everybody's guide to money matters

Everybody'sGuidetoMoneyMatters
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Everybody'sGuidetoMoneyMatters
byWilliamCotton,F.S.A.
September,1999[Etext#1903]
[Datelastupdated:August22,2003]
ProjectGutenbergEtextofEverybody'sGuidetoMoney,byCotton
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Everybody'sGuidetoMoneyMatters
INCLUDINGBUTNOTLIMITEDTOINDIRECT,CONSEQUENTIAL,
PUNITIVE
ORINCIDENTALDAMAGES,EVENIFYOUGIVENOTICEOFTHE
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indicatehypertextlinks;OR
[*]Theetextmaybereadilyconvertedbythereaderat
noexpenseintoplainASCII,EBCDICorequivalent
formbytheprogramthatdisplaystheetext(asis
thecase,forinstance,withmostwordprocessors);

OR
Page8
Everybody'sGuidetoMoneyMatters
[*]Youprovide,oragreetoalsoprovideonrequestat
noadditionalcost,feeorexpense,acopyofthe
etextinitsoriginalplainASCIIform(orinEBCDIC
orotherequivalentproprietaryform).
[2]Honortheetextrefundandreplacementprovisionsofthis
"SmallPrint!"statement.
[3]PayatrademarklicensefeetotheProjectof20%ofthe
netproitsyouderivecalculatedusingthemethodyou
alreadyusetocalculateyourapplicabletaxes.Ifyou
don'tderiveproits,noroyaltyisdue.Royaltiesare
payableto"ProjectGutenbergAssociation/Carnegie-Mellon
University"withinthe60daysfollowingeach
dateyouprepare(orwerelegallyrequiredtoprepare)
yourannual(orequivalentperiodic)taxreturn.
WHATIFYOU*WANT*TOSENDMONEYEVENIFYOUDON'THAVETO?
TheProjectgratefullyacceptscontributionsinmoney,time,
scanningmachines,OCRsoftware,publicdomainetexts,royalty
freecopyrightlicenses,andeveryothersortofcontribution
youcanthinkof.Moneyshouldbepaidto"ProjectGutenberg
Association/Carnegie-MellonUniversity".
*END*THESMALLPRINT!FORPUBLICDOMAIN
ETEXTS*Ver.04.29.93*END*
ThisetextwaspreparedbyNigelLacey,Leicestershire,UK.
Page9
Everybody'sGuidetoMoneyMatters
Transcriber'sNotes:
IhaveusedtheUKpoundsymbol(£)inthis

e-textasitappearsintheoriginal.[It
lookslikeanLwithacrossbar.]Iam
uncertainwhetherthissymbolwillbe
supportedonallsystemsandfontsthatthis
textileendsbeingviewedwith.Myapologies
ifthisappliestoyou.
Ihaveendeavouredtoretaintheoriginaltable
formatting,ratherthantoreformatthetables
inalignmentwiththetext.However,asseveral
ofthetableswereinlandscapeorientationin
theoriginal,thishasnecessarilyresultedin
someverylonglinesinthetables(upto130
charactersinsomecases).
Finally,asIcheckedthetranscriptionprocess
certainerrorsinthetablescametolight.
Ratherthancorrecttheseerrors,astheyare
anintegralpartoftheoriginal,theonesthat
Inotedaremarkedwithunderscores(_).[Note
thatunderscoresarealsousedtomark_italicised_
passagesintheoriginaltext.]
Page10
Everybody'sGuidetoMoneyMatters
Everybody'sGuide
to
MoneyMatters
_Withadescriptionofthevariousinvest-
mentschielydealtinonthestock
exchange,andthemodeof
dealingtherein_
also

Someaccountofthepitfallspreparedfortheunwary,
andsuggestionstothecautiousinvestor.
by
WilliamCotton,F.S.A.
LatetreasurerofthecountyofDevon,
authorof"AnElizabethanGuild,""GleaningsfromRecords,"
"TheBankManager,"etc.
Originatorofthepostalordersystem.
London1898.
PREFACE.
Page11
Everybody'sGuidetoMoneyMatters
THEAuthor,emboldenedbyaBankingexpe-
rienceofoverfortyyears,offersthislittlework
tothepublicinthehopethat,elementarythough
itbe,itmayproveacceptabletomanypersons
ofbothsexes.
Theworkhasbeenpreparedchielyforthe
useofwomen,avastproportionofwhomare
broughtupinutterignoranceofmoneymatters
inthesimplestform,thoughotherwisetheymay
behighlyaccomplished.
Thesubject,itmustbeallowed,isnotafasci-
natingone,butthereareperiodsinthelivesof
mostpersonswhensomeknowledgeofmoney
mattersmaybeusefulandevennecessary.
W.C.
CONTENTS.
PAGE
CHAP.I.-WhatisMoney?-Whattodowithit-Howto

openaBankAccount-HowtodrawCheques...1
CHAP.II.-HowtoDepositMoneyatInterest-TheBank
PassBook-TheAdvantagesofaBankAccount.13
Page12
Everybody'sGuidetoMoneyMatters
CHAP.III.-LondonBanksandBanking-BillofExchange-
Deposits-ScotchandIrishBanks.......20
CHAP.IV.-Investments-WhatareSecurities-Mortgages
-TheFunds-TheNationalDebt-StocksandShares-
Dividends,howPayable............26
CHAP.V.-BritishGovernmentFunds-TheDifferentDebts
-TerminableAnnuities-LoansGuaranteedbyGovern-
ment-Dividends,howtoReceivethem-AutomaticRe-
investmentofDividends............35
CHAP.VI.-GovernmentAnnuities,howtoPurchase-When
Payable-Tables-InsuranceOficeAnnuities-Tables-
IndianGovernmentStocks...........41
CHAP.VII.-LoanstoCorporations,&c.-ColonialGovern-
mentSecurities-InscribedStocksandBonds-Listof
InscribedStocks-BondsandCoupons-ForeignGovern-
mentStocks-CautioninInvesting-Railways-The
DifferentStocksandtheirRelativeValues-TheWar-
rantsforInterestandDividends-IndianRailwayStocks
-AmericanRailways-ForeignRailways-Banks-As
anInvestment-ColonialandForeignCorporationStocks
-CanalsandDocks-Gas-ElectricLighting,Telegraph
andTelephone-WaterWorks-Breweries-Industrial
Companies-Financial,LandandInvestmentCompanies
-FinancialTrusts-InsuranceCompanies-Steamship
Companies-Mines...............55

CHAP.VIII.-TheStockExchange-BrokersandJobbers-
HowBusinessisDone-"Contango"and"Backwarda-
Page13
Everybody'sGuidetoMoneyMatters
tion"-"Bulls"and"Bears"-"Boom"and"Slump"
-Settlement-RiskinKeepingConvertibleBonds-
Brokers-TrapsandSnares-GoodCompaniesandBad-
AdvertisingSwindles-GoldMines-ATypicalCase-
ExplorationCompanies.............79
CHAP.IX.-LifeInsurance-ItsAdvantages-Mutualand
JointStockCompanies-ChoiceofOfice-FormofPro-
posal-Examination-Premiums,howPayable-Examples
ofAdvantage-VariousModesofInsuring-Bonuses-
HowApplied-EndowmentInsurance-Non-proitable
Policies-SettlementPolicies-EndowmentofChildren-
InsuranceofJointLives-InsuranceonLongestofTwo
Lives-Surrenders-FireInsurance-FarmStock-Other
Insurances..................101
CHAP.X.-ABuildingSociety,ModeofDoingBusiness-
HowtoObtainaShare,andTableofPayments-Howto
Withdraw,andTable-Borrowers-HowtoBuilda
House-TableofPayments-HowProitsaremade-The
WeakPointsofSocietiesBadlyConducted-WhatLeads
toCollapse-NecessityforChoosingDirectorsofStanding
andCharacter-NecessityforEficientAuditofAc-
counts....................122
CHAP.XI.-ThePostOficeSavingsBank-ModeofDepo-
siting-OpeninganAccount-ConvenienceandPrecau-
tions-LimitinAmounts-Withdrawal-Paymentto
Representatives-GovernmentAnnuities,&c.-Advan-

tagesthePostOficeOffers.........134
Page14
Everybody'sGuidetoMoneyMatters
APPENDIX.
TableofInterestonInvestments...........142
ExamplesofBusinessCommunications-SendingMoney
byPost................143
RequiringMoney...............143
AcknowledgingReceipt.............144
TransfertoDepositAccount..........144
ArrangingChequestobeHonoredbyAnotherBank145
RequestforPassportandCircularNotes....145
OrderingLetterofCredit...........146
RemittinginthisCountry...........146
LodgingSecuritiesatBank..........147
OrdertoReceiveDividends..........147
OrderingInvestments.............148
EVERYBODY'SGUIDE
TO
MONEYMATTERS.
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,
Page15
Everybody'sGuidetoMoneyMatters
asrepresentedbyanexpressedsuminmoney.
Thepriceofsomethingsarearbitrarilyixed

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ive-shillingpiece,equaltoone-
fourthofasovereign.
Double-iorin,orfour-shillingpiece,equalto
one-ifth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one-
tenthofasovereign.
Shillingpiece,equaltoone-twentiethofa
sovereign.
Sixpennypiece,one-halfofashilling.
Page16
Everybody'sGuidetoMoneyMatters
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
iveshillingsandninepence.Sometimesthe
word"sterling"isadded,meaninggenuineor
standardcoinoftherealm.Inaccountsthe
igures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repre-
sented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
Page17
Everybody'sGuidetoMoneyMatters
restrictedfromissuingbeyondacertainamount
ixedbytheBankActof1844.Nonewbank
canissuenotes,andthosewhichhavetheprivi-

lege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consti-
tution,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cer-
tainamountofgoldhasalways,bylaw,tobe
Page18
Everybody'sGuidetoMoneyMatters
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ive-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Eng-
land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satisied,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inci-
dent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,
Page19
Everybody'sGuidetoMoneyMatters
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,irst
ascertainedthatthestandingofthecompanyis
suchthattheymaydosowithsafetyandconi-
dence.
Asairst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her-
selfontheideaofbeingquiteabovesuchthings.
Suddenlysheinds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acquaint-
ances.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
Page20
Everybody'sGuidetoMoneyMatters

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dificulty.
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cus-
tomers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re-
tainedbythecustomer.
InadditiontothisMissSmithwillbepre-
sentedwithwhatiscalledapass-book-abook
passingbetweenthebankandherself,now
becomeacustomer-inwhichshewillindit
Page21
Everybody'sGuidetoMoneyMatters

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illed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,inds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__________________________|
|||
|£____________|£_________________________|
|||

Page22
Everybody'sGuidetoMoneyMatters

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
illuptheblankspacesinherirst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
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Everybody'sGuidetoMoneyMatters
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
ills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conirmthealteration.*
Ihavealsodrawnparallellinesacrossthe

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Everybody'sGuidetoMoneyMatters
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dificulty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trades-
men'sbillsmaybepaidinthesameway,with-
out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,how-
ever,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nego-
tiable"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
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