Where to keep your money

Where to keep your money

Most of us have heard stories about people keeping their money under the floorboards or in their mattress but this isn’t usually the best way to look after money. We need money to live our lives so it is important that we keep it somewhere that we can get hold of it but we also need to make sure it is safe.

People have worried about keeping their money safe throughout history. Rather than leaving it at home, the ancient Egyptians used to keep their gold in temples because they believed it would be safer. The temples were big, sturdy buildings that were never left unattended and they were also sacred, which meant it was less likely someone would steal from them.

Today, most of us choose to keep our money in banks or building societies. While we don’t see these as sacred they do have qualities similar to the ancient temples. Set up specifically to manage money, banks and building societies are considered safe places that are capable of keeping our money secure for us until we need it.  

What is the difference between 

a bank and a building society?

Banks
Banks are companies. They are usually listed on the stock market. This means that people and organisations can buy shares in banks. The shareholders own the banks but they don’t necessarily have accounts with them or use any of the other services that banks offer. Instead, the shares they have in banks are an investment. If the bank is successful financially, they will benefit from this success because the bank will pay them a dividend, which is a share of the earnings made by the company. So there is pressure on banks – and all other listed companies - to make money for their shareholders. If they don’t, their shareholders are likely to invest their money elsewhere.

Building societies
Building societies don’t have shareholders so they aren’t under the same pressure to make lots of money to pass on to them. Instead, building societies are mutual institutions. This means that most of the people who use their services are members of the building society who can vote on decisions that affect the society.

Building societies were first formed in the 18th century to help people save up to buy land so that they could build their own houses. They also lent money to people to help them buy their land sooner.  Later they began to accept savings deposits from people who did not necessarily want to buy houses. 

This all changed in the 1980s when the Government made some changes. It allowed banks to start lending mortgages and building societies to offer banking services.  Building societies were also able to demutualise if their members agreed, which meant they could change from building societies to banks. Many chose to do this and a number of the banks on our high streets today started off life as building societies.