Do those cents really add up?

The Mof's One Year National Savings Service Badge.

When I was in primary school in the 1970s, the local Commonwealth Bank staff would visit the school regularly for children to deposit small amounts of money into their school savings accounts. These were interest-bearing deposit accounts which converted to regular bank accounts when the children left school. 'School Banking Day' was a long-standing tradition.

There is a excellent short filmclip at the Australian Screen website showing school children arriving at school in 1951 and giving their teacher small deposits of coins which he records in their bank books.

Before our time, the concept of regular bank savings was drummed into children from a young age, and it was not a phenomenon particular to Australia.

The Mof recalls that in Scotland:

The maxim of, "Look after the pence and the pounds will look after themselves," was drilled into us as children and we were encouraged to save whatever we earned or were given. Apart from the piggy bank, which could be rifled in desperation, one of the common ways to save was through the National Savings scheme.

The National Savings scheme was started in Britain during the First World War. The British Government introduced several ways to save as they needed both to reduce borrowings and raise funds for the war effort. The National Savings Movement, as it was originally called, grew from volunteers who organised Local Savings Committees and was launched at the Guildhall in London in 1916 with the intent to encourage British people to save and prosper.

Groups were formed in factories, shops, clubs and schools with an organiser collecting and recording the monies on a weekly basis. Savings took the form of savings stamps, certificates and bonds.

On a personal level I first encountered National Savings as it came to be known, as a student in primary school. Every Monday morning children arrived with their few pennies (the well off ones may have had a shilling!) to be collected and recorded by the teacher. On reaching a certain amount, which may have been 20 shillings (one
pound) or perhaps 21 shillings (a guinea) the child was given a savings certificate.

Later as a teacher I was on the collecting and recording side. Every year a district National Savings conference was held at a very swish hotel -- one I would never have been able to frequent as a humble teacher!

Service badges were awarded to the volunteer collectors. The one year badge was as far as I aspired, as I then married and came to Australia.

Nowadays we still encourage our children to save, but I suspect that the physicality of clutching coins in your sweaty hand on the way to school, handing them over and watching as the numbers recorded in your passbook grew each week is somewhat diluted by e-banking methods.

Although my husband and I insist that our daughters save some of their pocket money each week, it is transferred automatically via a direct debit to their account. It must be hard for them to imagine that the money even exists!

They do however, 'save up' their disposable pocket money in their purses for things they want to buy, and the youngest has started collecting every stray five cent piece she finds around the place and putting them into a container in the kitchen. It is surprising how many wayward five cents there are in this world! It's a slow process, but she now has a couple of dollars in the container. For her, this provides the joy that 1950s children may have had watching their bank deposits grow.

Does the electronic nature of banking today challenge children's concepts of long-term saving? Do school banking savings schemes still exist? How do you encourage children to save for the future?

Minding your money

The art of saving money is very much a woman's province. Women handle most of the money in the world. Though men are often good with money, women are generally better. Once they have established a goal, they can find ways to cut costs, while maintaining their living standards.

The first goal should be stabilising the family expenditure, the second to establish a sinking fund for emergencies, the third, getting hold of some money on which to base the family fortune.

"Are you making the most of your money?"

Australian Home Journal, February 1967

You can't turn around at the moment without encountering a reference to the Global Financial Crisis (GFC). The newspapers, TV news, radio reports - they're all full of it.

All of which is having the effect of making people very conscious of their own personal finances. Every day I have casual conversations with people about the changes they are making to their spending, or the impact the GFC has had on their superannuation accounts, or how their families, friends or acquaintances have been affected by job restructuring.

The boom-time mentality of the past ten years or so is definitely over.

Perhaps it is time to revisit some of the wisdom regarding finances from before our time.

I was intrigued to read an article from the February 1967 issue of Australian Home Journal and realise how much of what was written then has application today.

"A home is as much a business as a corner shop, and books should be kept. Not the great ledgers of Charles Dickens' times, and certainly not the soul-destroying budget books which list every packet of chewing gum. Just buy a small cashbook, write the month at the top of a double page, make one side the credit side and the other the debit."

In today's world it is easy to lose track of money coming in and going out. ATM withdrawals, direct debiting, eftpos, internet banking, cheque books, credit card charges...it takes a fastidious home accountant to keep on top of it all. But unless you do, how can you keep track of where your money is going and where savings could be made?

"Food is the most flexible item on the agenda and the one where all the economy usually starts."

It seems obvious, but we've become so used to buying what we want, when we want it, that we often forget there is a price to eating out of season. Fruit and vegetables are cheapest when they are in season. With a large freezer, food can be bought in bulk when it's cheap and then consumed throughout the year. Of course, if you don't have a large freezer already it may be false economy to go out and buy one! In our own household, we're currently clearing out our freezer in order to buy a half-side of beef. There are a number of 'cow-pooling' schemes springing up around the world, where families get together to buy a whole cow direct from a farmer and split it up between them. This means you may have to be a little more creative in your menu choices and start to exploring cooking with cuts of meat you don't normally buy, but it can bring the cost per kilo of the meat over the entire carcass down considerably.

"Impulse-buying, according to one bank manager, is probably the worst sin in the business of managing money...'Impulse spending can become a habit that grows and grows, until the impulse is an expensive holiday, or even an unsuitable house.'"

I don't think it takes a bank manager to point out the flaws in the habit of impulse buying! But I'm sure we've all been guilty of buying something on an impulse. It takes a fortitude of spirit to stop and ask, "Do I really need this?"

"Live within your income."

Again, obvious. But do you think all of our global financial managers followed this rule?

"Spend no more than one fifth of your income on rent, or equivalent mortgage payment."

This is one area where costs have slowly crept up over the past forty years. According to the Australian Bureau of Statistics 2008 Yearbook in 2005-2006, "For the majority of owner and renter households, housing costs represented less than 25% of gross household income, but for some it was more than 50%.

"Wherever possible buy goods for cash - and use the fact that you are a cash buyer to obtain a discount."

Cash talks. In the current environment, you can certainly negotiate discounts by offering cash.

Definitely some food for fiscal thought there.

What is your favourite money-management tip from before our time?