SAVINGS' banks are banks formed to promote saving. They are purely banks of deposit; they differ, however, from other banks of deposit in the following particulars: - First. Very small sums are received as deposits. Secondly. All the money deposited is lent, upon interest, to the government. Thirdly. The depositors are restricted as to the amount of their lodgments; these restrictions are designed to exclude from the banks all except the humbler classes of the community.
Loan banks, or institutions for lending money to the poor, are of ancient date; but savings' banks, or institutions for borrowing money of the poor, are entirely of modern invention. They were first urged upon the attention of the public and the legislature of this country in the years 1815 and 1816, by the late Right Hon. George Rose. In his pamphlet upon the subject, he thus traces the origin of these establishments: -
"The idea was first suggested by the Society for Bettering the Condition of the Poor, of which I have long been a member, and it has been acted upon in Edinburgh and Bath with such a degree of talent, zeal, and perseverance, as to manifest the great advantage of it.
"In other parts of Great Britain, however, the principle has been acted upon on a small scale, especially in Scotland, where the parochial institutions for savings are called Maneges; so full an account of these is given by Mr.
Duncan, the early promoter of them, as to render it quite unnecessary to enter on any particulars respecting them here. But however well intended they are, there are strong objections to them. In any event, extended establishments are infinitely more to be desired, on account of the preferable management of them, as well as for the safe custody of the money. By a large district being included, gentlemen of property are found to become trustees and managers; and a fund is easily furnished by small voluntary subscriptions at first, and by the surplus of the interest allowed to the depositors afterwards, to meet all the expenses of the institution.
"Since the first publication of these observations, a controversy has arisen by Mr. Duncan, the promoter of the parochial banks, insisting upon his having (by the establishment of the one at Ruthwell) been the first to bring the banks for savings into notice, in an address to Mr. Forbes, a gentleman of the highest respectability in Edinburgh, who was a zealous promoter of the banks there. The truth is, that the two establishments are perfectly dissimilar, as above stated, which will appear more manifestly to whomsoever will take the trouble of reading the pamphlet of Mr. Duncan and the answer of Mr. Forbes to it. As far as respects Scotland, it would seem that the Edinburgh plan has the merit of priority, for general advantage; but it may be hoped that in future there may be no contention, except how the public can be most benefited - it is of very little importance from whence the suggestion originated."
Mr. Rose proceeds to explain in detail the nature of these institutions, and points out the advantages they may be expected to confer u\pon different classes of the community: -
"Apprentices, on first coming out of their time, who now too frequently spend all their earnings, may be induced to lay by five shillings to ten shillings a week, and sometimes more, as in many trades they earn from twenty-four to fifty and sixty shillings a week.
"The same observation applies, though somewhat less forcibly, to journeymen in most trades (whose earnings are very considerable), from not beginning so early, and to workmen in several branches. With respect to these, it has been made evident to me, and to many members who attended the mendicity committee in a former session of parliament, that in numerous instances when the gains have been as large as above stated, the parties have been so improvident as to have nothing in hand for the support of themselves and families when visited with sickness, and have consequently with their families fallen immediately upon the parish. In some instances the tools and implements of their trade have been carried to the pawnbroker during illness, whereby difficulties were thrown in the way of their labour being resumed on the restoration of health.
"Domestic servants, whose wages are frequently more than sufficient for their necessary expenses.
"Carmen, porters, servants in lower conditions, and others may, very generally, be able to make small deposits, without finding the slightest inconvenience from the diminution of their income occasioned thereby.
"With respect to day labourers, the full advantage cannot be expected to be derived at first, as far as relates to married men with families: it too frequently happens that when there are two or three children, it is all that the father can do to support himself and those dependent upon him with his utmost earnings; but the single man, whose wages are the same as those of his married fellow-labourers, may certainly spare a small weekly sum, by doing which he would, in a reasonable time, have saved enough to enable him to marry with a hope of never allowing any one belonging to him to become a burthen to the parish.
"Nothing is so likely as a plan of this sort to prevent early and improvident marriages, which are the cause more than any others, of the heavy burthen of the poor-rates. When a young single man shall acquire the habit of saving, he will be likely to go on till he shall get together as much as will enable him to make some provision towards the support of a family before he thinks of marrying.
"The welfare of the lower classes of society cannot be a matter of indifference to any, nor can it be doubted that their situation will be ameliorated by the adoption and promotion of these banks. The industry, sobriety, and economy among the lower orders of the people will thus be promoted by their being encouraged to make little savings for a provision against want and distress; and their moral improvement will be advanced, while their social comfort is augmented. By the plan which I here recommend, this beneficent and most important object will be obtained at no expense to the higher orders, or at so trifling a one as to be utterly unworthy of notice.
"This plan has in it the germ of valuable moral principles, and if it can be fairly brought into action, will tend more than anything to lessen the enormous and increasing burthen on the middle and higher classes, and at the same time to infuse into the minds of the lower order a legitimate spirit of independence. Its merits are so well expressed where its advantages were early experienced, that I cannot do so well as to quote a few words from one of the Edinburgh reports: - ' It secures independence without inducing pride - it removes those painful misgivings which render the approaches of poverty so appalling, and often paralyze the exertions that might ward off the blow. It leads to temperance and the restraint of all disorderly passions, which a wasteful expenditure of money nourishes. It produces that sobriety of mind and steadiness of conduct which afford the best foundation for the domestic virtues in humble life. The effects of such an institution as this upon the character of the people, were it to become universal would be almost inappreciable.' "
In the year 1817, Mr. Rose obtained an Act of Parliament, entitled, "An Act to encourage the Establishment of Banks for Savings in England." About the same time an Act was passed, entitled, "An Act to encourage the Establishment of Banks for Saving in Ireland; " the provisions of which were similar to the preceding.
The establishment of Post-office Savings' Banks in 1861 (24 Vict. c. 14), by the greater facilities, and by the undoubted security which they afford, has further fostered the development of savings' banks in this country. Government and the public are indebted to Mr. Sikes, manager of the Huddersfield Banking Company, for the suggestion, and for an outline of the plan, as well, of making the Money Order offices contributory to the development of savings' banks.
Scotland has always had the advantage of savings' banks by means of the deposit system, which is a regular branch of the business of the commercial banks.