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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