It would be palpably foolish for a man or a firm doing a prosperous business to give it up into other hands, unless such a price could be obtained for it as would be almost ruinous to the purchaser. True it is that in the remaining quarter may be found perfectly legitimate un- dertakings formed into companies, owing to the death of the owner, deficient capital, or some other valid reason. Some of these flourish and take root, others are prosperous for a time and gradually die out. After a time it will be found that few remain which could be recommended for a permanent investment; and much informa- tion has to be sought and acquired before the venture should be made.

There are, of course, many persons who have the means of acquiring reliable information about a company, and are able to form a sound opinion as to its prospects, but the information is derived from personal knowledge and not from kind friends or from public prints, which are not always to be trusted. These persons purchase shares either for investment or as a speculation — in this latter case with a know- ledge or, at all events, a safe presumption that they will go to a premium, that is, rise in value to considerably more than their nominal amount, either from their own merits, or from an active demand for them on the part of the public, or by artificial stimulation. The holders know pretty well when the highest price has been reached, and then sell out with great advantage to them- selves. It is often at that moment that the tyro is recommended to buy, or is seized with a desire to have a share in so good a concern, and parts with his money. The knowing speculator has taken his profit, and sees with grim satisfaction the shares gradually declining in value, until they arrive at the position of more than one- third of existing companies which are now quoted at a discount.

FINANCIAL LAND AND INVESTMENT COMPANIES.

These companies are mostly formed for the purpose of employing their capital in the Colonies, where money commands a higher rate of interest, and can be more profitably employed than in this country.

Some of the older concerns have been suc- cessful, but of the whole number of existing companies at least one-half, judging from the price of their shares, have been failures. The difficulty with these concerns would seem to be the want of direct control, their business having chiefly to be conducted by agents who often consider their own interests before their employers'. Some of these companies appear to have advanced large sums of money on the security of land which they can neither sell nor let, and which has been abandoned by the borrower.

FINANCIAL TRUSTS.

The shares in these trusts were at one time much sought after as an investment. The ostensible business of a trust company is to purchase shares and stocks of other concerns at favourable opportunities, and to invest widely in foreign and other companies offering good dividends, so as to average a high rate of inter- est. They are divided into debenture stock, preferred stock, and deferred stock. The latter has its share of the profits after the others have been satisfied, and at present three-fourths of the companies now doing business have their deferred shares at a discount. The financial collapse in Argentine, some years since, very seriously affected most of these concerns, and it is doubtful, in view of the risky nature of the business, whether they will ever come into favour again.

INSURANCE COMPANIES.

Under the head of Life, Fire, and Marine Insurance, these companies, as a class, have been more steadily successful than others. Most of these concerns are making large profits, and their shares command a high premium; so high, indeed, that an investment at current prices yields but a moderate rate of interest. The risks undertaken by insurance offices are enor- mous in extent, but the law of average by which they are conducted is so accurate that, taken in the long run, and with sufficient business main- tained, misfortune is almost impossible. In all cases, however, so little is called up of the nominal amount of their shares, that a very large liability attaches to them.

STEAMSHIP COMPANIES.

Judging from the prices of the shares in these companies, they have not been very successful as a whole, and it would appear that a Govern- ment subsidy for mail or other service is almost necessary to make them profitable.

MINES.

Speculation in shares of mining companies has of late years been indulged in to an enor- mous extent, and large fortunes have been made and much money lost. As a rule the prizes have been secured by those behind the scenes, and the public have not had the opportunity of participating until the price of shares had reached a figure which was almost prohibitory. As an investment mining shares, even of the best, are not to be recommended. Mines are apt to get worked out when the source of income fails and there is an end to the concern. More- over, hundreds of companies are promoted which have a specious appearance on the prospectus, and are puffed in every imaginable way, when they have not an ounce of ore or a yard of ground to call their own. Of course, there are genuine undertakings which answer well and yield large profits, but it is extremely difficult to discriminate between the good and the bad, and the best after all are but a speculation.



CHAPTER VIII. THE STOCK EXCHANGE.

THE Stock Exchange is a market for the sale and purchase of all kinds of securities. The buildings, wherein business is transacted, occupy a triangular plot of ground near the Bank of England, and comprise the Hall where the various markets are held, and other rooms and offices for the use of the numerous officials. There are 2,500 members, and the management is vested in a Committee selected from their number. Admission to membership is open to any person not engaged in another business, and who is properly proposed and seconded; but very strict regulations and guarantees are enforced before entry, so as to exclude any one whose circumstances and character will not bear the strictest investigation. The hours of busi- ness are eleven to four o'clock on all days except Saturday, when they are until two o'clock. The members of the house are divided into Jobbers and Brokers, the former being dealers in stocks and shares. It is contrary to practice for brokers to deal with brokers, and all trans- actions are between brokers and jobbers.

What are known as "markets" are groups of jobbers distributed about the house, each group having its own particular dealings, one in Government Stocks, another in English rail- ways, a third in Foreign securities, and so on. A broker having received an order from a customer to sell 1,000 Great Eastern Railway Stock, would go to the English railway group and inquire of a jobber the price or quotation for Great Easterns, without disclosing whether he wants to buy or to sell. The jobber replies, "115 1/4 to 115 1/2"; whereupon the broker says, "I sell at 115 1/4," when the bargain is completed, without any memorandum or written contract, the verbal communication being alone in use, and the jobber is bound by it. It will be observed that the lower price, 115 1/4, is accepted by the broker on behalf of his customer, as a sale is always effected at the lowest quotation, and a purchase at the highest. Another broker pre- sently goes to the jobber and asks the same question receiving the same reply, 115 1/4 to 115 1/2 the broker says, "I buy of you at 115 1/2," being the highest quotation. The difference of 5s. between the sale and the purchase is the Job- ber's profit. The broker charges his customer his own commission or brokerage on the trans- action, which ranges from 2s. 6d. per cent. on the Government and Colonial Stocks up to 10s. per cent. on railway stocks. This is the elementary stage of the business of the Stock Exchange, but the variety of the securities dealt in, under constantly changing circumstances, the number of transactions, and the amount of money changing hands, involve intricate accounts and arrangements, which need not be particularised here. Accounts are settled fort- nightly, the precise dates being fixed some time before by the Committee of the house.

Many speculators, however, especially those who have bought stocks and shares with the expectation that they will speedily rise in price, do not find it convenient to pay the purchase- money on the appointed settling day; so pay- ment may, by arrangement, be carried over to the next settling day. For the accommodation a certain charge, which is called "contango," is made, the amount varying with the value of money and the quality of the stock. "Back- wardation," on the other hand, is a commission paid in order to postpone the delivery of stocks or shares which a speculator contracts to sell, but which he never possessed. He is a specu- lator for the fall, hoping by the delay to be able to purchase the same stocks and shares at a less price than he bargained to sell them for, and so make a profit out of the transaction. Specu- lations for a rise are known on the Stock Exchange as "Bulls," and their object is by every manner of means to get the prices of the stocks they are dealing in pushed up as much as possible. Speculators for a fall are called "Bears," and they are equally anxious to send prices down. So sensitive is the stock market that prices are easily affected; the rumoured prospect of an important dividend from a rail- way company will at once probably influence the price of its shares, whilst a report of a disastrous accident will have the contrary effect. A "boom" in the money market is a cheerful desire on the part of the speculative public to be purchasers at advancing prices, and this betokens good business for the brokers and jobbers. A "boom" in any particular stock is a buoyancy in prices, caused by some favourable rumour, whether founded or unfounded, more often the latter, and set agoing in the interest of persons who desire to get rid of surplus stock. A "boom" in railway shares is often brought about by increased traffic receipts; a "boom" in mining shares is caused by one or two com- panies having produced more gold this month than last; and a "boom" in foreign stocks is due to the settlement of some political or other difficulty, &c., &c. A "slump" is just the reverse, being an unaccountable depression which sometimes fastens upon the specula- tive world, and betrays distrust in everything. Unless this feeling is checked in time it degenerates into "panic," when prices fall to a ruinously low figure.

Each fortnightly settlement includes three days — the first being continuation or "con tango" day, when all transactions of a specula- tive description are arranged to be carried over to the next settlement day. The second is the ticket day, when the names of purchasers and sellers are handed over. The third is pay-day when all amounts or balances due for stocks bought or sold are paid or received. The great bulk of business being purely speculative, the first day is the busiest; after noon on that day all new transactions entered into are for settle- ment at the next account day, unless otherwise specially arranged.

Any sums of money may be invested in, or any particular amount of stock purchased of, the Government Funds, through a broker or banker, and there is practically no limit to the quantity that may be held. In the books of the Bank of England an account is opened, and the name, address, and description of the investor care- fully registered. A memorandum is given of the transaction, but it is of value only as such, not being in the nature of a certificate or receipt, and it is not required to be given up or produced in the event of a sale or transfer of the stock or any portion of it. Accounts may be opened in one, two, three, or four names, but not more, and four different accounts may be open at the same time in the same name or names, but they must be distinguished as accounts A, B, C, and D.

In order to sell stock the holder may attend at the Bank of England himself accompanied by his broker, and then and there have the transfer made and the money paid. But this would be unusual and held to imply mistrust, without perhaps occasion for it. The safest plan is for the holder to instruct his bankers to carry out the transaction, and give them a Power of Attorney to enable them to do so. A special form of power is provided by the Bank of Eng- land, the cost of which is 11s. 6d. The Inscribed or Registered Stocks of most of the Colonial Governments are dealt with in the same way, as well as Indian stocks and the stocks of many of our larger towns. The account of an investor may be added to or diminished at any time with- out difficulty or delay.

The stocks and shares of railway and other companies may be purchased through a broker or banker, and the holder passes them over to a buyer by a formal deed of transfer. The purchaser's name, address, and description are carefully registered in the books of the company, and he has then accepted all the responsibilities that may attach to the shares. For instance, the shares he has bought may be only partly paid up. The shares in railway companies are usually paid up in full, but it may so happen in an issue of new shares that they are paid up by periodical instalments; in which case what has already been paid is known as "scrip," and retains that name until developed into fully-paid shares. A company formed of 20 shares may have called up only 5 on each, and with no intention of demanding more, yet the holder is liable for 15 on every share he holds, and before he invests his money he should be careful to ascertain the full extent of his liability. Some little time after the transfer of the stock or shares has been completed, a certificate will be issued by the company, giving full particulars of the holding, and this certificate must be care- fully preserved, as it will be required to be given up before all or any portion of the property can be sold. The Colonial, foreign, and other bonds payable to the bearer, which have been pre- viously described, are purchasable through a broker or banker, and handed over without any transfer or other formality. Bonds of this description should be left in the safe custody of a banker, who would cut off and collect the interest coupons attached, as they became due.

As an example of the hazard incurred by keeping securities of this kind in one's own house, the writer remembers a case where a gentleman was examining in a room of his house, by the light of a candle, some bonds which he afterwards locked up in an iron safe. It was dark outside and the blind was drawn up, so that any one from the garden could see all that was going on in the room. Next morning the empty safe was found in the grounds and the contents had been carried off. All the par- ticulars of the bonds were at once telegraphed to the Stock Exchange, the London banks, and the Police authorities. Some months afterwards the bonds turned up in the hands of a banker in London, who had received them from an agent abroad. An action was brought by the original owner for their recovery, but it was of no avail, as the securities had come into the hands of the banker in the course of regular business, and so the loser could get no redress and, moreover, had to pay a large amount in costs.

The broker, who is a member of the Stock Exchange, from the precautions taken on his admission, should be a responsible person, whom it would be safe to entrust with any business which might be put into his hands. His deal- ings, however, are chiefly on behalf of the bankers and outside brokers, acting for them- selves and the public. There are numerous outside brokers (that is, brokers who are not members of the Stock Exchange) in London and all over the country. In every profession there are some doubtful members, and stock- broking has its fair share, but with ordinary vigilance on the part of their customers, well- established brokers will carry out their com- missions faithfully and reasonably. As to the advice, however, a broker may have to offer in the way of investments, it must be remembered that he is no more than mortal, and would at times be prone to submit such securities as he him- self, on behalf of a client, would most desire to dispose of. In this way, too, the country broker is liable to be pressed by his London agent to get rid of particular stocks or shares which hang heavy on hand. However, bearing this well in mind, an investor may gain much useful infor- mation from his broker, although for sound advice his banker is to be preferred.

Members of the Stock Exchange are not allowed to advertise themselves or their firms, but most of the daily newspapers in London have an agent in the house, either a jobber or broker, who furnishes to his principal for publi- cation a daily report of the state of the markets and the current prices of the day, which in that way reach the eye of the public. It may be assumed that in the better class of journals the information thus afforded is perfectly trust- worthy, although some years since one of the leading newspapers was imposed upon by its agent, who took advantage of his position to manipulate certain matters for his own ends. Less scrupulous publications, however, are freely made use of to influence the public, to cry up or prejudice the markets and particular concerns. The provincial broker, as a rule, limits his ad- vertisement to the name and address of his firm, with a quotation of the prices of a few of the stocks mostly dealt in, and monthly, or quar- terly, sends an extended list to his customers. The outside broker who advertises himself freely in the newspapers, as well as by pamphlets and circulars, is to be avoided. He will invite you to participate in his system — always an in- fallible one — of operating. He will suggest "options," "put and call," the "cover" system, and other devices by which the inexperienced may be mystified and beguiled into losing their money. However astute a man may consider himself, experience proves that, with amateurs, this kind of gambling is sure to result in loss.

An ingenious mode of practising on the cre- dulity of the public may be noticed in some financial publications. An editorial notice or subsidised paragraph will be inserted in the paper, extolling the merits and predicting the certain success of some concern which it is desired to bolster up or to foist upon the public. This is done in such a way that the reader is expected to believe that it is the genuine ex- pression of a truthful opinion by the editor, who has obtained his information from unimpeach- able sources. Of course, this peculiar kind of advertisement has to be paid for, but it has its advantages to the advertiser, for it can (for a consideration) be quoted by the country papers as unbiassed news, and attention called to it in a money article or leaderette. The pamphlets issued by the advertising outside broker are sometimes amusingly artless in the endeavour to sell shares and attract custom. On the first page will be found some paragraphs setting forth the merits and prospects of certain named companies, and advising the reader to buy shares in them without a day's delay, as a con- siderable and speedy rise in value is assured. One may be permitted to wonder why the broker and all his friends do not rush in and secure every share that is to be had. At the end of the paper the reason will be discovered; in every one of the concerns referred to shares are offered for sale, which cannot be got rid of in the regular market. It must be inferred that some credulous persons are taken in by this transparent artifice, or it would not be so con- stantly practised. The object of these publica- tions is chiefly to puff up doubtful securities, in the hope that some fatuous speculator may be tempted to buy. It is delightful when two of these gentry fall out and expose each other's knavery. The reader is assured that "Codlin's his friend, not Short"; the latter is denounced as a fraud and retaliates, but no action for libel is brought, because both know that on either side the imputation is justifiable.

It may excite surprise in some who are favoured with circulars and prospectuses which are, through the Post Office, sown broadcast over the whole country, how the name and address of a comparatively obscure individual should be known. Prospectus and circular distributing is a business conducted on a regular system. When it is desired to invite subscrip- tions to float some new company or to bolster up some concern, the share lists of the same sort of companies already in existence are drawn upon for names and addresses; and court directories also furnish a wide field for operations.

At the present time the rage appears to have set in for forming limited liability companies out of private industrial concerns or trading firms. Most of these companies, we are told by an authority, "are brought out under the same auspices" — that is they are started and floated by a skilled personage known as a "promoter." The stereotyped prospectus must now be familiar to most people, and the public respond freely to the invitation to subscribe for shares, without consideration or inquiry. The prospectus is usually replete with statistics, showing the suc- cess which has attended the business whilst in private hands, and the enormous profits made; and one is apt to wonder why they did not keep it to themselves, instead of inviting the public to share in the gains. But there are good com- panies and bad companies, and it is to be feared that the latter largely preponderate. A good company may have a genuine reason for its existence, such as the desire of a last surviving partner to retire from active life, or the growth of the business to such an extent that more capital is required than could be obtained from a private person, or upon some other equally valid ground. A bad company is often the make-shift to save a decaying firm from insol- vency, or to dispose of a business at a price quite out of proportion to its real value. The prospectus affords no opportunity of discrimi- nating what is genuine and likely to succeed from what is false and sure to fail. If, as it has been said, eighty per cent. of companies floated sooner or later go to the wall, then, indeed, inquiry and much circumspection are needed before entering upon a speculation of the kind. It must be said, however, that many companies formed from trading concerns have become well established and profitable, and if permanency could be relied upon, they furnish a field for lucrative investments. Those adventures which are unduly pressed upon the notice of the public should be regarded with suspicion. If a thing is really good in itself, it will not require much persuasion to commend itself; and if bad, no purchased laudation will make it better. A subtle mode of advertising is just now coming into vogue, which, though expensive, will for a time be successful. There need be no reflection on the companies which adopt it, though calcu- lated to beguile the innocent and confiding in- vestor. A leaf or two introduced in some of our illustrated papers, in no wise differing in the printing from the remainder of the publica- tion, and appearing as though it formed part of the regular pabulum offered to the public. This leaf or leaves contain well-executed pic- tures of the works and machinery and other interesting objects connected with the industry of a company to which it is desired to call attention, and a descriptive account is given of its magnitude and success. To the casual reader all this would appear to be a matter of public interest, offered to the public as part of the regular business of the paper, but it is only an ingenious form of advertisement and has to be paid for as such, but that is of no consequence if the effect is produced, of a rise in the price of the shares. There are some companies whose shares are quoted at such enormous premiums, and which pay such high dividends, that the investor is sorely tempted to embark in similar undertakings, apparently, that are brought be- fore the public. But these prosperous concerns are in most cases first taken up by a syndicate — that is, a certain limited number of persons behind the scenes — who finance and float the company, and when success has been attained, the public are granted the privilege of purchas- ing shares — but at such a price as the syndicate choses to put upon them, and, not seldom, that is the highest they ever attain. This is particu- larly the case with mining companies, the successful ones having certainly only benefited the few. This syndicate system has given rise to a bogus imitation, which, however, appears to have met with but limited success. Circulars in lithographed writing, marked "private and con- fidential," and implying a friendly interest in those addressed, are sent to persons whose names are obtained in the manner already indi- cated. An invitation is given them to join a syndicate about to be formed to float a certain company, the profits arising from the operation being certain and enormous. Again, if it be such an excellent and certain venture, why offer a share to an entire stranger? These circulars are very speciously worded, and there is an air of candour about them likely to allure. Anyone foolish enough to subscribe would probably, after an interval, be informed that owing to un- foreseen circumstances the adventure had turned out a failure, and that all the money had gone in expenses. Successful gold mines have yielded large fortunes to their proprietors, but it must be remembered that mines have but a limited existence, and once they are worked out the money invested in them is lost; for when they cease to yield ore there is nothing more to be obtained from them. Promiscuous dealing in mine shares is nothing more or less than gambling, or taking part in a lottery in which the blanks are overwhelming and the prizes next to nothing. If an enterprise has in it any degree of soundness or promise, there are plenty of the knowing ones ready to step in and take all the advantages to be gained; it is the des- perate ventures and unscrupulous swindles that the public are mostly pressed to support — only to lose their money. It is to be hoped that the dupes are at length awake to the pit-falls dug for them by the mining company promoter and speculator, whose seductive paragraphs are everywhere in evidence in the advertising sheets of the day.

A typical example — and not a fictitious one — of hundreds of knavish concerns foisted on the public may be quoted. A certain company, of which no prospectus has been issued, nor of which anything is publicly known, appears in the mining lists. One day, a paragraph in a financial paper reports that the agent for the mines, on the spot, has cabled that the promise of success exceeds all expectations, that samples of ore, yielding three ounces to the ton, have been found, and that the necessary machinery must be sent out at once. This is followed up by an editorial leaderette (of course, paid for), in which the writer expresses surprise that the shares of so promising an enterprise should be at so low a price, and predicting a rapid advance when the work is further developed. These notices effect their purpose to the extent of rais- ing the quotations of the shares a few shillings, but this is not enough for the promoter; a cir- cular is next issued, in the usual way, to the effect that the directors have been fortunate enough to secure additional property near their own, which furnishes wood and water, so essential to the proper development of the mine, and including, moreover, alluvial pits abounding in gold. An elaborate lithographed sketch of the property, with mines at work and a steam-engine, accom- panies the circular, and the whole presents an appearance of real business. The next move is the statutory meeting of the shareholders, which, however, is very sparsely attended, as the vic- tims are chiefly people residing in the country, who do not care to incur the expense of a journey to London. The man who presides at the meet- ing, an outside broker, begins a speech by apologising for the absence of the chairman of the company (of whom the shareholders hear for the first time), and then goes on to describe with tedious detail the technical working of the mine, the stopes and veins, and bunches of gold that there are, and the stamps, machinery, &c., that there are to be. He describes what has been done in the alluvial pits, and the prospect of wealth to be drawn therefrom as beyond the dreams of avarice, and winds up with warm con- gratulation of the proprietors on the valuable property they possess. Whether he has over- done his part or something prejudicial to the company leaks out, the shares which had changed hands at 10s. gradually drop to 5s. Then a circular goes the round in which some member of the ring of knaves invites the public to join a syndicate to buy up five thousand of these shares which he has, through peculiar circum- stances, been able to secure the refusal of at 4s. a share. A special meeting of the shareholders is next called, when it is announced that more capital is required, and that it will be necessary to pay up the one shilling per share which still remains outstanding. A last desperate effort to get rid of the shares at any price is then resorted to before the call of one shilling per share becomes payable, and some thousands are offered at one shilling and sixpence each. After the time has expired for paying the call, a last circular is issued, intimating briefly that the eminent engineer, who has originally given such a glowing account of the mine, now reports that there is no present indication of gold on the property, but that possibly some might be found if they dug deep enough!

The name of the company has disappeared from the mining share list, and it will be heard of no more. It is doubtful if there ever was any property, or engineer, or board of directors, or, in fact, anything more than the outside broker and his confederates.

Of the bona fide speculative undertakings in South Africa and Australia, the exploration and finance companies, or some few of them, have made the largest profits. Their system, broadly speaking, is to acquire certain tracts of land in a gold-bearing district, and then let small portions on lease to different subsidiary companies, which have been floated to develop gold or whatever else these portions may con- tain. The price paid to the parent company is made up of; perhaps, one half in cash and the other in the shares of the new concern. An im- mediate profit accrues from the payment in cash, and there is a wide field for further gains if the operations of the subsidiary companies are suc- cessful. But in this, as in all speculative enter- prises, the prizes have been few and the blanks many.



CHAPTER IX. LIFE INSURANCE.

LADIES do not take advantage of the system of life insurance to the extent one would expect, seeing the benefits it is capable of conferring upon themselves and their belongings; and as their indifference is no doubt, in many cases, owing to a want of knowledge of the subject, a chapter thereon may be useful.

Life insurance is an admirable system, devised, in all its ramifications, to provide against loss or damage through the various contingencies to which human nature is subject.

A simple life insurance is that by which a person may leave behind him a sum of money for the benefit of those who, during his life, have been dependent upon him. For example, a husband, whose income is entirely derived from his own exertions, desires to make some pro- vision for his wife and children in the event of his dying before them. At the age of thirty he may, by paying 25 a year to an Insurance Office, secure at his death, whenever it may happen, 1,000, for the benefit of his wife or chil- dren, or as he may direct by his will. In a way insurance is a kind of savings bank, but impos- ing an obligation on the part of the depositor to save a certain sum every year. In the case of the bank, the savings are optional, and cease at death; whereas by insurance, the return of a large sum is the result of the death of the com- pulsory depositor. If a person put by 25 every year and invested that sum in the Government Funds at 2 1/2 per cent., or deposited the same sum annually in a bank, at the same rate of interest, it would take him twenty-eight years to accumu- late 1,000, if he lived so long; whereas by an insurance on his life for the same amount, if he died a week after the first payment of 25 had been made, the 1,000 insured would be paid to his representatives. It might be said that if the person lived longer than the term of twenty- eight years and went on saving the 25 every year, he would in the end accumulate more than 1,000. This, however, is met by insuring in such manner that the insurance carries "profits," that is, additions made by the gains of the office from time to time. If insurance be made in this manner, for which a slightly higher rate of pre- mium is paid, it will be found that, however long a person might live, more would accrue at death by insurance than by saving.

There are in active existence so many insur- ance companies of good repute and undoubted stability that no difficulty need be experienced in making a judicious selection. Of course, the intelligent insurer would prefer an office whose system would best suit his own requirements. There are two kinds of Insurance Companies, one known as a "Mutual" office, in which all the profits which may be earned are periodically added to the amount insured, the other in the form of a Joint-Stock Company, in which a small proportion of the profits are distributed amongst the Shareholders and the remainder added to the Insurances. The Mutual Office dividing the whole of its profits amongst the insured would appear to be the more advantageous of the two, and undoubtedly it is, all other things being equal; but insurances may be effected which do not share in the profits, at lower rate of pre- mium, and in that case one system is as good as the other. The intending insurer would do well to obtain the prospectuses of several offices, which he can easily do by writing for them direct to the head office or by applying to the several agents of the companies who abound in all towns; and carefully compare one with another. It will be found, perhaps, that one office charges a less annual premium for an in- surance than another, but this may be compen- sated for by the latter declaring larger profits, or giving advantages in other ways. For instance, a certain "Mutual" office charges for an insur- ance of 1,000, on the death of a person begin- ning to insure at the age of thirty, a pre- mium of 26 16s. 8d. per annum, whereas a certain Joint-Stock Company's demand is only 24 14s. 3d.; but the advantages offered by the former in the shape of larger bonuses, though deferred, are greater, while the benefit of a less annual payment is of course immediate. Where the insurance is effected at the same age and for the same amount, but with no other benefit or profit prospectively than the bare amount, the premium in the former case is 21 4s. 2d., and in the latter 21 15s. 10d. There are good offices, however, where the premium charged is less than this.

There is at least one office which insures upon what is called the half-credit system. One-half the usual premium is paid for a certain term of years, and thereafter the full premium is charged. This may be useful in a case where a person wishes to insure while young and the premiums are low, and at the same time is desir- ous of deferring the full payment until his income is so improved that he can better afford it. This system is carried still further by an in- surer only paying half the premium during his lifetime, the other half being accumulated until his death, and then, with interest added, de- ducted from the amount payable in respect of the insurance policy.

Having chosen the insurance office or com- pany which best suits his purpose, the proposer applies to its nearest agent and makes known his desire to insure his life. A form containing printed queries somewhat like the following (though offices differ somewhat in details) will be placed before him and the blank spaces filled in either by the agent or himself.

- PROPOSAL FOR LIFE ASSURANCE - Full Name Profession or Occupation 1. Life proposed to be Assured Business Address Residence Married or Single 2. Age next Birthday years. Born at on the day of in the year 18 (Evidence to be produced.) 3. Has he resided out of Europe? If so, where, and for what period? 4. Is he, and has he always been, of sober and temperate habits? 5. Has he had any serious illness or disease tending to shorten life? 6. Has any near relative died of any hereditary disease? 7. (1) Has a proposal to effect an Assurance on his life ever been declined? (2) Or accepted at more than the ordinary rate? (3) If so, on how many occasions, and when, and by what office or offices? 8. Is there any other circumstance which ought to be communicated in order to enable the Company to judge fairly of the risk? If the Name person has 9. (1) Who is his usual Medical Attendant? Residence never Has known him years. required (2) When was he last in professional atten- Date of Attendance Medical Ailment attendance, the fact 1st Friend. 2nd Friend. should be (if necessary: see marginal note to stated, and 10. Mention an intimate friend, who is not in- Question.) reference terested in this Assurance, to be referred Name given to to for information as to health and habits Residence TWO friends, of life Profession or in answer to Occupation Question 10. Has known him years Has known him years. If the Name Proposal be 11. Name, &c., of the person in whose favour Profession or Occupation upon the the Assurance is to be effected? Business Address person's own Residence life these enquiries 12. Is the pecuniary interest in the Life to be need not be Assured, which is the object of this answered. Assurance, to the full amount thereof? - Sum to be Assured With or without Profits? Is the Policy to be for Life? Are the premiums to be payable Yearly? I do hereby declare that the above statements are true, and that this Proposal and Declaration shall be the basis of the contract for effecting the above-mentioned Assurance, which Assurance is also conditional on the accuracy, in all respects, of the statement for the Medial Officer, made, or to be made, by the person whose life is proposed for Assurance. Date Signature of the Person in whose favour the Assur- Witness ance is to be effected. Address and Occupation -

The proposer has now to undergo one other formality, disagreeable no doubt, but absolutely necessary, and that is the medical examination. This is done by the medical officer of the com- pany who has to certify that the proposer is free from any defect likely to shorten his natural life, and that he is sound "in wind and limb." Defi- ciency in the number of the latter is, however, not considered unsoundness, as a person with one arm, or one leg, or one eye may be just as good a "life" and therefore equally eligible for insurance with him who is perfect. All the en- quiries in the form are made by the Office and the expenses (including the doctor's fee) paid by the Company.

If the proposal is accepted, the proposer is informed of the fact and then pays his first pre- mium in advance, it may be a year's, or half-a- year's, or a quarter year's, at his own option, and he then becomes (subject to the rules of the particular company) the insured.

A few days subsequently a life policy will be sent to the insured. This is a document setting forth, in full, the terms of the agreement between the Company and the insured, and must be care- fully kept, in such wise that it may readily be discovered by the person for whose benefit it is ultimately intended. The writer once found amongst some old papers a life policy in the name of a man who had been dead for many years. On enquiry at the office it was found that the amount which was payable at his death had, by some neglect, never been claimed. The company of course at once paid the money, and a needy sister was very much benefited.

Thirty days' grace are usually allowed for subsequent payments of premium. It is custo- mary for insurance offices to forward to each policy holder a reminder, from one to four weeks before the periodical payments for premium become due, but the absence of any such notice will not be accepted as an excuse for non-pay- ment, and if the premium be not paid before the thirty days' grace allowed have expired, the policy becomes void. It may, however, be re- vived upon paying a fine and producing a medical certificate of health.

Should the proposal be declined the fact will be notified to the proposer, but he will not be informed of the reason. Proposals are rejected because of something wrong being discovered by the medical examiner, or because of intemperate habits, or that the history of his near relations in regard to health and longevity is unfavour- able; anything in short that indicated that the proposer will not, in all probability, live as long as a healthy man is expected to live is enough reason for declining to insure his life.

Insurances may be effected for a limited period, say for one, three, or five years, at about one half the premium charged for the whole term of life. If the insured dies within the period, the amount of the policy is paid, but the insurance ends with the periods of time agreed upon. This class of insurance is useful in many ways. For example: A person with a certain income for life is desir- ous of borrowing 500, to be repaid by annual instalments. There would be no difficulty in finding a lender, provided he could be sure of repayment; and this could be secured in this manner — the borrower would assign to the lender 100 a year of income for five years for the gra- dual discharge of the loan; the borrower's life would also be insured for five years and the Policy assigned to the lender. If the borrower lived for five years the loan would be paid out of the income. In the event of his death, it would be paid by means of the insurance money.

Another example: a child aged seventeen is entitled to a fortune, large or small, at the age of twenty-one, but meanwhile is wholly depen- dent on its mother who has only an annuity for her life. Should the mother die before the child becomes of age the latter would be left without the means of subsistence. In such a case the prudent mother would insure her own life for the four years which must elapse before the child could come into the fortune, for such a sum as would keep it from want, so that in case the mother died the insurance money would provide the means of living. The premium charged on this class of insurance is moderate; about 2 6s. for a person aged fifty; and the outlay by the mother could be subsequently repaid when the child was in a position to do so.

There are other special modes of insurance to prevent loss or damage in cases of remote risk; indeed almost any chance of loss through the possibility of something improbable occurring may be guarded against by insurance. For instance, a lady aged forty-five has been married for twenty years and has had no children. If she has a son her property will descend to him; if she dies childless it passes to a nephew. The chance of the lady having a son is extremely remote but still there is a possibility, and it is against loss by this possibility happening that the nephew takes out a policy of insurance for any reasonable amount, the premium charged being surprisingly small and payable in one sum down.

BONUSES.

It has been mentioned in a previous page that insurance has the advantage over the savings bank, no matter how long a person may live, and this is brought about by the operation of Bonuses, so called. These are the whole pro- fits in the case of a Mutual Company, and the larger proportion of the profits in the case of a Joint-Stock Company, which are distributed amongst the policy holders. At the end of every five years, in some cases seven, a valuation is made of all the property of the Company and on the other hand is ascertained what the company is liable for, present and prospective. The difference between the two constitutes the sur- plus or profits, assuming of course that the assets preponderate. This seems at first sight to be a very simple process, but in reality the most intricate calculations are necessary to arrive at mathematical accuracy; but this needs no further notice here. The bonus being declared, it may be dealt with in various ways.

1. — It may be added to the amount insured, and so payable at death. 2. — It may be commuted for an immediate payment in cash. (In this case the amount will, of course, be less than in No. 1.) 3. — It may be applied in a permanent reduc- tion of the future annual premiums, or a proportionately larger reduction of these for the next five or seven years, and in other ways. Most offices granting every reason- able facility for applying profits in any way the insured may consider desirable.

Endowment Insurance. — This is a class of insurance by which an insurer may receive the amount of a policy himself during his life, at an age to be fixed at the time the insurance is effected. Should he die before reaching the age specified, the money is payable to his represen- tatives.

It may also be so arranged that instead of receiving the money at a certain age, he may be paid a fixed sum annually for the rest of his life thereafter.

For example — a person at the age of thirty may insure 1,000 to be paid to him on attain- ing the age of sixty. The annual premiums for insurances of this kind vary with different offices; but they can be effected at the age named, at about 28 10s. for the 1,000. If the person died before attaining the specified age, the money would be paid to his representatives; if he sur- vived, he could either receive the 1,000, or be granted an annuity for the remainder of his life of 92 a year. In the case of females the annuity would be 83 only, as they are supposed to live longer than males.

Non-forfeitable Policies. — This plan provides for the continuance of insurance upon the life of a policy holder should the insured from any cause be unable to keep up his premiums. The prin- ciple of this scheme ensures that, in considera- tion of the premiums already paid, a policy for a certain amount — less of course than that named in the original policy, which would be cancelled — would be granted freed from all future pay- ments in respect of premiums, and the insurance money of the new policy would be payable at death. For example — a person insures his life for 1,000 at the age of thirty, the annual pre- mium on which would be 25 a year. At the age of forty he finds himself unable any longer to pay the annual premium, but to avoid the loss of the 250 which he has paid during the ten years, he will surrender the old policy for 1,000 and will be granted a new one, say for half the amount, payable at death, and he will not be called upon to pay any further premiums.

Settlement Policies. — This class of policy is issued under the Married Women's Property Act (1882), whereby a trust can be created for the benefit of a wife or children of an insured person, the trustee being the Insurance Com- pany. The advantage of this is that such a policy does not constitute a part of the husband's estate or become subject to his debts, either whilst living or at his death, so that in the latter event the money is paid to the widow or children direct for their own use. A policy of this kind, if necessity should arise, could also be exchanged for a non-forfeitable policy in the manner before pointed out.

Endowments for Children. — A parent, by paying a premium of about 5 5s. annually, can secure to a child aged six a sum of 100, on its attain- ing the age of twenty-one. Should the child die before reaching that age, the money paid in pre- miums is not lost, for it is all returned to the parent without deduction.

By this means a marriage portion or outfit for a girl, or a start in business for a boy can be provided to any amount that may be desired.

Insurance on Joint Lives is another mode of insurance, very useful in particular cases. For example: a mother aged fifty has an income, for her life and no longer, of 300 a year, and she has a daughter aged twenty, who has no means of her own, present or prospective, being entirely dependent on her mother. The joint lives are insured for, say, 2,000, which would cost in premium 100 a year; the insurance money to be paid at the death of the first of the two. If the daughter died first the mother would get back, by the insurance money, possibly more than she had paid in premiums. If the mother died first, say at the age of seventy, by that time the daughter would have attained the age of forty, and the 2,000 would be paid to her. With the money she might, if she so pleased, buy an annuity for life of 110 a year.

Insurance on the Longest of Two Lives, payable on the death of the survivor, is useful in cases where land or house property is held on lease, so that there may be no pecuniary loss when the lease expires. The rate of premium is in this case naturally less than where the insurance is to be paid on the earlier of the two deaths.

SURRENDERS.

If from any cause it is desired to give up a policy and discontinue paying any more pre- miums, the offices will pay to the insured what is called the surrender value of the policy, at the same time cancelling it and all its conditions. This surrender value may be roughly calculated at about 40 per cent. of the premiums paid, in a case were bonuses have been added to a policy, and about 33 per cent. of the premiums paid in a case where the bonuses have not been so applied. For example: a person has paid 25 a year in premiums for ten years — in all 250 — on a policy for 1,000, to which has been added 60 in the shape of bonuses. The surrender value in such a case would be 100. But if the insured had taken his bonuses in cash, or his policy did not carry profits, then the surrender value would be 82 10s. only.

Any insurance office will lend the insured, on the security of the policy, an amount of money not exceeding the surrender value, and the rate of interest is usually moderate.

In this case there would be no necessity to abandon the policy, which would be kept alive and increased by added bonuses as before.

FIRE INSURANCE.

This is a distinct branch of insurance business, the object being to compensate a person in case of pecuniary loss through the accidental burning of his property. By paying annually a com- paratively small amount in the shape of pre- mium, a person may insure that in case of the destruction by fire of such of his goods as may be specified in a fire policy, issued by the Insur- ance Company, he will be recouped their value. Nearly all the Fire Insurance offices are agreed in charging a certain rate of premium, which is called the tariff rate. For dwelling-houses built of brick or stone with slate or tile roof, the rate is only 1s. 6d. for every 100. For more hazard- ous buildings such as thatched houses, ware- houses, inns, shops, &c., the rates are higher, according to the nature of the risk. Household furniture and the other contents of a brick or stone house can be insured at various rates, or they may be included in one insurance with the house, when the rate would be 2s. per cent. for the whole.

It should be remembered that there is a limit, usually of 5 per cent., of the whole sum so in- sured, placed on any one work of art which may be destroyed.

For instance, a picture valued at 200 maybe burnt in a house which, with the contents, is insured for 2,000 If the picture were alone destroyed, the office would only compensate to the extent of 100, being 5 per cent. on the 2,000, the total amount of the insurance. Any particular picture or work of art may, however, be specially insured by itself.

Insurances should never be made for a greater sum than the value of the property insured, as it would be paying more premium for no purpose. The offices take good care that they pay no more than the actual value of the property destroyed, which they have the means of ascertaining with some degree of accuracy.

It has been found necessary to subject the insurance of farming stock to special conditions. A farmer having stock of the value, say, of 1,000, might reason in this way: "My ricks, implements, crops, &c., are situated widely apart, and it is difficult to imagine that all could be consumed in one and the same fire; therefore, I will insure the whole stock for 500 only, then I shall have to pay only half the amount in the premium I should be liable for in case I insured to the full value." The offices are, however, quite alive to this kind of reasoning, and frustrate the intention by inserting what is called the "average" clause in the policy, the effect of which is that in the event of a claim being made for loss by fire, only one half of the value would be made because only one half of the value of the stock was insured. Live stock, however, may be separately insured without the average clause, and animals killed by lightning are paid for if insured against loss by fire.

There are other offices which insure against loss by special contingencies, such as damage to glass houses, and cattle, and garden produce, by hailstorms; destruction of boilers by explosion, of plate glass, and from accident or disease affecting cattle. There are companies, too, which insure against accidents sustained by rail, road, or water, guaranteeing a specified sum in case of death, and compensation in case of injury. Also societies which take the place of sureties and guarantee an insurer against loss or default by anyone in his employ; and companies which undertake to make good any loss arising from burglary or larceny. In all cases, of course, the liability of the office is limited to a certain declared amount.



CHAPTER X. BUILDING SOCIETIES.

THE main object of a Building Society is to aid a man to become proprietor of his own dwelling. This can be accomplished by means of the society in two different ways:- 1, by depositing with the society periodical money savings until, with the interest allowed, enough has been accumu- lated to buy a house; 2, by borrowing from the society a sufficient sum to purchase a house and repaying the loan, with interest, by instal- ments spread over a term of years. A person desiring to become a depositor must qualify for membership of the society by paying an entrance fee of; say, 2s. 6d. He then takes up a share and, by paying periodical instalments according to the tables, he becomes entitled at the end of the appointed time to receive 100.

The same applies proportionately to a half share of 50 or to a quarter share of 25. For example, as regards the whole share, a person paying 13s. a month regularly to the society is entitled, at the end of ten years, to be repaid a lump sum of 100, and any bonus added thereto which the profits of the society may afford. If the term be fifteen years, then, to secure 100, he will have to pay only 7s. 7d. every month, and if twenty-one years, then a monthly payment of 4s. 7d. The terms vary in different societies, but those quoted have been adopted by an exist- ing institution of repute. If the term of ten years is selected, the depositor will have saved and paid to the society (with added interest) 78 in all; if the term of fifteen years is chosen he will have paid 68 5s. in all; and if twenty-one years be adopted, 57 15s. In either case, at the end of the term he has selected, the depositor will be paid back 100. Thus any one taking a share for 100, and keeping up the instalments for twenty-one years, will in the end have paid only 57 15s. for it — the difference being met by the interest paid by borrowers from the society. The following table shows particulars of other terms and the monthly subscription payable:-

- Term Monthly Sub- Term Monthly Sub- of scription for a of scription for a Years. 100 share. Years. 100 share. - - s. d. s. d. 3 2 12 10 13 0 9 1 4 1 18 8 14 0 8 4 5 1 10 2 15 0 7 7 6 1 4 6 16 0 6 11 7 1 0 6 17 0 6 4 8 0 17 6 18 0 5 10 9 0 15 2 19 0 5 4 10 0 13 0 20 0 5 0 11 0 11 8 21 0 4 7 12 0 10 6 -

After the first year a depositor may, if desirous, withdraw, on giving one month's notice, the full amount he has paid, with interest, to the date when the subscription ceases. This prevents the possibility of any loss arising to a depositor in the event of his being unable to keep up his instalments, or desiring from any cause to with- draw from the society. It may, however, in case of a loss of confidence, operate seriously against the society, by the sudden withdrawal of de- posits. The following table shows the amount that could be claimed, in respect of the monthly subscriptions paid, at the end of the several years of membership.

SHOWING THE AMOUNT WITHDRAWABLE AT THE END OF EACH YEAR FOR THE RESPECTIVE MONTHLY SUBSCRIPTIONS STATED IN THE ABOVE TABLE. At the s. d. s. d. s. d. s. d. s. d. end of 2 12 10 1 18 8 1 10 2 1 4 6 1 0 6 17s. 6d. 15s. 2d. 13s. 11s. 8d. 10s. 6d. Year of per per per per per per per per per per Mem- month, month, month, month, month, month, month, month, month, month, bership. 3 years. 4 years. 5 years. 6 years. 7 years. 8 years. 9 years. 10 years. 11 years. 12 years. s. d. s. d. s. d. s. d. s. d. s. d. s. d. s. d. s. d. s. d. 1st 31 14 0 23 4 0 18 2 0 14 14 0 12 6 0 10 10 0 9 2 0 7 16 0 7 0 0 6 6 0 2nd 64 19 0 47 11 0 37 2 0 30 2 8 25 4 2 21 10 6 18 13 1 15 19 9 14 7 0 12 18 3 3rd 100 0 0 73 2 0 57 1 2 46 6 10 38 15 6 33 2 0 28 13 9 24 11 9 22 1 4 19 17 2 4th 100 0 0 78 0 2 63 7 2 53 0 2 45 5 1 39 4 5 33 12 4 30 3 5 27 3 0 5th 100 0 0 81 4 6 67 19 2 58 0 4 50 5 8 43 1 11 38 13 7 34 16 2 6th 100 0 0 83 13 2 71 8 4 61 17 11 53 1 1 47 12 3 42 17 0 7th 100 0 0 85 9 9 74 1 10 63 10 1 56 19 10 51 5 10 8th 100 0 0 86 17 11 74 9 7 66 16 10 60 3 1 9th 100 0 0 86 0 1 77 3 8 69 9 3 10th 100 0 0 88 0 10 79 4 9 11th 100 0 0 89 9 11 12th 100 0 0 13th 14th 15th 16th 17th 18th 19th 20th 21st

- At the end of 9s. 1d. 8s. 4d. 7s. 7d. 6s. 11d. 6s. 4d. 5s. 10d. 5s. 4d. 5s. 4s. 7d. Year of per per per per per per per per per Mem- month, month, month, month, month, month, month, month, month, bership. 13 years. 14 years. 15 years. 16 years. 17 years. 18 years. 19 years. 20 years. 21 years. s. d. s. d. s. d. s. d. s. d. s. d. s. d. s. d. s. d. 1st 5 9 0 5 0 0 4 11 0 4 3 0 3 16 0 3 10 0 3 4 0 3 0 0 2 15 0 2nd 11 3 5 10 5 0 9 6 5 8 10 2 7 15 10 7 3 5 6 11 3 6 3 0 5 12 9 3rd 17 3 8 15 15 2 14 6 8 13 1 5 11 19 7 11 0 5 10 1 9 9 9 1 8 13 5 4th 23 9 9 21 11 0 19 11 10 17 17 5 16 7 7 15 1 5 13 15 10 12 18 7 11 17 1 5th 30 2 3 27 12 6 25 2 3 22 18 3 20 19 11 19 6 5 17 13 8 16 11 6 15 3 11 6th 37 1 5 34 0 3 30 18 3 28 4 0 25 16 11 23 15 8 21 15 4 20 8 1 18 14 1 7th 45 4 2 40 14 2 37 0 0 33 15 3 30 18 9 28 9 3 26 1 1 24 8 6 22 7 10 8th 53 18 9 49 8 3 44 18 0 40 19 10 36 5 8 33 7 8 30 11 1 28 12 11 26 5 2 9th 62 2 4 56 17 8 51 13 10 47 3 8 43 3 5 39 14 10 35 5 8 34 2 7 30 6 5 10th 70 13 5 64 14 6 58 16 5 53 13 8 49 2 7 45 4 5 41 7 5 38 16 8 34 11 9 11th 79 13 1 72 19 4 66 6 3 60 10 3 55 7 9 50 19 8 46 12 10 43 15 7 40 1 5 12th 89 1 9 81 12 4 74 3 5 67 13 8 61 19 1 57 0 5 52 3 5 48 19 5 44 16 5 13th 100 0 0 90 16 8 82 8 5 75 4 2 68 17 0 63 7 5 57 19 7 54 10 0 49 16 3 14th 100 0 0 91 1 9 83 2 5 76 1 10 70 0 8 64 1 6 60 0 0 55 1 1 15th 100 0 0 91 8 5 83 13 11 77 0 _ 70 9 7 65 18 8 60 11 1 16th 100 0 0 91 8 5 84 7 8 77 4 0 72 3 5 66 6 8 17th 100 0 0 92 1 10 84 5 3 78 14 5 72 8 0 18th 100 0 0 91 13 6 85 11 11 78 15 5 19th 100 0 0 92 16 4 85 9 2 20th 100 0 0 92 9 8 21st 100 0 0 -

For example, the depositor of 13s. a month for a ten years' term, if he desired to withdraw his savings at the end of six years, would be entitled to 53 1s. 1d.; the depositor of 7s. 7d. a month for fifteen years could claim, at the end of the ninth year, 51 13s. 10d.; and the depositor of 4s. 7d. a month for twenty-one years could get back 44 16s. 5d. at the expiration of the twelfth year. In each case the earnings of the depositor would have been increased by the interest added.

BORROWERS.

A member desiring to effect an immediate purchase of a house or property may borrow the money required by depositing the title deeds with the society as security, and repaying the loan by instalments, monthly or quarterly. Or if he elect to build a house himself; he deposits the deeds of the land with the society and takes up a loan by instalments as the work proceeds. In this case an architect or surveyor would have to give a certificate from time to time to the effect that so much money could be advanced upon the work actually done; and the repayment of the loan would only begin when the house was finished. The following table shows the repayments required, including interest for each 100 advanced:-

Term of years. Monthly. Quarterly. s. d. s. d. 1 8 14 0 26 4 6 2 4 10 0 13 11 4 3 3 3 0 9 9 11 4 2 8 9 7 7 0 5 2 0 3 6 1 4 6 1 14 7 5 4 3 7 1 10 6 4 12 0 8 1 7 6 4 2 11 9 1 5 2 3 15 11 10 1 3 5 3 10 7 11 1 1 11 3 6 1 12 1 0 8 3 2 4 13 0 19 8 2 19 4 14 0 18 9 2 16 6 15 0 18 0 2 14 3 16 0 17 4 2 12 3 17 0 16 9 2 10 6 18 0 16 2 2 8 9 19 0 15 8 2 7 3 20 0 15 3 2 6 0 21 0 14 11 2 5 0

And in like proportion for larger or smaller loans.

In many societies it is a common practice to ballot amongst the members for the right to receive an advance (sometimes without carrying interest) which right may be transferred, for a consideration, to some other member.

By this table it will be seen that a person borrowing 100 for ten years would have to repay the amount by monthly instalments of 1 3s. 5d., or by quarterly instalments of 3 10s. 7d., and if borrowing for a term of twenty-one years, then by monthly instalments of 14s. 11d., or quarterly of 2 5s.

Now, if we refer to the depositor's table of rates, we shall find that he has, for a ten years' term, paid to the society 78, and received back 100; thus receiving from the society 22 (the difference) for the use of the money, plus the interest added. On the other hand, a borrower of 100 for the same term pays back, beyond the capital sum of 100, as much as 40 2s. in interest. Thus there is a difference of 18 2s. between the interest received by the depositor and that paid by the borrower. This constitutes the gross gain of the society on these trans- actions, but out of it has to be paid the expenses of the office, salaries of officials, and a reserve provided for bad debts, &c.

The social and moral utility of societies estab- lished for the direct purpose of aiding a man to become proprietor of his dwelling-house is obvi- ous, and the above calculations seem to show that a society conducted on the plan represented would earn an ample margin of profit for all contingencies.

Doubtless the greater number of the existing building societies, including the one whose figures have been quoted, are conducted in a safe and legitimate manner, but there have been, and may still be, exceptions.

As an inducement to join a building society, people are told that they have to pay, on the instalment system, the same as though they paid the rent of a house, and in a few years will become the owner. A man who has paid for three or four years only what he would have paid for rent, would have very little hesitation in throwing up his contract with the society, if the locality became objectionable to him or the in- evitable repairs of a cheap house were more than he could bear. The money borrowed is lent chiefly upon the security of small suburban houses, a kind of property always in course of depreciation, and it may be that the society would have returned upon its hands a number of houses in a bad state of repair and in a dete- riorating locality. The instalments having ceased and the houses void, the property becomes a profitless burden upon the society and a probable ultimate loss. When "jerry" builders are large customers of a building society and have some influence, direct or indirect, with its Board of Directors, the evil is greatly aggravated. Whole streets are built with borrowed money, on specu- lation until, perhaps, there are twice as many houses as can possibly be let.

The society, to protect itself, is bound to con- tinue advancing until it is drawn completely into the net and finds itself encumbered with a lot of unsaleable and useless property. To stave off the evil day when all things must be disclosed to the trusting member, "financing" is restored to, money raised on direct deposit, and advances obtained from banks. The money thus raised tides the society over their difficulties for a time, but it may be that some rumour or report influ- ences members and depositors to withdraw their money, and eventually the coffers are empty and the end arrives.

Unhappily, in the collapse of more than one building society during the last few years there have been revealed frauds and dishonesty of the most flagrant character, and hundreds of trusting investors of the industrial classes have been ruined through the machinations of scoundrels, some of whom posed as philanthropists and ultra righteous members of society. To protect the interests of members and depositors, only men of unimpeachable character and business ability should be elected Directors of a building society, and the audit ought to be of the strictest char- acter. The balance-sheet should present details of the securities upon which the advances are made, and the auditors should certify that they have examined the deeds and identified them as representing the property described in the balance-sheet. Generally speaking, the auditors appointed by the members are not lawyers, and have not the necessary skill for verifying the documents relating to the property, indeed they are not expected to do so. One of the auditors should certainly be legally qualified to ascertain that the securities of the society do represent the properties set forth in the balance-sheet, and he should give a certificate to that effect. If this course were insisted upon, such scandals as have been brought to light could hardly be repeated, where one set of deeds was made to do duty for the assets of three distinct societies, each man- aged by the same Board of Directors; and the case in which the deeds of abandoned or destroyed property were palmed off upon the auditors to represent securities which had practically no existence. The industrial classes are less careful than those above them in seeing to the safety of their investments, and some legislation seems to be called for to prevent their hard-earned savings being frittered away by bad management or rank dishonesty.



CHAPTER XI. THE POST OFFICE SAVINGS BANK.

THIS institution offers a most admirable, con- venient, and secure depository for the savings of the industrial classes and of others. Its value to the thrifty and timid investor is incalculable, for here he may rest satisfied that he has abso- lute security, and the system is so hedged about with safeguards that it is difficult to discover any means by which loss can be sustained. The interest allowed is not high, but reasonable enough when the perfect security and the facili- ties offered are taken into consideration.

Money may be deposited by any person over seven years of age, and by anyone on behalf of children under seven. Also by married women, and with this advantage, that such deposits, unless and until the contrary is proved, are deemed to be the property of such married woman; moreover, the fact that any deposit is standing in the name of a married woman being prima facie evidence that she is entitled to draw the same without the consent of her husband.

Deposits may be made by two or more per- sons, provided no one of them has any other account in a Savings Bank, and by one person as trustee for another person. On opening an account a person has to sign a declaration to the effect that he takes no personal benefit from any other account in the Post Office Savings Bank or in a Trustee Savings Bank, and should this declaration not be true all sums so deposited will be liable to forfeiture.

Any person opening an account, that is, de- positing money with a Post Office Savings Bank, will receive a book in which the amount is entered, and the signature of the Postmaster and stamp of the office affixed to the entry. In addition to this he will receive from the depart- ment in London, a few days after, a receipt for the amount. Once in each year, on the anni- versary of the day on which his first deposit was made, the depositor should forward his book to the Controller of Savings Banks, London, in order that it may be compared with the books of the department in London, and that the in- terest may be inserted in it. A depositor may add to his deposits at, and withdraw the whole or any part of them from, any Post Office in the United Kingdom without change of deposit- book. It will thus be obvious that all deposit accounts, although operated upon through the branch post office, are really kept at the Savings Bank Department in London, and depositors are so kept in touch with the department that complete protection is afforded them.

Any sum from one shilling upwards (but excluding pence) may be deposited, subject to certain limits. These limits are 50 a year, that is, no more than 50 will be received on deposit in any one year, but any withdrawals during the year may be re-deposited once, and once only. No more than 200 in all can be held on behalf of a depositor. The reason for these limits apparently is that the bank was created for the encouragement of saving habits in, and providing a secure place for, the money of thrifty people of small means, and not for investment of the capital of the wealthy. Interest at 2 10s. per cent. per annum, which is at the rate of sixpence a year, or one halfpenny a month, for each com- plete pound, is allowed on ordinary deposits and added to the principal; but when, by the addi- tion of interest or from any other cause, the deposit is raised to above 200, interest is allowed on 200 only, and the excess over that sum, when it amounts to 5, is applied to the purchase of Government Stock, unless the de- positor desires otherwise. When a person has 200 to the credit of his deposit account, he cannot make any further addition thereto, but the Post Office will invest this sum, or any part of it, for the depositor in Government Stock, and he can then continue paying in money to his account as before until the sum again reaches 200. No more than 200 Government Stock can be purchased in any one year, and the total amount of stock standing in a depositor's ac- count at any one time must not exceed 500. The dividends or interest on any Government Stock is credited periodically to the holder's ordinary deposit account. When a depositor wishes to withdraw the whole or any part of his money, he has to fill up and forward to the Savings Bank Department in London, a notice of withdrawal, and a form for the purpose may be obtained at any Post Office Savings Bank. He will then receive by post a warrant, on pre- sentation of which, at any branch Post Office he may have selected, payment will be made. Pay- ment by a warrant may be made to another person on behalf of the depositor, provided the latter signs a form of authority for the purpose, which form may be obtained at any Post Office Savings Bank.

A depositor of the age of sixteen and upwards may nominate any person to receive any sum (not exceeding 100) due to such depositor at his death. Every nomination must be in writing on the proper form, which may be obtained from the Controller of the Savings Bank Department, in London, to whom the nomination must be sent during the depositor's life-time.

Where, at the time of the depositor's death, the amount standing to his credit exceeds 100, it will be necessary, in order to obtain payment, that probate of his will, if any, or letters of administration (if he has died intestate), should be obtained in the usual manner.

Where the whole amount standing to the credit of a depositor at the time of his death, inclusive of Government Stock, does not exceed 100, in default of a nomination, or probate, or letters of administration, payment may be made:-

To any person who has paid the funeral expenses of the depositor; To creditors of the depositor; To the widow or widower of the depositor; To the persons entitled to the effects of the deceased according to the Statute of Distribution. To any other person establishing, to the satisfaction of the Postmaster General, a claim in accordance with the Statutes and Regulations relating to the Post Office Savings Bank.

The salient points of the Post Office Savings Bank have been placed before the reader, but in connection with the system there is another organization, for the purpose of purchasing Government Annuities and effecting Life Insur- ance, of so varied and elaborate a character that every possible requirement seems to be provided for. The "Post Office Guide," which is pub- lished quarterly, contains voluminous tables and explanations in respect of this organization, and full details and clear directions for the guidance of the public in regard to the Savings Bank.

The growing success which attends these several institutions is an unmistakable indica- tion of the value set upon them by the people. The prudent and thrifty have not been slow to take advantage of the benefits they offer, not the least of which are the freedom from doubt and anxiety they enjoy as to the safety of their money, and the certainty felt that, though other concerns may fall and involve their victims in ruin, here there is absolute and permanent security.



APPENDIX



TABLE OF INTEREST ON INVESTMENTS. Showing how the rate of interest actually received varies according to the amount paid for the Stock.

Example. — If a purchaser gives 88 for 100 6% stock, he will find that the rate of interest on the sum invested is 6 16s. 6d., being the amount in the column headed 6%, opposite to 88 in the first column.

Price per 3 4 4 1/2 5 5 1/2 6 7 100. pr. ct. pr. ct. pr. ct. pr. ct. pr. ct. pr. ct. pr. ct. - s. d. s. d. s. d. s. d. s. d. s. d. s. d. 125 2 8 0 3 4 0 3 12 0 4 0 0 4 8 0 4 16 0 5 12 0 120 2 10 0 3 6 8 3 15 0 4 3 4 4 11 8 5 0 0 5 16 8 115 2 12 2 3 9 7 3 18 3 4 7 0 4 15 8 5 4 4 6 1 9 110 2 14 6 3 12 9 4 1 9 4 10 11 5 0 0 5 9 0 6 7 3 105 2 17 2 3 6 2 4 5 9 4 15 3 5 4 9 5 14 4 6 13 4 98 3 1 3 4 1 8 4 12 10 5 2 0 5 12 2 6 2 6 7 2 10 96 3 2 6 4 3 4 4 13 9 5 4 2 5 14 4 6 5 0 7 5 10 94 3 3 9 4 5 0 4 15 7 5 6 4 5 17 0 6 7 6 7 8 10 92 3 5 3 4 7 0 4 17 10 5 8 9 5 19 7 6 10 6 7 12 3 90 3 6 8 4 8 10 5 0 0 5 11 1 6 2 3 6 13 4 7 15 7 88 3 8 3 4 10 10 5 2 4 5 13 7 6 5 0 6 16 6 7 19 0 86 3 9 9 4 13 0 5 4 7 5 16 3 6 7 11 6 19 6 8 2 9 84 3 11 6 4 15 4 5 7 3 5 19 1 6 11 0 7 3 0 8 6 9 82 3 13 1 4 17 6 5 9 7 6 2 0 6 14 2 7 6 3 8 10 7 80 3 15 0 5 0 0 5 7 6 6 5 0 6 17 6 7 10 0 8 15 0 78 3 17 6 5 2 10 5 15 8 6 8 7 7 1 6 7 14 3 9 0 0 76 3 18 10 5 5 2 5 18 4 6 11 6 7 4 7 7 17 8 9 3 11 74 4 1 0 5 8 0 6 1 6 6 15 0 7 8 6 8 2 0 9 9 0 72 4 3 4 5 11 1 6 5 0 6 18 11 7 12 9 8 6 8 9 14 5 70 4 5 9 5 14 3 6 8 7 7 2 10 7 17 6 8 14 3 10 0 0 68 4 8 1 5 17 6 6 12 2 7 7 0 8 1 9 8 16 3 10 5 9 66 4 10 0 6 0 0 6 15 0 7 10 0 8 5 0 9 0 0 10 10 0 64 4 13 9 6 5 0 7 0 8 7 16 3 8 11 10 9 7 6 10 18 9 62 4 16 9 6 9 0 7 5 1 8 1 3 8 17 4 9 13 6 11 5 9 60 5 0 0 6 13 4 7 10 0 8 6 8 9 3 4 10 0 0 11 13 4 58 5 3 5 6 17 10 7 15 1 8 12 4 9 9 7 10 6 10 12 1 4 56 5 7 1 7 2 10 8 0 8 8 18 6 9 16 4 10 14 3 12 10 0 54 5 11 9 7 8 0 8 6 9 9 5 0 10 4 3 11 2 0 12 19 0 52 5 15 3 7 13 6 8 12 10 9 12 3 10 11 4 11 10 6 13 9 0 50 6 0 0 8 0 0 9 0 0 10 0 0 11 0 0 12 0 0 14 0 9 48 615 0 8 6 8 9 7 6 10 12 6 11 9 0 12 5 0 14 11 8 46 6 10 4 8 13 10 9 15 0 10 17 4 11 19 0 13 0 0 15 4 2 44 6 16 1 9 1 10 10 4 6 11 1 9 12 10 0 13 12 9 15 18 2 42 7 2 9 9 10 2 10 19 3 11 18 0 13 2 0 14 5 3 16 13 4 40 7 10 0 10 0 0 11 5 0 12 10 0 13 15 0 15 0 0 17 10 0 36 8 6 8 11 2 2 12 10 0 13 17 9 15 5 0 16 13 4 19 15 7 32 9 7 6 12 10 0 14 1 3 15 12 6 17 3 9 18 15 0 21 17 6 30 10 0 0 13 6 8 15 0 0 16 13 4 18 6 8 20 0 0 23 6 8 26 11 10 0 15 7 9 17 6 3 19 5 0 21 3 6 23 1 6 26 18 6 20 15 0 0 20 0 0 22 10 0 25 0 0 27 10 0 30 0 0 35 0 0 15 20 0 0 26 13 4 30 0 0 33 6 8 36 13 4 40 0 0 46 0 0 10 30 0 0 40 0 0 45 0 0 50 0 0 55 0 0 60 0 0 70 0 0



EXAMPLES OF BUSINESS COMMUNICATIONS.

CORRESPONDENCE.

(Sending Money by Post.)

Address Date The Manager, Blankshire Bank.

Sir, Please place the amount of the enclosed cheques and notes to the credit of my account and acknowledge receipt to Yours faithfully JANE SMITH.

Cheque 20 0 0 Notes 45 0 0 ———- 65 0 0

(Requiring Money.)

Address Date The Manager, Blankshire Bank.

Sir, I shall be obliged by your sending me under registered cover to the above address 15 in 5 Bank of England notes for which I enclose my cheque. Yours faithfully JANE SMITH. Blanktown.

(Acknowledging Receipt.)

Address Date The Manager, Blankshire Bank.

Sir, I have to acknowledge with thanks the receipt of 15 in bank notes. Yours faithfully JANE SMITH. Blanktown.

(Transfer to Deposit Account)

Address Date The Manager, Blankshire Bank.

Sir, I shall be obliged by your transferring 300 from my current account to a deposit account and forwarding me the receipt. I enclose a cheque for the amount. Yours faithfully JANE SMITH. Blanktown.

(Arranging for Cheque to be Honoured by Another Bank.)

Address Date The Manager, Blankshire Bank.

Sir, I shall be obliged if you will advise your Branch (or some other Bank) at Liverpool to pay me 20 on application. Yours faithfully JANE SMITH. Blanktown.

(Request for Passport and Circular Notes.)

Address Date The Manager, Blankshire Bank.

Sir, I propose during the next two or three months to travel on the Continent accompanied by my niece, Miss Lucy Smith, and my maid, Jane Parker. Will you kindly obtain a passport for us and also forward me 100 in circular notes, for which I enclose my cheque. Yours faithfully JANE SMITH. Blanktown.

(Ordering Letter of Credit to Remit.)

Address Date The Manager, Blankshire Bank.

Sir, I desire to send 120 to John Smith, residing near Winnipeg, in North America; and shall be obliged if you will send me the necessary form to remit to him so that he may obtain the money without difficulty or delay. Yours faithfully JANE SMITH.

N.B. — Remittances in this way can be sent to almost every town in the civilised world.

(Remitting in this Country.)

Address Date The Manager, Blankshire Bank.

Sir, I shall be obliged by your advising your Branch Bank (or some other Bank) in Leeds, to pay George Jones on application the sum of 54, for which I enclose a cheque and a specimen of Mr. Jones's signature. Yours faithfully JANE SMITH. Blanktown.

(Lodging Securities at Bank.)

Address Date The Manager, Blankshire Bank.

Sir, I shall be obliged by your taking charge for me of some securities which you will find specified on the other side, and hold them for safe custody. Please also cut off and collect the coupons attached to the Bonds and place the amounts from time to time, as they fall due, to the credit of my account. Yours faithfully JANE SMITH. Blanktown.

(Order to Receive Dividends.)

Address Date The Manager, Blankshire Bank.

Sir, I am desirous that the dividends or interest in my stock shall be paid to the bank direct for the credit of my account. Kindly send me the proper form or order for my sig- nature. Yours faithfully JANE SMITH. Blanktown.

(Ordering Investments.)

Address Date The Manager, Blankshire Bank.

Sir, Please purchase on my account 500 stock 2 3/4 per cent. Consols at the market price, and send me an account of the same when I will forward my cheque in payment. Yours faithfully JANE SMITH. Blanktown.

Or

Please purchase 500 Preference (stating which stock) Stock in the Great Blankshire Railway, at a price not exceeding 150 per cent., in my name, and send me the account for the same, when I will forward my cheque for the cost. Yours faithfully JANE SMITH.

The same form can of course be adapted for selling out, by substituting "sell" for "purchase," writing "less" for "not exceeding," and omitting the line as to forwarding the cheque.

THE END