Evening star. [volume] (Washington, D.C.) 1854-1972, 1929-08-18
Banking Facts For
Boys
By John Y. Be0y,
~
Boys
Editor OF the Bankers MonthIy.

Henry Sands wanted to buy farm. Tn
farm was to cost $4,000. But Mr.. Sands did
not have that much money. He was afraid
that If he waited until he did accumulate
$4,000 the farm he wanted would be sold, "a
some one else
So he went to see his banker He explained
his plan to the banker and told him how
much money he had and about when he en-
pected he would be able to pay the rest of tbs
cost Of the farm. The banker knew the farm
He knew that it was a good one. He also
knew that Sands was a good farmer and
would undoubtedly make a good profit from
the farm and be able to pay for it within
few years. So the banker offered to lend
Sands the money he needed.
However, the amount that Mr.. Sands
needed was so large that the banker knew
that he would require some security. So heS
asked Mr.. Sands il he would be willing to giveE
the bank a mortgage on the farm, and this
was agreed to.
The mortgage was the banks security. TheH
mortgage gave the bank the right to take the
farm If the money was not paid, and SO the
bank was made secure. That is, 1t did mott
run a chance of losing the money that was|
loaned to Mr.. Sands.
mortgage is an agreement between tW0I
people in which the man who owns a certainI
property gives the man who lends him money!
the right to that property in case the money!
he owes is not paid.
OF course, the bank was entitled to someI
compensation for lending the money, and that
compensation, 1t was agreed, should be sperI
cent. That means that Mr.. Sands was sx-|
pected to pay S. year for each 500 the bank
loaned to him.
On another occasion Mr. Sands wanted tOI
buy a new grain binder. All he needed toI
borrow from the bank was 500, and he wanted
to borrow that only for short time.
In this case the banker loaned him the
money without any mortgage Mr.. Sands
simply gave him note which is a written
promise to pay the money back. The bankerl
charged him per cent interest in the same
way as on the bigger loan. The bank is inl
business for the purpose of lending money inl
this way, and the banker makes his profit
from the interest paid by those who borrow.
Mr. Sands borrowed the 500 for only three
months, and so he did not pay So for it, but
one-fourth of Sc, because three months is one
fourth Of year.
When any one wishes to purchase some
thing and does not have enough money to pay
for It, there is always the possibility of bOT-|
rowing the money from the bank.
However, it is seldom that all Of the money
can be borrowed. You must have some money
of your own, as a rule, before you can borrow
enough to buy an automobile or a COW or
anything else. Furthermore, the banker must
know that you are going to be able to earn
enough money to pay back what you have
borrowed
This means that the banker must know
you, must know something about your work.
and about your success. If you went into
strange bank in town some distance away
from where YOU live YOU could not borrow
money unless you had some security such as
a Liberty bond that the banker knew the value
Of. Even then, he might hesitate to lend you
money, because banks are supposed to lend
money only to those whom they know.