BUILDING SOCIETIES.

Poverty Bay Standard, Volume III, Issue 280, 12 June 1875, Page 2

BUILDING SOCIETIES.

Many persons have but vague ideas respecting Building Societies, their principles, and advantages. A Benefit Building Society is in fact a Joint Stock Association, the members of which put various- sums into the common fund, which suras, when united, are let out at interest to those members who wish to borrow for the purpose of purchasing a house or houses. The interest paid *by tfeg borrowers makes and themouey is thus let out again, and fresh interest is received. The investors, of other members who do not wish to borrow money for the purchase of a house, receive, at the end of a fixed number of years, the amount of their subscriptions with compound interest accumulated thereon. Professional men, shopkeepers, clerks, and artizans can thus invest small amounts at a time, which are let out at interest for them by the society, and, at the end of a number of years, are returned to them in a considerable sum, without their having had any trouble in examining the security, and receiving the interest, and re-investing it, so as to make it produce compound interest, which latter process cannot otherwise be carried out by any person having only a few shillings to invest monthly. The value of the working-man’s shillings appears to have been only found out within these last forty years. The discovery once made, however, that, by a number of individuals merely uniting their savings, they become capitalists, has resulted in the formation of thousands of Building Societies. By this union the members not only gain higher and compound interest, but also obtain better security for their investments. Unity is strength : when dogs attack a flock of sheep, the sheep scatter, and thus become an easy prey ; but in attacking goats they find it more difficult to accomplish their purpose,— the goats form into a ring, the kids in the centre, and the horns of the old bucks presented against the enemy, are a strong defence. When a man begins to save fora definite object it is wonderful how the habit grows upon him ; the habit may be carried too far, but, on the whole, the benefit it confers upon a man is incalculable. If it gives him nothing else, it gives him a sense of independence. In Birmingham alone, out of £25,000 subscribed some years ago by working men, not less than £20,000 was calculated to have been saved from the tavernsandbeer-houses. By encouraging prudent habits, these societies are doing much to counteract the extravagance of the present day. The man'who will live above his present circumstances is in danger of living, in a little time, much beneath them, —or, as the Italian proverb runs, “The man who lives by hope, will die by hunger.” There, are at present above 3,000 of these societies, with a total income of nearly £10,000,000 per annum. A few years ago, Building Societies were not generally appreciated, but at the present time one of the great secrets of success lies in being connected with them either as investors or borrowers. Persons enjoying but slender means, can often with the exercise of a little judgmoot, add to their income by buying property in a rising neighbourhood. House property is not liable to fluctuate as bank shares or other stock, but as the prosperity of the country increases, so house property becomes enhanced in value. Many men owe their start in life to the fact of their borrowing through a Building Society. The desire to become possessed of a house renders them provident in their habits, and, when such desire is accomplished, a stake in their country is secured. It often answers a man’s purpose, though he may be a capitalist, to borrow largely through a Building Society, as by doing so he can fix his own time for the repayment of an advance.

Building Societies are now the most popalar institutions we have for the investment of savings, inasmuch as they are encouraged by government, and rendered comparatively safe by the statute under which they are enrolled. The rules and regulations for their government are such as to make the contingency of loss very remote. Statistics prove that it has scarcely ever happened for a society to become so involved as to lose its entire capital. This state of things may be attributed to their not being liable to have a run made upon their funds, which has led to such disastrous results in undertakings where a promise to pay on demand is made. The time will most assuredly come when the payment of rent will be considered as so much money thrown away, although many persons argue that it is useless to be hampered with a house through a Building Society, which cannot be called your own until the expiration of a certain term ; but this argumentisfallacious,for, although the house may be tied up for a period of years, still the owner thereof possesses- a valuable interest in the same, which interest he is often able to dispose of at a large profit, subject

to the Society’s mortgage, providing, of course, that a certain amount of judgment has been shown at the timeof purchasing the property. In joining a Building and Investment Society caution and judgment are necessary. Be sure that there is a sufficient Reserve Fund. A Building Society, without a Reserve Fund, may be compared to a man living up to his incotae. No Society can be considered safe, unless a portion of its profits is periodically reserved to meet contingencies : the law of probabilities being that at some time or other, a loss will have to be met even by the best regulated Society. A good Reserve Fund makes a safe Society. Those who have managed their own business affairs well, are the persons to select to manage a Building Society ; and men of this class are calculated to make provision for every contingency however remote or unlikely. Professional accountants of deputation should be engaged to audit the accounts. The plan of a Permanent Building Society, which wfls devised in 1846, is free from most of the objections peculiar to Terminating Societies') for borrowers may at any time be obtained ; new members may join in any month, without having to pay up arrears or ncreased entrance tee; the Society becomes stronger from the number of members increasing, instead of becoming fewer every month ; all the expenses can be more fairly divided among a large number of members; any member can redeem his mortgage or withdraw his subscriptions without delay or expense ; and the number of years’ subscriptions and rates can be more certainly calculated. Experience has proved that the practice of bidding for priority of advance adopted in the earliest formed Building Societies is useful only to those whose security is of a highly speculative character, and who undertake to pay an enormous interest and bonus, the result proving too often the truth of the principle that the prospect of high interest is delusive, and merely another name for bad security.