A Paean to Passbook Savings Accounts

A recent article in the Wall Street Journal got me thinking about the passbook savings accounts of my long-ago youth.

The article said that kids today don’t want their parents to give them cash for allowances and doing chores. They want to be paid in Robux, which is an online currency from Roblox Corp. Kids can then use the currency to play video games, including games where brand-name products are part of the action. They can even buy virtual merchandise for their avatars.  Other game companies are following suit.

This brings to mind the famous marshmallow experiment of 1972. Children were offered a choice between getting one marshmallow immediately or two marshmallows if they waited for a short time. In a follow-up study, the ones who had delayed gratification turned out to be more successful later in life.

There’s no deferred gratification with kids being given Robux currency. They gobble the marshmallows immediately, figuratively speaking.

It’s not just the kids who gobble. There’s a lot of gobbling going on across generations today, due to mass consumerism and easy credit. In fact, the nation has so little impulse control that the national debt is $31 trillion. That’s quite a contrast to the high savings of yesteryear, as exemplified by the past popularity of passbook savings accounts. 

My poor immigrant grandparents and my working-class parents were typical of those times. They would open a savings account for me, deposit some seed money in it, and deposit additional money as gifts or as a reward for doing chores around the house. Also deposited was most of the money that I earned from cutting grass in the neighborhood and selling newspapers on a street corner. I kept the rest for spending money.

A passbook about the size of a passport came with the account, showing the account balance. Once a month, my parents would take me to the bank to have the passbook updated with the current account balance. It was quite a ritual, like going to high mass at our parish church.

Back then, banks did not resemble today’s ubiquitous branch banks that can be found on almost every corner and have as much architectural appeal as a gas station. They were stately buildings of neoclassical architecture, with a lot of marble and brass inside. Tellers sat on raised stools behind what looked like a marble altar.

As I approached a teller, my instincts as an altar boy would kick in and I would feel like genuflecting. Resisting the urge, I would reach up and reverentially hand my passbook to the teller as if it were a religious offering.  She would then walk away to update the passbook, and, upon returning, would hand it back to me.

I would eagerly open the passbook to see how much the balance had grown from interest alone. To me, it was free money. I had become hooked on the magic of compound interest and had learned the value of saving, investing, and working—all of which would later enable me to earn two college degrees without any debt.

Call me old-fashioned, but I believe it was a better system.