Save money this year because thrift isn’t a four letter word
I recently attended the opening of the Templestowe Community Bank in my electorate. As a result of more than two years hard work by local traders and residents, the village has a bank for the first time in over a decade.
The branch was the 248th to open under the Bendigo Community Bank umbrella, one of the great local success stories of the past decade across Australia.
As the big banks closed their branches, and forced people to use ATMs and online services, many local communities lost an important institution. In some rural areas, this was devastating. In most, it caused considerable inconvenience to local residents.
In a little more than a decade, the Bendigo banks have given over $36 million to local charities and community activities. More than $10 million has been returned to shareholders.
Most importantly, the bank was seen as something the community had a stake in, not just an impersonal service with the object of increasing bank profits.
The community banks also serve as a model for industry and thrift.
In an era of instant credit, the age-old value of thrift seems largely forgotten.
Yet for hundreds of years, it was encouraged and celebrated.
In the first great novel in English literature, Daniel Dafoe records how through thrift and careful husbandry of the corn he saved, Robinson Crusoe prospered.
“I carefully saved the ears of this corn , you may be sure, in their season, which was about the end of June; and laying up every corn, I resolved to sow them again, hoping in time to have some quantity sufficient to supply me with bread. But it was not until the fourth year that I could allow myself the least grain of this corn to eat, and even then but sparingly. . .”
Thrift had also been the theme of Dafoe’s earlier work of political economy, An essay of Projects, in which he advocated savings to provide for old age and illness.
For two hundred years after Dafoe, thrift was discussed and encouraged, even though the dominant values associated with it changed from era to era. Benjamin Franklin encouraged it in the US: “Be industrious and frugal, and you will be rich.” John Wesley promoted it amongst his followers, preaching: “Gain all you can, Save all you can, then Give all you can.”
In England, Samuel Smiles encouraged thrift during the Victorian era, with books including Self Help, Character, Thrift, and Duty. Across the Atlantic, Catherine Beecher, Booker T Washington and others stressed similar values.
As late as the beginning of last century, institutions built on it thrived such as the building and friendly societies they flowered in many parts of the world.
There was a rapid growth of friendly societies in Australia from the 1860s to the early1850s when between a quarter and a half of all Australians benefited from their services. By the middle of the nineteenth century the friendly societies were a major presence in every Australian town. They were known for their organisation of medical services, the supply of medicines, for sick pay, and the help they gave to those who fell on hard times.
By the eve of World War I, the 400,000 members funded benefits for more than one million Australians, while less than 100,000 people received aged or invalid benefits from the Commonwealth government. National health and tax changes weakened these institutions over the ensuing decades. Apart from the private health insurance funds, they are little more than a footnote in history today.
Building societies have survived, but their significance has also declined. A generation ago, school children were given a money box to learn to save. In Victoria, the State Bank provided an account for children from when they commenced school. Each week they were encouraged to deposit a few pence or shillings.
Credit Unions spread throughout the community, encouraging local savings and a commitment to a common good. In time they were swamped by a plethora of other financial institutions outbidding each other to provide cheap credit. Easier borrowing, credits cards and debt have largely replaced the culture of thrift.
To the extent that people speak of thrift today, they are probably quite certain that it means “scrimping and saving, usually up to and including being unpleasantly cheap and stingy,” says David Blankenhorn in his Cyclopedia on the subject.
Faced with the global financial crisis, caused in part by the easy access to credit, many governments have encouraged even more borrowing and spending. Thrift, enterprise and the link between effort and reward have been ignored. The savings that fuel the economy through capital accumulation are now rejected.
Thrift is out of fashion. Not only has personal and national debt grown, but the Australian government is urging us to spend, removing incentives to save, and borrowing from overseas. Ultimately this is unsustainable. A return to the values of thrift, enterprise and reward will be required if the nation is to prosper.
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