Everybody's Guide to Money Matters
Everybody's Guide to Money Matters by William Cotton, F.S.A.
CHAPTER I. EASY STEPS TO MONEY MATTERS.
MONEY is the medium by which we may acquire from others, who are willing to part with them, such things as we may desire. The price of an article is the value set upon it by the possessor, as represented by an expressed sum in money.
The price of some things are arbitrarily fixed by law or custom, such as stamps, professional fees, duties, &c.
The standard of value in this country is gold, and it is as against gold, represented by coins of different denominations, that the value of all commodities is estimated.
The authorised coins of the United Kingdom consist of the following pieces:-
GOLD. Five-sovereign piece, equal to Five pounds. Two-sovereign piece, equal to Two pounds. One-sovereign piece, equal to One pound. Half-sovereign piece, equal to Half-a-pound.
SILVER. A crown, or five-shilling piece, equal to one fourth of a sovereign. Double-fiorin, or four-shilling piece, equal to one-fifth of a sovereign. Half-a-crown, or two shillings and sixpence, equal to one-eighth of a sovereign. Florin, or two-shilling piece, equal to onetenth of a sovereign. Shilling piece, equal to one-twentieth of a sovereign. Sixpenny piece, one-half of a shilling. Threepenny piece, one-half of a sixpence.
BRONZE. A penny, equal to one-twelfth of a shilling. Halfpenny, equal to one-half of a penny. Farthing, one-fourth of a penny.
In writing or speaking of sums of money the expression takes the form of pounds, shillings, and pence; for example, Twenty-one pounds five shillings and nine pence. Sometimes the word sterling is added, meaning genuine or standard coin of the realm. In accounts the figures are placed in three parallel columns under the heading of £ s. d. £ for pounds, s. for shillings, and d. for pence, from Libri, solidi, and denarii, the Latin equivalents for these values.
|| | | |
|| £ | s. | d. |
|| 21 | 5 | 9 |
|| | | |Another form of money, if it may be so termed, is the Bank note. This is simply a promise to pay, on demand, the amount represented on the note, in gold or some legal tender. The most common in use are £5 notes, but there are others of different denominations, such as £10, £20, £50, £100, &c. Some country banks still issue these notes, but they are by law restricted from issuing beyond a certain amount fixed by the Bank Act of 1844. No new bank can issue notes, and those which have the privilege are gradually relinquishing it, so that in course of time there will be only one bank entitled to issue notes, and that is the Bank of England.
The notes of country banks, other than the Bank of England, are not a legal tender; that is, it is not compulsory on anyone to accept them in payment of a debt.
The Bank of England is the oldest joint-stock bank in the country, and although, in its constitution, it does not differ materially from other joint-stock banks, yet, being the agent of the British Government in all money matters, and possessing other exclusive privileges, it is looked upon as one of the enduring institutions of the country.* (* See Joint-Stock Banks, p. 68.)
Amongst other privileges it enjoys is the authority to issue promissory notes to a certain extent, representing respectively sums of £5, £10, £20, £50, £100, £200, £500, and £1,000.
These Bank of England notes, as they are termed, are absolutely convertible, that is to say, the bank is legally bound to exchange them for gold at all times when demanded; and a certain amount of gold has always, by law, to be kept in stock for the purpose. Moreover, the tender of Bank of England notes, the same as with gold, in payment of a debt, cannot, in this country, legally be refused. No one, however, can be compelled to give change; that is to say, if you owe a person £4 15s., you are bound in strict law to pay him that exact sum. You cannot offer him a five-pound note and insist upon his giving you 5s. change, though, as a matter of courtesy and convenience, payments are constantly accepted in that form.
It must be obvious that these Bank of England notes are a great convenience, and even a necessity to the public, as it would be quite impossible to carry on the enormous business of the country if such a cumbersome medium as gold coins was the only legal way of paying debt. Nevertheless, gold coin of proper weight is a legal tender to any amount. Silver is not a legal tender for sums over two pounds, nor bronze for sums over one shilling.
But even with bank-notes the requirements of business are not fully satisfied, as there is always the risk of their being lost or stolen. To avoid this risk, and to provide facilities for buying and selling, with the complications incident thereto, and the passing of money from one hand to another, an intermediary agency is required, and that agency is to be found in the banking companies. In nearly every town, having a pretence to the name, in the United Kingdom, will be found a branch bank of some establishment of more or less repute, and those who are fortunate enough to possess money will do well to take advantage of such an agency for their money matters, having, of course, first ascertained that the standing of the company is such that they may do so with safety and confidence.
As a first step we give an example of what is occurring daily in hundreds of cases.
Miss Jane Smith is a lady who has been brought up without the slightest instruction in business matters, indeed has rather plumed herself on the idea of being quite above such things. Suddenly she finds herself dependent upon others for guidance and advice. She would like to act for herself if she only knew how to do so safely, being of a somewhat suspicious temperament and mistrustful of advice from friends or acquaintances. Even the highly respectable lawyer, who has handed her a packet of documents and £500 in cash (a legacy from her uncle), with much sage counsel, she is not quite sure about, for she has imbibed the idea from her youth that lawyers are not always to be trusted.
The packet of documents in the tin box as they came to her is set aside in a safe place for the moment, but the bank-notes and gold are a matter of serious concern to her. She fears to carry them about her person lest she should lose them, or be robbed, and feels sure that if kept in the house they will attract any burglars that may be in the neighbourhood.
The best thing Miss Smith can do is to go to one of the neighbouring banks of repute - say the Blankshire Bank - and ask them to help her out of the difficulty.
She has an interview with the Manager or Cashier, tells her story, and is advised to leave the money at the bank and have an account opened in her name. This course she consents to adopt, and hands over the £500, requesting some acknowledgment that she has done so, in common terms, something to show for it.
Many banks provide and require their customers to use paying-in slips, that is, printed forms specifying the payments made to the bank under the head of cheques, notes, gold, and silver. A form is handed in with each payment, and the initials of the cashier placed against the amount noted on the counterfoil, which is retained by the customer.
In addition to this Miss Smith will be presented with what is called a pass-book - a book passing between the bank and herself, now become a customer - in which she will find it stated in the briefest business manner, that the Blankshire Bank is Dr. (debtor) to, or owes, Miss Jane Smith £500. She will be told that portions of this money may be drawn out from time to time as she may need it, but this can only be done by cheques, or forms of request to the bank to pay out the amount desired.* These forms, provided by the bank, are printed, blank spaces being left to be filled up in writing, and they are made up in books of various sizes, each form bearing a penny stamp. The customer pays for the book according to the number of stamps it contains, but no more. Miss Smith buys a cheque-book, and, opening it, finds the following form in print:-
(* The practice with some people of writing cheques on plain paper is discountenanced by bankers, and is to be condemned.)
--------------------------------------------------------- | No. 10901. | No. 10901. __________ 189 | | | | | _________189 | To the Blankshire Banking Company, | | | Blanktown. | | | | | _____________ | Pay to ____________________ or bearer | | | | | | the sum of __________________________ | | | | | £____________ | £___________ ______________ | | | | ---------------------------------------------------------
She then recollects that she has no money to go on with, and asks to have £10 of the £500 she has left in the bank. The cashier offers to fill up the blank spaces in her first cheque, making corresponding entries in the counterfoil, and having done so asks her to sign it at the foot.
It then appears as follows:-
--------------------------------------------------------- | No. 10901. | No. 10901. __March_I,_ 1898 | | | | | March I, 1898 | To the Blankshire Banking Company, | | | Blanktown. | | | | | ____Self_____ | Pay to ___Self_____________ or bearer | | | | | | the sum of ___Ten_Pounds_____________ | | | | | £10__________ | £10_________ __Jane_Smith__ | | | | ---------------------------------------------------------
The cheque is detached from the counterfoil at the dotted line, and is retained by the cashier, who hands over £10 to the lady together with the book containing the remaining cheques.
"Oh! I had quite forgotten - I owe Miss Tucker, the milliner, £23 10s. Will the cashier please to let me have £23 10s. to pay her with."
Miss Smith is told that there is no need of incurring the risk of carrying the money through the streets, as a cheque in favour of Miss Tucker will equally answer the purpose; and again he fills up the blank spaces in a second cheque, which appears thus:-
--------------------------------------------------------- | No. 10902. | No. 10902. ! ! __March_I,_ 1898 | | | ! ! | | March I, 1898 | To the Blank!hir! Banking Company, | | | !Bla!ktown. | | | ! ! order J.S. | | _Miss_Tucker_ | Pay to ___Miss_Tucker______ or ====== | | | ! ! | | | the sum of _Twenty-three_pounds_10/-_ | | | ! ! | | £23_10/-_____ | £23_10/-____! ! __Jane_Smith__ | | | ! ! | ---------------------------------------------------------
"You see," says the cashier, "I have struck out the word 'bearer' and substituted the word 'order.' This will oblige Miss Tucker to sign her name on the back of the cheque (technically, to 'endorse it') before it can be paid. Your initials are required to confirm the alteration.* I have also drawn parallel lines across the cheque, which makes it what is termed 'a crossed cheque,' and a crossed cheque cannot be cashed direct, but must be paid into an account at a bank. So you see you will have the signature of Miss Tucker, proving that she has been paid her bill by means of this cheque; and it is obvious that by crossing the cheque, should it be lost and made an improper use of, there would be no difficulty in tracing through whose hands it passed."
(* Banks also issue cheques with the word "order" printed instead of "bearer.")
Miss Smith soon learns that all her tradesmen's bills may be paid in the same way, without going to the bank to draw the money, and with the advantage that the cheque is not only a proof of payment, but that she has also a record of her accounts in the bank pass-book.
It may here be mentioned that should a banker cash a cheque with a forged "endorsement", he is not responsible, and the loss falls on the drawer of the cheque.* The crossing of a cheque, however, necessitating its being paid to a bank account, would facilitate the discovery of the culprit. An additional security is given to a crossed cheque if it bears the words "not negotiable" written underneath the crossing. This means that it cannot legally be used as a means of payment to a third party. In the event of such a cheque going wrong, the loss would fall upon a bank negotiating it for a customer. The bank could be called upon to make good the amount to the payee.
(* If, however, he pays a cheque with a forged signature he is responsible, as he is supposed to know the handwriting of his own customer.)
It is illegal to post-date a cheque, the reason being that bills of exchange, which are obligations to pay money at a future date, bear a much higher stamp duty than cheques. It would, therefore, be a fraud upon the revenue to make cheques do duty for bills of exchange.
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