Victorian Banking, Through the Ledger

The value banks add to industry is well known, the value of banking to commerce is no less uncertain. By contrast, it can be easier to lose sight of the value banks provide to ordinary people, especially in a historical setting. Indeed, for the first couple centuries of modern banking, common folk hardly interacted with banks; peasants and the working-classes rarely had access to simple bank accounts. In Britain, this began to change in the 19th century when Victorian values underscored the importance of thrift. Back then, the state took up the cause of opening up banking to the common man and woman through a system of privately operated but state-subsidized savings banks.

Savings Banks

Britain’s system of 19th century savings banks for the working classes came about with the passage of the Savings Bank Act of 1817. The legislation, promoted by social reformers like William Wilberforce, Priscilla Wakefield, and Henry Duncan, took up the cause supported more than a century earlier by the novelist, and writer of economics, Daniel DeFoe. The Act allowed for the establishment of savings banks designed to serve the lower-classes across Britain, in contrast to the commercially focused joint-stock banks in London.

The savings banks saw some of the proto-Victorian ideals of self-help grafted onto the existing system of poor relief. For example, the Act allowed savers to avail themselves of the aid provided by the ‘poor laws’ even if they had up to £30 in savings. Such savings might previously have disqualified them from receiving relief but reformers saw such restrictions as discouraging thrift.

There was pent-up demand for the new banks in the country. By 1830, there were four-hundred savings banks in the UK serving 400,000 depositors and holding £14 million in deposits, a modest £35 per depositor. For comparison’s sake, consider that at this time, a laborer in London might earn just around £50 a year and a particularly skilled craftsman, maybe double that. The clients of the banks were by and large ordinary people.

Given their target market and the values that fostered their creation, the savings banks were focused exclusively on offering savings accounts; they did no lending themselves. Rather, the banks invested their deposits in government bonds though a National Debt Commissioners’ office established at the Bank of England. To encourage saving, the government guaranteed a superior rate of return for these banks, 4.5% at first then 3.75% after 1828. In either case, the interest was in excess of yields offered on British consols, the state bonds of choice. To ensure that this benefit accrued to the poor and working classes, the size of deposits was limited, usually to no more than £50 a year. However, few saved even that much. In 1830 for example, 51% of depositors had less than £20 in their accounts.

Thrift

Queen Victoria came to the throne in 1837 and she lent her name to an era and its values. Of particular relevance to the savings banks, these values included thrift and self-help, values that would from then on guide state policy towards poor relief. The role of the savings banks was more than charitable though. In a society sensitive to revolutionary fervor, the establishment believed that saving money, particularly in a bank invested solely in state debt, would give the poor a stake in civilized society. Through the 1830s and 1840s, the savings banks grew and there were 1.1 million depositors by 1851, more than two-and-a-half times the number twenty-one years earlier.

The banks continued to focus on small savers and average balances actually fell with time, partly as a result of laws limiting the balances in these subsidized accounts. In 1857, by which point there were nearly 470 savings banks, a full 63% of depositors had under £20 in their accounts. This was quite a large number of banks, amounting to one for every 36,000 people in England. What’s more, these banks were mostly in the country with only 38 in London, where the more commercially-oriented large banks were clustered. As the peak of the savings banks drew near, the number of depositors reached 1.6 million in 1861, quadruple the number thirty-one years earlier, though shrinking average balances caused deposits to grow by a more modest 180% to £39 million.

Ledgers

Whatever their value to Victorian savers, which must no doubt have been great for some, the savings banks continue to be of value to historians. The surviving ledgers of the banks preserve of a record of the transactions of the Victorian working classes across Britain. For example, in 1976, the 19th century ledgers of the Limehouse Savings Bank in the East End of London were re-discovered in the crypt of a local church. The customers of the banks were not the mercantile elite of London but workers in the docks, factories, and workshops nearby.

The information in the ledgers have been combined with directories, poll books, and census data to reveal patterns in accounts and their holders. For example, the ledgers reveal that the largest savers were unmarried men and women who boarded with others and servants who had food and lodging provided by their employers. This no doubt helps historians today understand the appeal of certain employment, marriage, and lodging choices faced by the working classes up to two centuries ago.

Family

Bank records also tell stories of how family dynamics impacted the savings of working-class households. The ledgers show that far fewer women than men had bank accounts but also surprise observers with respect to how many children had accounts. Regarding the former, women made up 11.7% of account holders in 1852 controlling 13.5% of deposits. That said, these proportions varied and tended to rise as the Victorian century went on. At the same time, minors made up 15.3% of depositors and controlled 8.1% of deposits. However, this statistic vastly understates the figure because banks tended to use the age of thirteen as the division between minor and adult as opposed to the age of majority, which was twenty-one in England at the time.

The marginalia of clerks, combined with the diary entries of customers, expose the details of customers’ domestic problems. One employee at a savings bank in Lancashire wrote in the account of a certain Anne Bleasdale that she “got a bad husband; request that her book be kept here and remain in her maiden name”. Another client of that same bank, Benjamin Shaw, a disabled mechanic who nonetheless had a job, was able to save over £180 by the end of his life despite being robbed by his own wife and supporting his spendthrift daughters who, despite being married, moved back in with their economical father.

At the savings banks, patterns of deposits and withdraws may have been similar across most demographics, but there were some exceptions. For example, the savings of widows and the recipients of inheritances followed a completely different profile from most accounts. They might see large deposits followed by small withdraws until the funds were exhausted. These life events can be tracked in the bank ledgers. Deposits into children’s accounts may reveal when they entered the workforce. For children, like adults, accounts were labeled with their employment, revealing the ages at which children started working, something that tended to happen around ages fourteen to sixteen for boys and generally around age sixteen for girls in working class households. A minority started working at ages far younger than that though.

Legacy

Despite being aligned with Victorian ideals, there was substantial disappointment with the system of savings banks. Firstly, the subsidized interest was expensive and naturally benefited the largest accounts the most and these were sometimes kept at the banks by better-off clients. Secondly, few of the banks had sophisticated operations and frauds were not unheard of. The 1857 Select Committee on Savings Banks revealed that out of 584 banks, 90% had only one or two paid officers and over a third were run out of an employee’s home.

However, perhaps the single largest reason for the eventual decline of the small savings banks was their lack of scale. Relatively few working-class people had deposits with them; many banks had just a few hundred depositors. They arguably failed to meet the needs of many small savers because, while they provided subsidized interest, use of the banks was inconvenient. Many were open for just a few hours a week and some had designated days for withdrawals and separate hours of operation for deposits. Others required a week’s notice for withdrawals. Perhaps it was mostly a result of these hinderances that only in a few areas of the country did more than 10% of the population have accounts with the savings banks.

In an effort to create a more effective system of savings for working people, the Post Office Savings Bank was created in Britain in 1861. This larger institution turned out to be more successful, with more deposits and depositors, and did well in attracting the savings of the poorest. Two years later, the Savings Bank Act passed in 1863 tightened supervision of the old savings banks. Among other things, the Act required independent auditors certify the annual reports of the banks and mandated that bank information be made public. In the end, competition from the Post Office Savings Bank killed off many of the small old savings banks.

Lesson

Despite becoming an artifact of the 19th century, the savings banks were clearly of value to many ordinary people who kept money with them. It is worth noting that, especially for working-class people outside London, banks were virtually inaccessible prior to the first Savings Bank Act in 1817. There was a reason that social reformers saw the extension of retail banking to the common folk as meaningfully beneficial for them. The savings banks provided a safe place they could leave money and perhaps encouraged the average person to save more than they otherwise would. For historians today, the savings banks’ ledgers provide a unique window into the financial lives, and even private lives, of ordinary people.

More from the Tontine Coffee-House

Read about other aspects of 19th century British banking, including its Quaker origins and the infamous failure of a previously storied firm.