| Rate per cent. | Time in which a sum will double itself. | |
| Simple Interest. | Compound Interest. | |
| 2 | 50 years | 35 years 1 day |
| 2½ | 40 years | 28 years 26 days |
| 3 | 33 years 4 months | 23 years 164 days |
| 3½ | 28 years 208 days | 20 years 54 days |
| 4 | 25 years | 17 years 246 days |
| 4½ | 22 years 81 days | 15 years 273 days |
| 5 | 20 years | 14 years 75 days |
| 6 | 16 years 8 months | 11 years 327 days |
| 7 | 14 years 104 days | 10 years 89 days |
| 8 | 12½ years | 9 years 2 days |
| 9 | 11 years 40 days | 8 years 16 days |
| 10 | 10 years | 7 years 100 days |
The really surprising difference between simple and compound interest is, however, only seen after the first few years are over. A loan of £100 for ten years at 4 per cent. simple interest would give £40, and at 4 per cent. compound interest about £47. But if the loan were for a hundred years the simple interest would be only £400, whilst the compound interest would be no less than £4,950.
Having now said all that is necessary at present about interest, we must speak for a little on the subject of banking, for it is by means of banks that most money transactions are satisfactorily managed.
What, then, is a bank? There seems, at first sight, something mysterious about it, but it is really a simple institution. It is partly a shop and partly a left-luggage office. It is a shop for dealing in cheques, bills, notes, gold, and silver, and a left-luggage office to which we consign our spare cash to lie till called for.
This, however, is only a rough and ready way of putting it, and we may as well add the following extract from a writer who has taken pains to give an exact definition:—“A banker is the custodier of the money of other people. Such is his business, viewed in its simplest aspect. A banker, however, if he hoarded the money deposited with him, would be simply a cash-keeper to the public; his bank would be literally a bank of deposit.... But the business of receiving money on deposit has always been, and is now, universally combined with that of lending it out. A banker does not hoard all the money deposited with him—he gives the greater portion out in loan. The lending of money is as much a part of his business as the receiving of deposits.”
You cannot go into a banker’s and say, “I have come to open an account,” just as you would enter a grocer’s with, “Be so good as send me half a dozen tins of the best sardines.” You must be introduced by someone who can vouch for your respectability, or, if not introduced, you must be able yourself to satisfy the banker that you are likely to be a desirable customer.
This first step being taken, you open what is called a current or drawing account; that is to say, an account into which you can pay money whenever it suits you, and from which you can draw money at any time by means of orders, or cheques, as they are called. In a current account in a good bank money is kept safely—which is a great matter—and at the same time you can make use of it as readily as if it were lying in your pocket.
For convenience, and partly, too, as a protection against fraud, bankers are in the habit of supplying their customers with books containing forms of cheques. When a book of cheques is exhausted, a new one is supplied on the presentation of a form which, when filled up, may resemble the following:—
The Cashier,
The Cosmopolitan Bank.
London, 29th November, 1886.
Please deliver to Bearer Cheque Book containing 25 cheques payable to
Jemima Bouncer.