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Saving And Savings Institutions

Saving is an individual matter for which the essential conditions are
the development of the instinct to make provision against
uncertainties of future income and to better the material condition of
one's self and family, and a surplus of income above necessary daily
expenditures. In order to secure the realization of these conditions
to as great an extent as possible, many agencies cooperate in all
modern nations, among them savings institutions. Included among these
are various forms of provident associations, sometimes independently
organized and sometimes connected with other organizations, insurance
associations of many kinds, building and loan societies, and savings

The need for savings institutions varies greatly among the different
nations and among different classes of people in the same nation.
Among people of great wealth the surplus of income above expenditures
is so great that large savings can hardly be avoided, and among all
the well-to-do classes the margin from which savings are possible is
sufficiently large and the desire to save sufficiently great to insure
large accumulations of capital. Among these classes there is little or
no need for institutions designed primarily for the development of the
saving instinct. What they need are institutions for the safe keeping,
accumulation, and investment of the savings which they are constantly
making. The principal work of savings institutions, therefore,
pertains to the classes of people who are not well-to-do and who need
encouragement and help in their efforts to improve their material
condition, if they are so inclined, and stimulus to make such efforts,
if they are not so inclined.

The means available to savings institutions for the accomplishment of
these ends are the urging of the importance of saving upon the
attention of people who do not adequately appreciate it, the placing
at their easy disposal of facilities for making savings when they have
the ability and inclination to save, and the application of pressure
of various kinds to compel or induce saving.

In the application of these means the methods employed by the various
groups of institutions mentioned differ widely and they are efficient
in different degrees, partly because they have other objects in view
besides the promotion of saving and partly because they deal with
different classes of people. Savings banks constitute the only group
to which the term bank can properly be applied and consequently the
only one to which attention will here be given.

In a book entitled, Savings and Savings Institutions, written by
Professor Hamilton of Syracuse University, the following definition is

Savings banks are institutions established by public
authority, or by private persons, in order to encourage
habits of saving by affording special security to owners of
deposits, and by the payment of interest to the full extent
of the net earnings, less whatever reserve the management may
deem expedient for a safety fund; and in furtherance of this
purpose bank offices are located at places where they are
calculated to encourage savings among those persons who most
need such encouragement.

Professor Hamilton classifies these institutions as trustee,
cooperative, municipal, and postal savings banks. In the first group
he places institutions managed by boards of philanthropically inclined
persons who serve without pay; in the second, those managed
cooperatively by the people who make use of them; in the third, those
established and administered by municipalities; and in the fourth,
those connected with the post-office departments of governments. The
strength of trustee savings banks lies in the comparatively low costs
of their administration and in the fact that in their investments
they are likely to enjoy the advantages of the judgment and enthusiasm
of people skilled in the investment business; that of cooperative
savings banks, in their adaptability to the special needs of their
constituents and in the education which cooperative administration
involves; and that of municipal, and especially of postal savings
banks, in their capacity to place their services within the easy reach
of all who need them and in the confidence which their public
character inspires.

In the investment of the funds intrusted to savings banks, safety and
as large returns as are consistent with it, rather than ease of
liquidation, are the prime considerations, and hence they usually take
the form of high grade investment securities rather than of commercial
paper. Their deposits are usually subject to withdrawal only after due
notice, and, being savings deposits, their withdrawal usually follows
only after the lapse of a considerable period of time.

The purpose of their withdrawal is frequently investment and this is
sometimes made through the agency of the bank which held the deposit
and may involve merely a transfer of securities.

Outside of the New England and middle states, savings banks were rare
in this country previous to the inauguration of our postal savings
bank system in 1911. The explanation of this condition is doubtless to
be found chiefly in the wide extension of private, state, and national
banks, and trust companies, practically all of which conduct savings
departments and solicit the patronage of savers. These institutions
have coveted this field and have not encouraged the establishment of
savings banks. There is reason to believe, however, that they have not
worked the field as thoroughly as savings banks would have done and
that, on account of the dominance of their other interests, they are
not as well fitted as savings banks to work the field thoroughly.
Moreover it is probable that they are not able to pay as high a rate
on deposits as well conducted savings banks would be able to pay.
There seems, therefore, to be room, and probably need, here for the
development of savings banks of some at least, if not all, of the
types above described.

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