| To be an investor you must first accumulate funds | | | | departments and services, may be considered as |
| for investment, and safety in your savings plan is the | | | | applying modern merchandising methods to the |
| first consideration. This will immediately limit the | | | | banking business. |
| number of media into which such funds may be | | | | The savings or thrift account, as operated by most |
| placed. After you have accumulated a sufficient | | | | banks, is an excellent depository for surplus funds. |
| amount, then will be the time to consider whether | | | | The interest rate varies with general business and |
| higher risks are justified. | | | | money conditions, but is about 3 per cent at present, |
| How much should be the goal before further | | | | usually credited semiannually, and compounded if not |
| investment, with attendant higher risks, is | | | | withdrawn. The account is insured up to $10,000 by |
| attempted? The answer cannot be given in the form | | | | any bank which is a member of the Federal Deposit |
| of an exact amount, because your total income and | | | | Insurance Corporation. Over 90 per cent of present |
| expenditures will have a bearing upon it; but most | | | | day commercial banks are members of the |
| authorities agree that a "nest egg" or "rainy day | | | | organization. |
| fund" must first be obtained which is the equivalent | | | | Many people complain that the rate of interest of |
| of at least three months' salary. | | | | about 3 per cent is too low. They forget that a high |
| In other words, investment for the person of | | | | degree of safety will always be coupled with a low |
| modest means is a series of steps: the gradual | | | | rate of return and that this is a fundamental principle |
| accumulation of surplus cash as a "rainy day" or | | | | of all investment. |
| emergency fund; the accumulation of an additional | | | | Building and Loan Associations |
| fund for investment; and the placing of this fund in | | | | These are locally owned, privately managed thrift and |
| investments which may entail somewhat higher risks. | | | | finance corporations. The savers really become |
| Mutual Savings Banks | | | | stockholders, since they purchase shares in the |
| These banks are quite different from commercial | | | | company with their deposits. Some of these |
| banks, inasmuch as there are no stockholders and | | | | associations even offer installment accounts, |
| the depositors themselves receive, as dividends upon | | | | whereby the depositor may buy shares on the |
| their deposits, all funds in excess of the costs of | | | | installment plan. Their savings accounts are similar to |
| doing business and the amounts transferred to | | | | those of banks, but they often pay a higher rate (32 |
| surplus. | | | | to 42 per cent), because a larger percentage of their |
| This form of savings bank has several advantages, | | | | loans are invested in long-term home mortgages |
| among which the following are worthy of mention: | | | | which carry a higher interest rate. |
| It is a safe place for the deposit of surplus funds. | | | | Most of them are state chartered, but some are |
| It issues various combinations of life insurance at | | | | federal chartered and will carry the word "Federal" in |
| very low rates. | | | | their titles. Those which are federal are members of |
| The Federal Deposit Insurance Corporation | | | | the Federal Savings and Loan Insurance Corporation, |
| membership offers $10,000 maximum insurance (as it | | | | which provides an insurance of $10,000 maximum per |
| does for other types of banks) on each deposit | | | | account per person, similar to that in savings banks. |
| account for some of these banks; in three states | | | | Some state charters require membership in the |
| (Massachusetts, Connecticut, New Hampshire) the | | | | Federal Home Loan Banking System as well. The |
| banks contribute to a central fund which provides | | | | depositor should find out in all cases; the information |
| similar protection. | | | | is readily available. |
| Since these banks are state regulated, they will be | | | | As in the case of savings banks, these institutions |
| subjected to frequent examination, which, in turn, | | | | are not required to pay out money on demand, but |
| protects the depositors. | | | | usually do so. |
| Commercial Banks | | | | Any of these institutions are a good place to start in |
| The modern commercial bank, with its various | | | | your investing. |