The simplest of money saving tips is merely to hold cash for use when needed. It is also a sensible thing to do, if not carried too far.

One of the surest ways to waste money—and a way fol­lowed by tens of millions of Americans—is never to have any free cash, which is to ignore this simplest of money saving tips. When one of these people buys clothes, jewelry, household goods, an automobile, insurance, or va­cation travel, he begins to use the item immediately, but he pays by installments that are not completed until months or years afterward. Maybe he is still making payments after the item is all used up or worn out. In exceptional cases, perhaps a family can make sensible, temporary use of install­ment payments. But once a family have entered the treadmill of having their income tied up in weekly or monthly commitments, it is pretty hard for them to break out.

When a salesman and a buyer meet, the salesman nor­mally has the advantage that he and the organization backing him are specialists in the items being sold, and (he terms thereon, whereas the buyer is a greenhorn. The more complicated the terms of sale, the greater the sales­man's advantage. In arranging for "convenient, easy pay­ments," a buyer forgets the total cost, his attention being diverted to the size of a single payment. This is where our simplest of money saving tips wins out. A salesman in­clined to be tricky obviously has more opportunity in the complications of installment contracts. So the total amount paid by an installment buyer is apt to be much larger than the cash price of what he set out to buy.

The prices, called premiums, on life insurance are handy to use as an example of installment buying, because a large insurance company's charges are the same throughout the United States and Canada, whereas on most other items the charge probably varies from store to store in the same town.

Suppose a young man, twenty-five years of age, is buy­ing a life-insurance policy of the "whole life" type, with a death value of $5,000. This policy is partly an investment, but that has nothing to do with the point being discussed here. Paid once a year, in advance, the premium is $92.10. Or he can pay $9.35 a month, which adds up to $112.20 a year, $20.10 more than the single annual premium. Paying by the week is far and away the most expensive; the weekly premiums, $2.75, amount to $143.00 a year.

These premiums are those quoted in 1956 by one of the largest companies. They apply to policies that technically are different, but essentially they are alike. The policy with the annual premium of $92.10 is not offered with a monthly premium, and neither this policy nor the one with a monthly premium of $9.35 is offered with a weekly pre­mium. It appears that the company offers separate policies primarily as an excuse for increasing the extra charge for more frequent and smaller premium payments.

A good many people, although they having savings, will nevertheless go into debt to buy, rather than reduce their savings temporarily. Doubtless they fail to realize how much money they waste by this practice. As money saving tips go, this is something simply to avoid. In the case of the insurance premiums, the difference between the single an­nual and one monthly payment is about $20. Suppose a man withdraws this much from his savings deposit in order to pay the annual insurance premium. Then during the year, with no monthly insurance premium to pay, he gradually rebuilds his savings deposit. To be sure, he loses a dollar or two of interest on his savings, but why should this loss stop him from saving $20 on his insurance? Generally speaking, using savings to buy for cash cuts ex­penses by a much larger amount than the income that could be obtained by ordinary investing of those savings.

Having decided to hold some spare cash, an owner must choose where and in what form to hold it. If he favors currency, either paper bills or coins, the simplest way to hold it is in his clothes, or to hide it somewhere, as under the mattress. A safer way is to rent a safe-deposit box located within the steel vault of a bank. A still safer way to hold cash is not in currency, but to put it into a de­posit or checking account in a commercial bank that is a member of the Federal Deposit Insurance Corporation. Up to $10,000, this insurance means prompt and full payment to a depositor, even though the bank fails. Money saving tips are never more secure than that.

A checking account can help its owner in several ways: depositing and paying by check, he avoids the risk of los­ing or being robbed of currency; paying bills by mail, he saves time; the stubs in his checkbook give him a record of expenses; and his canceled checks, returned to him by the bank, are proof that he made payments.

Many banks make a service charge for handling a check­ing account. In effect, a bank says: "We must charge you what it costs us to handle the currency and keep track of your account, unless you offset our expense by letting us have a certain minimum amount of your cash, also without charge." By maintaining the minimum deposit that the bank wants, thereby eliminating the service charge, a de­positor may cut his expenses by a larger amount than the income he would receive by investing that money else­where.

But suppose that by cutting the balance in his checking account a depositor is able to buy something for cash, rather than pay by installment. Probably the bank's service charge is cheap compared to the extra cost of installment buying, as discussed a couple of pages back. Its when you see the savings that you are sure to see the benefit of this simplest of money saving tips.

A Christmas Savings Club is a way of collecting savings in a peculiar form of bank account. Each week through­out the year a club member is supposed to deposit the same amount in his club account. Shortly before Christmas the bank closes the account by paying to each member the total of his deposits, making no charge for expense and no payment of interest for the use of the depositor's money. The popularity of Christmas Savings Clubs seems to be due to such points as these:  saving is more fun (or less painful) when the goal is as definite as next Christ­mas; the weekly sacrifice is small, as little as fifty cents; and lots of acquaintances are doing the same thing. Many people want to belong to a large group, no matter whether the activity is saving money or attending a ball game. As easy as money saving tips can be, you don't get much easy than this (once everything is in place).

Sometimes a man avoids bank accounts and paying by check because he wants no record of what happened. By receiving income in the form of currency and holding it, with no records, maybe he intends to avoid paying income tax. But this is both dishonest and illegal, and a tax dodger, if caught, pays a penalty added to the tax. The larger the amount of income involved, probably the greater likelihood of getting caught. Besides, unless the unrecorded cash is spent within a few years, the saving in tax is likely to be smaller than the potential income lost through failure to invest the money. So the over-all advantage of this method is doubtful!

No matter where or how cash is kept, an American holding more cash than he needs for spending or investing in the near future is wasting his money - that's why caution is needed with this simplest of money saving tips. Holding more than a useful amount of cash is surprisingly similar to making an investment that offers no possibility of yielding either in­come or profit. When a man receives currency, he is practically making a loan to the United States Government, the issuer of the currency. No matter how long he holds the currency, the Government pays him no income. Or when a depositor's balance in his checking account is larger than the bank requires to avoid a service charge, he is making a loan to the bank on which the bank pays no interest.

Some investments can be turned into cash quite readily and also have the advantage of yielding some income. An owner of a Series E bond, after holding it for only two months, and with no advance notice, can cash it without loss. Or if he keeps the bond, each six months its surrender value rises. As to reliability of payment, a savings bond has exactly the same government backing as a dollar bill.

To one who likes to think in large amounts of money, the figures given in this chapter may look like chicken feed. But without an extra-large income, or a great stroke of luck, how can a man hope to accumulate substantial savings unless he learns to grab chances to save a little bit at a time? And in learning to dig out the dollar facts, rather than swallowing whatever an ad or a salesman says, especially about "easy payments," he forms habits that will be helpful in buying investments in either small or large amounts. That's what makes this simplest of money saving tips easy to remember - the fact that it leverages further future savings.