(b) It gives to every depositor the greatest safety possible, as "the faith of the United States is solemnly pledged" for the repayment of depositors.
(c) It brings a savings institution to many a small town and rural place formerly entirely lacking in facilities for small depositors. The benefit of this has not immediately appeared to be great, but may in time prove to be.
(d) It pays interest from the first of the month following the date of deposit, whereas the usual practice of savings and commercial banks is to pay only from the beginning of the quarter year or half year.
(e) It provides for the exchange of deposits for bonds hearing a higher rate of interest—a unique feature greatly simplifying for the small saver the process of buying bonds for more lasting investment.
In some respects, however, the postal savings system offers less favorable conditions than do ordinary banks, and its usefulness was deliberately restricted by provisions in the law, as has been clearly pointed out and deplored by com petent critics. The post-office will not receive deposits of less than one dollar, whereas regular savings banks usually accept for deposit as small an amount as ten cents. It pays only 2 per cent interest (only half as much as the regular savings banks now pay) and only for a full year instead of quarterly. Only simple interest is paid, not interest com pounded automatically, as in the case of banks. These and other features of the law so greatly restrict the usefulness and appeal of the system that its failure to grow is not surprising. With wise and proper changes it should be pos sible to refund a large part of the national debt in securities issued in small denominations through the postal savings system.
§ 9. Collection of savings and education in thrift. Small savings have been encouraged in many places by penny provi dent funds, dime savings banks, and school savings funds, which have been conducted at public schools, social settle ments, and factories, by school officers and by charitable and educational societies acting through canvassers. These plans all call for much personal effort and cost, which must be pro vided by volunteer services and private gifts. These plans being undertaken mainly as a means of education in thrift and in the related moralities, their results are not to be meas ured merely by the magnitude of the sums collected. They are not rivals of the ordinary savings banks, but rather auxiliary methods of encouraging their use. The funds col lected by these agencies are usually deposited in local savings banks, and depositors are encouraged to open individual ac counts there, whenever they have considerable sums saved.
Before the Great War began, public schools in Germany were equipped with automatic machines vending savings stamps in as small denominations as ten pfennigs cents) when a coin was dropped into a slot. This method could be used effectively in connection either with the postal sav ings system or with a local savings bank. It ought to be made easy to deposit funds at every schoolhouse, at every post office, at every factory counter on pay-day, and wherever people pass in numbers. Allurements to foolish expenditures meet old and young at every turn ; to spend the nickel or the dime is made all too easy, whereas to save it and deposit it in a safe place too often calls for wasteful and discouraging efforts from the person of small means.
§ 10. Building and loan associations. Building and loan association is the name applied to a cooperative organization having as its purpose the collecting regularly from mem bers of small sums which are loaned to some members for the purpose of building or paying for The first associa tion of this type was organized in Frankford, Pennsylvania, in 1831. It and others of its kind have made Philadelphia notable among all the larger cities as "the city of homes." The number of such associations has almost steadily increased in the United states. Pennsylvania continues to rank first in respect to amount of total assets, with Ohio a close second, and New Jersey third (though ranking first in proportion to population). Associations of this type have been hardly second in importance in America to the savings banks as institutions for savings for persons of moderate means. The number of their members (in 1920) was 4,300,000, which is about one third of that of savings banks depositors, and the amount of their assets ($2,100,000,000) is nearly one third that of the reported savings banks. But they are growing more rapidly, and their relative influence in educating and en couraging to thrift is doubtless much greater than these figures indicate. There are nearly eight thousand of them, more than three times as many as savings banks ; their manage ment is much more democratic than is that of the banks ; and many of their members attend and participate in the meetings and understand how they are conducted. Moreover, the savings made through these associations are constantly passing on into houses that are fully paid for, and that continue to yield their usances and rents to their owners. Each year these associations collect from their members as dues and in repayment of loans (made to build houses) the sum of more than half a billion dollars, which is twice as 8 See Vol. I, pp. 290, 297-298, 484, and 486.