Beginners Guide for Business and Financial | Thesecretmeeting.com

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Capital, then, is wealth invested in industry, finance is the machinery by which this process of investment is carried out, and international finance is the machinery by which the wealth of one country is invested in another.

Let us consider the case of a doctor in a provincial town who is making an annual income of about L800 a year, living on L600 of it and saving L200. Instead of spending this quarter of his income on immediate enjoyments, such as wine and cigars, and journeys to London, he invests it in different parts of the world through the mechanism of international finance, because he has been attracted by the advantages of a system of investment which was fashionable some years ago, which worked by what was called Geographical Distribution.

[2] This meant to say that the investors who practised it put their money into as many different countries as possible, so that the risk of loss owing to climatic or other disturbances might be spread as widely as possible. So here we have this quiet country doctor spreading all over the world the money that he gets for dosing and poulticing and dieting his patients, stimulating industry in many climates and bringing some part of its proceeds to be added to his store. Let us see how the process works.

First of all he has a bank, into which he pays day by day the fees that he receives in coin or notes and the cheques that he gets, each half year, from those of his patients who have an account with him. As long as his money is in the bank, the bank has the use of it, and not much of it is likely to go abroad. For the banks use most of the funds entrusted to them in investments in home securities, or in loans and advances to home customers. Part of them they use in buying bills of exchange drawn on London houses by merchants and financiers all over the world, so that even when he pays money into his bank it is possible that our doctor is already forming part of the machinery of international finance and involving us in the need for an explanation of one of its mysteries.

A bill of exchange is an order to pay. When a merchant in Argentina sells wheat to an English buyer, he draws a bill on the buyer (or some bank or firm in England whom the buyer instructs him to draw on), saying, “Pay to me” (or anybody else whom he may name) “the sum of so many pounds.” This bill, if it is drawn on a firm or company of well known standing, the seller of the wheat can immediately dispose of, and so has got payment for his goods. Usually the bill is made payable two or three, or sometimes six months after sight, that is after it has been received by the firm on which it is drawn, and “accepted” by it, that is signed across the front to show that the firm drawn on will pay the bill when it falls due.

These bills of exchange, when thus accepted, are promises to pay entered into by firms of first-rate standing, and are held as investments by English banks. Bills of exchange are also drawn on English houses to finance trade transactions between foreign countries, and also as a means of borrowing money from England. When they are drawn on behalf of English customers, the credit given is given at home, but as it is (almost always) given in connection with international trade, the transaction may be considered as part of international finance.

When they are drawn on behalf of foreign countries, trading with other foreigners, or using the credit to lend to other foreigners, the connection with international finance is obvious. They are readily taken all over the world, because all over the world there are people who have payments to make to England owing to the wide distribution of our trade, and it has long been England’s boast that bills of exchange drawn on London firms are the currency of international commerce and finance.

Some people tell us that this commanding position of the English bill in the world’s markets is in danger of being lost owing to the present war: in the first place because America is gaining wealth rapidly, while we are shooting away our savings, and also because the Germans will make every endeavour to free themselves from dependence on English credit for the conduct of their trade.

Certainly this danger is a real one, but it does not follow that we shall not be able to meet it and defeat it. If the war teaches us to work hard and consume little, so that when peace comes we shall have a great volume of goods to export, there is no reason why the bill on London should not retain much if not all of its old prestige and supremacy in the marts of the world. For we must always remember that finance is only the handmaid of industry. She is often a pert handmaid who steals her mistress’s clothes and tries to flaunt before the world as the mistress, and so she sometimes imposes on many people who ought to know better, who think that finance is an all-powerful influence.

Finance is a mighty influence, but it is a mere piece of machinery which assists, quickens, and lives on production. The men who make and grow things, and carry them from the place where they are made and grown to the place where they are wanted, these are the men who furnish the raw material of finance, without which it would have to shut up its shop.

If you are a student or have recently graduated, then there a large number of bank accounts and financial products designed specifically for you. Although students used to be much derided for the large government grants they received, those days are long gone and students today have to be financially astute in order to avoid large debts. If you are a student or recent graduate then here are some tips about the types of accounts to look for.

Why so many student accounts?

Student and graduate accounts are more and more common, and they usually have a wide range of features and good rates. Although students are generally fairly poor and cannot pay back money they borrow, banks want to offer these accounts to students in the hope that they will remain loyal to their company once they are earning good money.

Student accounts

When you go to university you might have a simple current account, but the best thing to do is to open a dedicated student account. Student accounts offer a wide range of benefits, including vouchers and discounts for clothing and record shops. However, the most important part of your student account is the interest-free overdraft

Overdrafts

When you are at university it is likely that at some point you are going to need an overdraft facility to handle the fees whilst not bringing in a lot of money. Therefore it is essential that you pick an account with a good interest-free overdraft limit. Try and find the bank that has the highest level of interest-free overdraft, because any unauthorised borrowing will cost you a lot of money.

Overall package

Although the overdraft limit is important, you should look at the overall account package. Look at other fees and charges that the bank applies to your account, as well as the extra benefits on offer. Some student accounts will offer students a credit card with their account amongst other benefits. Try and find the best overall account package for your needs.

Dedicated support

In addition to the account benefits, you need to make sure that the student account you choose has dedicated support, as this can help you when times are tough. An even better option is a bank that has a branch on your campus, because a dedicated student bank manager is more likely to be sympathetic to your financial difficulties. Online banking is also something to look out for, as this can help you move funds and pay bills quickly when you need to, as well as helping you to closely monitor your spending.

Graduate accounts

Once you have finished university, many banks will offer you an upgrade to a graduate account. It is worth looking at these when you get your student account, as the right student and graduate package can really help you to move smoothly from student to worker. Whatever package you choose, don’t be afraid to move accounts and banks, and shop around before you make any decision.

52% of us have moved our savings because we were unhappy with customer service, according to the latest moneyfacts.co.uk user polls.  42% of us have avoided a particular account provider due to a friend’s bad experience.

With bank account providers, 46% of us have moved current account because of bad customer service and 45% have avoided a certain bank because of a friend’s bad experience.

Accessing our banking and savings via the internet is becoming increasingly popular but still many of us prefer to pick up the phone or visit a branch.  Our finances are something that we need to take seriously and can cause a lot of stress.  This means when we want to discuss them or need help, we need to be treated fairly and receive a good service.

Banks are continually being slated in the press for unfair charges and for things such as going overdrawn.  This, along with hearing about people close to us having had a bad experience, would be enough to put many of us off choosing a certain account provider.  However important good service is to us, we should still be aware of interest rates being offered by different providers.

The average rate of interest paid on current accounts is 1% gross on a balance of £1.  However, current account best buy charts on moneyfacts.co.uk show that rates of over 4% can be earned on these accounts.  Banking facilities should also be looked at when choosing your current account.  For instance, is it important to have a branch near to you?  Do you want to use internet banking?

As well as these things, if you use an overdraft on your current account it is wise to compare rates of interest on these.  Moneyfacts’ research of overdrafts shows that some providers are charging EARs (Effective Annual Rates) on authorised overdrafts of over 20% and for unauthorised overdrafts over 30%.  Again, best buy charts on moneyfacts.co.uk show that better deals are available with rates on authorised overdrafts as low as 0% (introductory) and unauthorised at under 6%.

Rates on savings accounts also vary greatly.  On no notice accounts at £1,000 the average rate of interest is around 2%.  The savings best buys charts show that rates of over 4.5% can be found.  Again, account facilities should be considered.