divided among 1,415 banks. These institutions have a host of 8,588,000 depositors. These are the cohorts of the thrifty, 'i'he average deposit of each depositor is $429.64.

Ten years ago the savings bank deposits were $26 per capita of the population of the United States. To-day they are $41 per capita of the population which is larger even than the per capita circulation of the general money of the country.

The geographical distribution of savings deposits is interesting for it shows that the centre of economy and thrift is still near its very foundation —New England. The total number of savings banks in the New England States is 463, and they have nearly three million depositors. Yet the State of New York with 134 banks has practically as many depositors. The farther west you go the smaller becomes the number of savings banks. Likewise the rigor of the laws governing them diminishes.

Since return or yield is a highly essential feature of any kind of employment of money it is helpful to see just what savings banks pay. Taking all the savings banks of the country into consideration, you find that the maximum rate of interest paid to depositors is 4.50 per cent. ; the minimum is 2.72. The average rate is 3.65 per cent. It is a safe thing to set down that four per cent, is usually the average savings bank rate compatible with the utmost safety. This is what the New York banks pay and they are managed with the utmost conservatism and under what might be called ideal conditions, both as regards conduct and supervision.

It is interesting in this connection to see just what could be accomplished with the total deposits of the New York savings banks which alone amount to $1,394,296,034, a sum greater than the bonded debt of the United States It would buy out, among other things, the entire textile industry of the country. It is sufficient to have bought the whole corn crop of 1906 which aggregated nearly three billion bushels, and to have had enough left over to purchase the winter wheat yield of that year. Turning to another staple, it is enough to have bought the two biggest cotton crops that the United States has ever known and have enough surplus to acquire, for $81,000,000. the entire output of cotton seed, a very valuable byproduct.

The army of New York savings bank depositors (they outnumber the residents of Manhattan Island), could pay off with their deposits the entire stock and bonded debt of the New York Central, Pennsylvania and Baltimore and Ohio Railroads. They could control the stock of the Atchison, the Northern Pacific, the Union Pacific, the Southern Pacific, and the Great Northern, and in addition could buy outright the entire stock issues of the eastern coal roads including the Lackawanna, the Reading, the Erie and the Chesapeake & Ohio. Here indeed is power from the piled up pennies of the poor.

Perhaps no other class of deposits has so large a human interest side as those of the savings banks. They come from the greasy wallets and

pantry hoards of misers; from the slender purses of widows ; from the stockings of scrub women; from mendicant and merchant; from the tin safes and nickel banks of children— in fact, from all sources and all conditions. Often they spell sacrifice or mean some fond ambition.

Take the example furnished by the Bowery Savings Bank, of New York City, the largest institution of its kind in the world. The huge columns of its massive front rise in what was once, and in some respects still is, the most sordid centre of the greater city. Past its doors rumble the elevated trains and within stone’s throw of its great vaults lives the most motley population of a motley city. On its books are the names of 150,000 depositors, a host as large as the population of Rochester or Denver. Its deposits are $100,000,000. half of the fortune of the late W. H. Vanderbilt who at his death was the richest man in America. On a busy day the lobby of this bank is like an international congress, for a dozen languages are heard. Many of the circulars and books of instructions are printed in English, French, Yiddish, Italian and German. In its effort to reach every class the Bowery Savings Bank has a special department for the enlisted men of the United States army and navy and receives deposits from the soldiers and sailors from every part of the world.

In New York are savings banks with special facilities for the accommodation of seamen and immigrants —Italians, Jews. Poles and practically every race or calling represented there in large numbers. Most of these people come from thrifty nations and the idea of a savings bank appeals to them.

Yet the idea of saving knows no creed, race or color. It is one of the most constructive steps in the uplift of all the people.