Just recently I visited the local branch of my bank in order to deposit a cheque into my account. (Yup, there really are people today who still use cheques – seriously). After waiting about half an hour I finally got my chance to speak with someone. If the woman behind the counter thought there was anything unusual about my request she didn't seem to show it, as she simply took my cheque from me and went straight to work. However, several minutes later when she was done she grinned at me and asked,“Would you like a receipt for your, deposit?!”, and as she said 'deposit' she both laughed and made air-quotes. I was so surprised by her response that I didn't quite know what to say. I simply mumbled a “yes please”, and departed as hastily as I could.
It's times such as these that I wish I was more forthright, as I spent the next few days kicking myself for not simply asking her what the hell she had meant by her reaction. As insignificant as the entire exchange had been, my curiosity drove me to go over it again and again in my head. Had I done something unusual? Said something funny? I couldn't think of anything I'd done that could have elicited such a strange response. Eventually I felt compelled to relate the experience to some friends so as to gain a second opinion, but they were just as befuddled as I was.
“Maybe she thought it was funny that people still use cheques?”
Well perhaps, but then the cheque had been issued by another branch of the same bank, so as quaint as the idea of cheques might be to many folks today, it seems a little strange to so openly ridicule one of your own company's services...
“Maybe you went to a branch that doesn't normally accept cash deposits?”
I'm sorry – what?!
I wasn't looking in a mirror at the time this suggestion was put forward, but if I had been, I have to believe that my expression would have been utterly blank. A bank that doesn't accept cash deposits – was that supposed to be a joke?! You might as well tell me that there are post offices that won't accept letters, or fire departments that refuse to put out fires! But nope, to my amazement I learned that this is now quite common – many bank branches today can and do refuse to accept cash deposits from their own customers.
This revelation swept all thought of my own personal banking conundrum aside. What on earth was going on with the banking industry today?! The role played by certain banking institutions in the global financial crisis has been well documented and should not come as a surprise to anyone any longer. But learning that banks were now declining deposits served to highlight an aspect of the modern customer/bank relationship that I feel has not been well publicised before now – the current role of banks in educating and encouraging the public to save money.
I clearly remember being taught in primary (elementary) school about the importance of saving money - being taught to appreciate the value of 'interest.' We all had bank accounts opened in our names through the school, and we were all given our own passbooks in which all of our deposits were recorded, along with the interest we earned. It was stressed to us that by depositing our pocket money in the bank we were doing the bank a 'favour', and in return for 'lending' our money to the bank, the bank would pay us some money in return. I remember checking my passbook each month and thinking something along the lines of, “Woh, I didn't put THAT money in there – that's amazing!” Obviously the interest I earned on my pocket money as a six year old was not an enormous amount, but it was enough that I noticed it – it was definitely there.
When I moved into my current apartment I was required to open a new bank account and keep the equivalent of two month's rent there – a little over a thousand euros - as security against any damage I might cause whilst living there. The account would be in my name, but I couldn't touch the money until I moved out. For over five years now that one thousand plus euros has sat there untouched, and in total it has earned me the princely sum of 4,90€. (made up of five annual interest payments of 1,16€ + 1,16€ + 1,17€ + 0,99€ + 0,42€). 4,90€ - less than a euro per year on a more than 1.000€ deposit – an annual interest rate of slightly less than 0.1%.
Now I fully understand that this account is clearly not intended to be or operated as an investment account, and thus I shouldn't expect to receive much interest. My question is simply, why? Why shouldn't I expect a decent return on my money, regardless of the intended use or purpose of the account? My bank obviously feels that interest on this account is warranted, otherwise I wouldn't be getting paid anything at all. But 0.1%?! What interest rate would my bank charge me if I were to borrow the same amount back from them?
As a child, one of the clear implications of the customer/bank relationship I was taught to respect was this: that banking was a right – the right of every individual. I can't help feeling that that is no longer the case anymore. To my mind, banking is now portrayed by the banking industry as not a right, but a privilege. “We will accept your money (if you're lucky) and keep it safe for you. In return we will pay you an amount so small as to be inconsequential. In fact more often than not we will actually charge you a monthly fee for the privilege of having your money kept by us. If you want or need your money to earn more than nothing, then we will invest it for you, but at a risk. Although not to us, only to you”.
Some might argue that it is the cost of providing all the convenience we have come to expect of modern banking services that demands monthly fees and negligible interest, but can this really be the case? Banks incurred costs in the past too, primarily in the form of a significantly larger number of branch offices and staff to service them, and that cost money. Yet they still managed to pay their customers interest without overwhelming them with fees. Today banks have far fewer branches and staff than they did in the past, and on top of that customers are increasingly encouraged to utilise electronic services rather than engage with bank personnel. So where is all that money going?
Given the banking system we have today, how do parents go about teaching their children the importance and value of saving their money? How do they encourage their kids to save when compound interest appears to be going the way of the dinosaurs, and monthly account keeping fees are often likely to devour the principal? How do parents convince their children that putting money in the bank is a great idea, when there is now every possibility that their local bank will refuse to accept any cash deposits one might wish to make anyway? What role do banks really play today in teaching and encouraging the public – especially children – to save?