TO THE POINT
“Lessons in Thrift”
In the early 1930′s, when I was in grade school at P.S. 41 in New York City, a weekly ritual took place in our classes. Each week students had the opportunity to participate in a savings plan sponsored by a local savings bank. Our nickels and dimes were collected (there were not many quarters in those days) and placed in individual banks which were then forwarded to the bank and credited to our account. In retrospect, I am quite sure, given the smallness of the accounts, that this was not a moneymaker for the bank. Rather, it was part of the educational process regarding the importance of thrift. Banks in that era regarded the promotion of thrift as an important part of their mission and what better place to instill this philosophy than young children.
Still later, in the late 1930′s when I was making more money carrying a paper route in Columbia, South Carolina and working at an Army P.X. at Fort Jackson, I was introduced to another form of thrift. In those days, the post office sold Postal Savings Bonds and promoted the idea of a “bond a week” program. Dutifully, I bought a small bond, usually two to five dollars each week. Because cashing in the bonds was not as handy as writing a check, my account grew steadily.
However, when I joined the Army Air Corps in June of 1941, I cashed in all my bonds except one for one dollar. I still have that bond despite the fact that the post office used to write me regularly to cash it in so they could get it off their books. I kept it as a reminder of the necessity for systematic savings no matter how tough the times were. Postal Savings Bonds gave way to War Bonds which could be purchased by payroll deduction plans, and now we have Treasury Bonds – all good lessons in thrift, if done systematically.
Still later, I entered the life insurance business in 1956 and was introduced to a new concept of systematic savings. I was raised in the business on the three-way security concept that money put into life insurance would benefit a person if they lived, died or quit. The objective was not so much to make a person rich, but rather to avoid poverty. The hard times of the Great Depression were still vivid in my memory, and this form of systematic savings held great appeal to me and I bought into the idea wholeheartedly.
The idea that life insurance savings were “double duty dollars” and the prospect of being my own banker in times of need or opportunity were consistent with the lessons I learned at P.S. 41 and the post office. Over the years, the concept of systematic thrift has served me well. We have saved thousands in interest that might have been paid to lenders, and now enjoy a retirement free of debt and with adequate income.
I bring this up because I do not see the lessons of thrift being promoted today as in former times. When the “do not call list” came into being, I did not sign up for it. I remembered my early days in the business when I spent hours on the phone just trying to get an appointment, and I could not bring myself to foreclose that opportunity to some struggling salesperson today. But as a consequence, I get lots of calls and most all of them promoting either spending or the acquisition of debt.
The irony of this is that the banks, once the champions of thrift, are, in my judgment, among the worst offenders. Never a day passes that I do not receive a call from someone offering to refinance our home. I reply that we have no mortgage, then they want to help “release the equity” in our house in order to more fully enjoy the life in some way.
Also on a daily basis, offers for all kinds of credit cards and home equity loans pour in from phone calls or are delivered by the post office. Everyone is offering systematic debt and the purveyors of systematic thrift are relatively silent. The financial product “du jour” is more often something to provide a quick return rather than a roadmap to real financial security.
In a recent column, N.U. editor-in-chief, Steven Piontek, expressed a concern that I share: Most young people I know have interest-only mortgage loans that could well be a future disaster. Interest-only loans are not a system of thrift, but in many cases a system of indenture. Additionally, many of the same people are up to the eyeballs in credit card debt because of loose credit employed by banks.
Going with the flow and selling to popular whims and concepts is relatively easy. But it is the tough sale, the one that breaks through a person’s sense of denial about reality that is more often the right sale. True financial security rests more on the system used rather than the hope of a lucky purchase.
It is not likely banks and other lenders will change their way, and the post office has been reduced to that of a deliverer of ways to access debt. Over the years, life insurance people have focused their efforts on a systematic way to save and protect. It seems to me this is the kind of lesson in thrift that is needed today more than ever.