Saving on Time


By CHARLES W. GREEN, Franklin Square National Bank, Franklin Square, N. Y.

Delivered before the Savings Division, American Bankers Association War Service Meeting, New York City, September 13, 1943

Vital Speeches of the Day, Vol. X, pp. 85-87.

IT is highly improbable that a generation reared on instalment buying, and whose income for years has been apportioned in advance of each pay day will suddenly become budget-wise and set up their own machinery for regular savings even for as important a matter as home ownership.

For more than twenty years, manufacturers, distributors, retail stores, instalment loan houses and finance companies have educated our people to "Buy On Time." But with the disappearance of consumer durable goods the economic picture has changed completely. The last instalment notes on 941 durable goods purchases are being matured every day. Branch offices of loan and finance companies either have closed or are closing their windows—for the duration—and Mr. and Mrs. Public find, themselves with nothing to buy—no notes to pay—plenty of money in their pockets but with no leadership to direct their spending, nor attract their savings.

As a result of this condition, we spent twenty-three million, five hundred thousand dollars every twenty-four hours in 1942 for cigarettes, soft drinks, liquor, cosmetics, movies, juke boxes, and skill games, not including money spent at the tracks. The total estimate of non-essential spending by our people this year is placed at fifteen billion dollars.

Instead of letting this money slip through their combined fingers, why have our people not started to save a portion of each pay towards the partial or entire cost of the home and durable goods they will want as soon as they are available? Because the banks are failing to grasp the only opportunity they have had in twenty years to direct the spending and saving of our people. It is definitely the responsibility and the patriotic obligation of the banks to take over now. Be cause there is no other, the banks must assume the necessary financial leadership to indoctrinate our people with the desire to save objectively. As Doctor Ernest Fisher has aptly put it, "Save on Time" instead of "Buy on Time."

More than a million families have indicated their desire to build or buy a home after victory is won. Because the prospect must have either sufficient cash for the down payment or its equivalent in unencumbered land value, here are a million prospects for objective savings accounts. Here also are a million prospects for a sound mortgage investment for the banks.

While some of them may have already accumulated the down payment, they represent a small percentage of the total of those who will want a home when the war is over.

The first prospects for savings accounts are the thousands of disappointed home seekers who were caught in the building freeze when home construction became a war casualty. Their desire for a home still burns at white heat, but due to lack of a concrete plan they are of the opinion that nothing can be done about it now. In the meantime builder and buyer are static. Inflation continues to soar. We art putting off interminably what must be the first step taken by the home seeker when the war is over.

Let's go back to the time when home building was left in suspended animation. In every flunking area in the country, we find beautiful real estate developments in various stages of completion. Water, gas, electricity, sidewalks, streets, and curbs already in. Beautiful homes in rows or dotting the landscape. A promise of the completed development, approved by the F. H. A., building and loan associations, or savings banks.

It is here that the builders will again resume construction immediately, when materials are available. Likewise it is here the first home seeker will go to buy his home. Why not bring buyer and builder together now? Let the buyer select a home site in the development featuring homes at a price he can afford to pay, and open a specific savings account for his new home at once.

In order to make a saver we must give him something specific for which to save and the home site is the connecting link between the present and the future, for having taken the first step his future home becomes a concrete objective. Through objective and consistent savings he will be ready to build when the first critical materials are released. A survey of the present residents in the development will afford a list of prospects made up of relatives and friends who were prevented from buying a home in that area when war struck.

Banks should get together with the best development builder at once to work out their cooperative plans and policies. One or more choice developments, such as described earlier in this subject, of different price levels should be selected, as home buyers are classified automatically by the amount of money they can pay for a home. For example a prospect for a ten thousand dollar home should not be shown one in a five thousand dollar development and vice versa. So a minimum of two developments should be selected to have offerings for both price groups.

The publicity campaign should be approached exactly the same as under normal conditions, through newspaper advertisements, direct mail, radio and other effective advertising media. Many accounts will be opened immediately through this activity, as soon as the public realizes that something is being done now.

The prospective home owner should select his home site on one of two plans—either by outright purchase or by purchase option. On the first plan the one who has sufficient cash will become the immediate owner of the land and open a savings account for the building fund. The amount set up as savings should approximate the amount of his anticipated monthly mortgage payment. This will create the habit of saving today the sum he will have to pay tomorrow.

Those who are not so fortunate can use the second plan and reserve their home site through option, based on the annual payment of five per cent of the purchase price. For example, a home site costing five hundred dollars would require an option payment of twenty-five dollars per year, to the developer. If three years elapsed before the home could be built, the accumulated seventy-five dollars would be credited to the purchaser, in full. His objective savings account then would be opened for the purchase price of the land.

The home seeker will want to know what will happen to his savings account in the event he can not complete his building plans. Let it be definitely understood that he is in complete control of his savings account at all times. That his future home account is no different than any other savings account. If circumstances prohibit the home seeker who has purchased his home site outright from going through with the plan, he will return the land to the builder through original agreement, at the purchaser's cost. This will prevent land standing idle. It will enable the builder to complete the development.

If the home seeker operating on plan number two finds himself in the same condition, he forfeits the options paid to the builder, who is free to sell the home site to some other purchaser. There can be no other strings attached.

With regard to the future price of the homes, no dollar and cents commitment can be made. The selling price of the last homes built is known. The quality of materials and workmanship are self-evident. It is generally recognized that the future home will be built for the then prevailing price of materials and labor.

Obviously all costs must be competitive with other homes in comparable developments.

There will be some mortality in the ranks and plans of the home seekers, but a sufficient number of them will carry through td make the venture a real success. The number of homes thus planned now and the success of objective saving will depend entirely upon how agressively the banks and builders go after this waiting market. The future of private industry and free enterprise is in our hands.

Let us be forewarned here and now that this plan is not the old fashioned lot selling scheme. The banks are not interested in selling lots. The developer must not be. We are all familiar with the ghosts of vacant land, bought in sales of former years. Rank weeds and wild cherry trees are growing in profusion on the dead hopes and heavy losses of earlier investors in vacant land. This plan is to be used as a necessary concrete stepping stone from the present to the future. Go back and review the type of development I mentioned and look well to the builder or developer who originally started it and who will ultimately complete it. Because of his investment and because of the character and background of his development, select only the builder upon whom you and your depositors can depend.

Remember, first, last, and always that a bank's most important obligation and responsibility is to its depositors.

Over the past seven months, in cooperation with a builder and developer, we have set up over fourteen hundred accounts for prospective home owners. They are paying for their home sites now and when building materials are available most of these accounts will be turned into mortgages.

Were it not for the inauguration of the necessary plan, none of these accounts would have been started. It is likely that most of the money paid on these future homes would have been thrown into the pot with other aimless dollars. But due to the plan and foresight of the investors, the majority of these fourteen hundred savers will be ready to move in, while other hundreds will be trying to arrange for the down payment.

Last spring one of the oldest and largest builders of prefabricated homes placed an exhibit in one of New York's largest retail stores of a quarter size post-war home. Over a period of three weeks, seven thousand people viewed the exhibit, and three thousand, seven hundred indicated their desire to own such a home after victory.

By arrangement with the manufacturers we have contacted those future home owners who are located in our banking area and have opened a number of savings accounts. These deposits are being accumulated for the down payment and the ensuing mortgage is practically guaranteed.

That future home seekers are anxious to do something about their plans is evidenced by the several hundred customers of our bank who have registered in our Prospective Home Owners Department, and from whom we solicit savings accounts.

They receive a home owner's catalogue published by the F. W. Dodge Corporation, which contains the latest offerings of building materials, home equipment, and many types of accessories for the new home produced by the leading manufacturers. It is impossible to leaf through this catalogue and not plan a new home or determine to remodel the old.

This registration and catalogue plus the knowledge that ready money must be available to complete their plans leads many registrants to open an objective savings account.

Through the county recorder's office we have secured the names of owners of vacant lots. Many of these owners can be interested in building homes or business property at some future time either for speculation or owner occupancy.

We are emphasizing the post-war building opportunities and suggesting they open a post-war building account now so as to be ready for the opportunity after the war.

In this program of making savers we cannot confine our efforts to homes alone. There is another ten billion dollar market which likewise is "out of sight and out of mind,"—consumer durable goods such as automobiles, radios, washing machines, ironers and other items, which both the home seeker and established home owner will want as soon as they are available.

To make objective savers of these prospects we are opening Victory Club accounts, to be handled on the same plan as the Christmas Clubs.

Here again we find that something more than just the announcement of the inauguration of Victory Club accounts is necessary to get people to open an account.

In the lobby of the bank we are setting up a display of the latest models available of the several items mentioned. The last prices at which they were sold will be attached and this price will be the goal of the saver in his Victory Club account.

In order to make the savings objective, we have a special ub book for each item, for example:

Our New Radio—Our New Refrigerator—Our New Home, etc. If several articles are desired a separate account and club book is issued for each article. The cue for this department was taken from the regular Christmas savings clubs.

Every January in more than five thousand banks and savings institutions, approximately seven million, five hundred thousand men and women open Christmas Club accounts and deposit each week or month certain definite sums of money to be withdrawn by them in early December for Christmas buying of presents or durable goods for the home.

In 1942 more than four hundred million dollars was deposited in approximately eight million Christmas Club savings accounts.

It is common knowledge that the handling of Christmas Club accounts, as such, has been a direct expense to the bank. The majority of them have not produced any tangible results for the bank. But as applied to our plan for victory accounts they will be productive of a variety of new business, such as mortgage investments, personal finance, dealer business, and builder contacts.

Times does not permit a detailed examination of these various planks in our program to make savers of prospective home owners. Some of them are not as productive as others. They are all steps in the right direction. That these steps must be taken by all of the banks in order to assist in the rapidly approaching post-war readjustment is borne out by the fact that if each of the fifteen thousand banks in the country were able to start only five hundred objective savings accounts between now and the end of the war, we couldplace on industry's desk a total of seven million, five hundred thousand orders for homes and consumer durable goods, backed up with a savings account for each order.

You will encounter negative attitudes and age old procrastination in the establishment of your program for some builders, dealers, and distributors who feel that once the war is over something will happen to enable business to pick up where it left off. Some golden panacea will come from somewhere to create purchasing power and great volumes of orders. Because of this it is not necessary to do anything about it now. It is unfortunate that such thinking is presently creating the inertia that forces the thinking up and proposal of post-war plans that are far removed from the hopes and ambitions of private industry.

It is obvious that make-work projects will be commenced with the first widespread cancellation of war contracts unless industry has a backlog of orders on which to begin work and for the production of which will be needed most of the people who are presently employed. Meanwhile our national income for this fiscal year will total one hundred and fifty billion dollars. Living costs and all taxes will absorb a hundred and five billion dollars leaving more than forty billion dollars to burn holes in the combined pockets of our gainfully employed.

These are Free funds for Spending—or Free funds for Saving!

Which shall it be? The answer lies with our banks.