1 March 1909
Canadians are known for being careful with their money. While this may have been true in the past, the reputation is more apparent than real today. The average Canadian household’s debt to income ratio is much higher than that of households in other countries, and seems to touch a new record level every year. Canadians also save a much smaller portion of their incomes today than they did their parents or grandparents. Still, Canadian financial institutions have been more conservatively run than their American and British counterparts, a factor that helped them get through the 2008 global financial crisis with only minor bruises. The Canadian reputation for thrift and prudence may have originated with our canny Scottish forebears, who founded many of Canada’s chartered banks during the nineteenth century, such as the Bank of Nova Scotia and the Bank of Montreal.
The thriftiness of our grandparents’ generation was also undoubtedly influenced by the Great Depression when they had little choice but to scrimp and save. But another important factor was the Penny Bank of Toronto, later known as the Penny Bank of Ontario. While a tiddler in the Canadian financial seas, the Penny Bank helped to instill a sense of thrift in hundreds of thousands of youngsters throughout Ontario and beyond during the early decades of the twentieth century. And, yes, Scots played a big role in its establishment too.
The Penny Bank had its roots in informal saving associations established by religious groups in the late nineteenth century for working class men and women. At that time, one needed to make a minimum deposit of $1, more than $25 in today’s money, to open an account at a bank, or at the government-owned Post Office Savings Bank. This was beyond the means of the very poor. Two such groups in Toronto were the Savings Association of the St Andrews Presbyterian Church and the Victor Five-Cent Savings Association organized by the Fred Victor Mission. The Mission, which continues to thrive today, was established by Hart Massey, a prominent Toronto industrialist and devout Methodist who founded Massey-Ferguson, the agricultural equipment company. The Mission was named after his son, Fred Victor, who died in 1890 at age thirteen. In 1900, the Mission organized an informal “penny bank” with the Toronto Board of Education through which students at the Lord Dufferin School could make small deposits and earn interest. It was very successful. So successful that its backers thought that a more formal structure for the savings association would be advisable, and approached the Dominion Government for legislation.
Instead of incorporating the Penny Bank of Toronto through a private Act of Parliament, the government favoured more generic legislation to allow for the incorporation of penny banks throughout Canada. The Penny Bank Act was passed by the Dominion Government in 1903 as a way of encouraging thrift among the “labouring classes,” especially their children. In the event, the Penny Bank of Toronto was apparently the only such bank to be incorporated under the Act though there is a brief reference in the legislative record of the 1920s to a very small Penny Bank of Chicoutimi in Quebec.
The Penny Bank of Toronto, which brought together the St Andrews and Victor thrift organizations, was not an ordinary bank, but rather a philanthropic institution supported by many of Toronto’s prominent citizens. Early backers included Angus McMurchy, K.C., the solicitor for the Canadian Pacific Railway, Sir William Hearst, who became Premier of Ontario from 1914-1919, and Sir Byron Edmund Walker, president of the Canadian Bank of Commerce from 1907 to his death in 1924. Sir George Burn of the Bank of Ottawa later joined the Penny Bank’s Board of Directors. The manager of the Penny Bank was H. D. Lockhart Gordon, a principal in the Canadian accounting Clarkson, Gordon & Dilworth. The Penny Bank, a not-for-profit institution, had no shareholders and no capital. Its backers provided a guarantee fund, initially $10,000, to support the organization. They also managed the institution. However, they were forbidden by the legislation from receiving any dividend or compensation for their work. The Bank payed depositors 3 per cent interest, the standard rate of interest of the day. All funds raised by the Bank were deposited with the Post Office Savings Bank owned by the Dominion Government. The maximum size of an account was $300. Despite the Bank’s backers managing the institution for free, there were clerical costs associated with keeping track of deposits and withdrawals. These costs were partially offset by interest earned on the guarantee fund. As well, the Post Office Savings Bank financially assisted the Penny Bank by giving it a preferential interest rate. Initially, this rate was set at ½ percentage point above the 3 per cent rate the Post Office paid on its deposits. The government increased this margin to 1 percentage point in 1911. Over time, the Penny Bank also received various grants from the Ontario and Dominion governments to help sustain its operations.
While the Penny Bank was open to all, its focus was on public school children. Supporters hoped that young, working class kids who might not otherwise be exposed to the banking system would learn through personal experience the value of thrift and the wonders of compound interest, thereby improving their quality of life in later years. Youngsters could bring in their pennies every Monday to their classroom teacher who would record their deposits in their personal passbooks. Deposits as low as one cent were accepted. School principals would receive the funds and in turn deposit them in the Penny Bank. Students or their parents went to a designated chartered bank to withdraw funds.
The Penny Bank of Toronto quickly spread throughout the Toronto School Board and beyond. Within five years, it was operating in schools in Oakville, Guelph, Galt, Port Hope and Orangeville. It reached Ottawa in 1909, though not without considerable discussion and opposition by Ottawa teachers who had to run the programme in their classrooms. It was estimated that it took thirty minutes a week for a teacher to handle Penny Bank deposits. The Ottawa’s Public School Board recommended a pilot project at five public schools—Glashan, Cambridge, Creighton, Osgoode and Elgin. But at a meeting of teachers on the issue, of the sixty-nine teachers that attended only seventeen supported the Penny Bank. School trustees were also divided, with some calling the Penny Bank “a fad” that had no bearing on education, and would cost as much as $1,200 per year to operate. One trustee believed that the Penny Bank would make “mammon worshippers of the children.” He maintained that the proper place “to teach little ones the value and importance of thrift [was] in the home.” (Sounds like what some people say about sex education today!)
Among the strong supporters of the Penny Bank was the Ottawa Journal newspaper. Several editorials in favour of the Bank appeared in the paper. It rejected the teachers’ opposition as being irrelevant saying that it was for the School Board to decide. The newspaper argued that the Penny Bank had direct and practical educational benefits that would prepare children, especially those from working-class backgrounds, “for the battle of life.” It noted that 95 per cent of public school children went directly from school to earning their living. Consequently, “it naturally follows that the education be as utilitarian in nature as possible.”
Toronto’s successful experience was also noted. The newspaper claimed that children there were saving with a definite objective in mind rather than simply hoarding their money. “What wasted 5-cent pieces could not buy, saved 5-cent pieces, which invariably bulked into five dollars, could buy.” It also opined that during a recent economic downturn, which it described as an “out-of-work spell,” children’s savings helped their parents over “a most critical and trying time,” that prevented them from appealing to “the charity department.”
Despite teacher opposition, the pilot programme went ahead as planned though with one small change. Owing to concern expressed by school principals that they would have to leave their schools during the school day to deposit their Penny Bank collections, it was arranged that a clerk from the Traders Bank of Canada, the institution in Ottawa that initially handled the funds on behalf of the Penny Bank, would pick up the cash. Start-up expenses for ledgers, stationery and passbooks in the five schools was estimated at $65.
On 1 March 1909, principals in the five test schools explained the Penny Bank system to students in assembly. Small passbooks were handed out. Pennies, nickels and dimes quickly flowed in. Of the five schools that participated in the pilot project, Glashan School topped the list that first day, raising $52.16 from 173 depositors out of a school body of 550 pupils. Deposits ranged in size from one cent to three dollars. The collection might have been higher as many students had forgotten to bring in their pennies that morning. Two months later, the youngsters in the five schools had squirreled away over $1,000 (equivalent to more than $22,000 in today’s money).
With the pilot project a great success, it was expanded the following year to the Rosemont Avenue, Kent Street, Percy Street and Wellington Street Public Schools, and subsequently to all nineteen Ottawa public schools. By end-March 1910, Ottawa students had more than $3,800 on deposit in their names in the Penny Bank of Toronto. By December, the amount had topped $8,500. That Christmas, the youngsters “had the means to be generous gift-givers” said the Ottawa Journal that also opined that without the Penny Bank, the money would “likely to have been long spent.”
Over the next two decades, deposits in the Penny Bank grew steadily as schools across Ontario and in other provinces joined the programme. The Y.M.C.A. also participated. Newspapers regularly reported on deposit growth. Schools competed on how much they could save. In 1921, Penny Bank directors initiated a contest for a banner to the school that had “made the best use of the bank.” The banner read: “Prize Banner, Province of Ontario, Penny Bank Competition” with a maple leaf and a penny centred on it, with space for the names of five schools and the years in which they won it. That first year, St Patrick’s Public School in Guelph won the banner, with the Hester How school of Toronto in second place.
The 1920s brought changes to the Penny Bank. With more and more schools outside of Toronto joining the scheme, its name was changed to the Penny Bank of Ontario in 1923. More schools and rapidly growing deposits also meant rising administrative costs. Bank directors sought and received government approval to invest the institution’s growing guarantee fund in higher-yielding assets, including Victory bonds and subsequently mortgages to help offset costs. Penny bank deposits continued to be invested with the Post Office. Reflecting the growth of the scheme in Ottawa, the Penny Bank hired Mrs Evelyn Topley in 1924 to administer the scheme, a position she held until her retirement in early 1939.
By 1929, total Penny Bank deposits had topped the $1 million mark with more than 350 participating schools. Ottawa deposits reached almost $53,000. Although teachers complained about the detailed work required to keep track of thousands of small deposits, the Journal reckoned that the “moral effect on children [was] incalculable.”
Despite the onset of the Great Depression, Penny Bank deposits continued to grow during the early 1930s, peaking at about $1.5 million in 1932 with 466 participating schools. Deposits of Ottawa’s nineteen public schools touched almost $59,000. However, the prevailing poor economic conditions began to take its toll. Ottawa school deposits began to slip, falling to just over $43,000 by the end of 1937. At the depth of the Depression, the Ontario Government provided a $150,000 guarantee to back-stop the Bank and protect the children from losses. There were allegations in the Provincial legislature that the provincial guarantee was required because the guarantee fund put up by the Penny Bank private backers had sustained losses.
But it was the onset of World War II that crippled the Penny Bank. Anxious to do their bit, children began withdrawing their savings to invest in war bonds and war savings stamps. Deposits dropped precipitously. By December 1942, Ottawa deposits in the Penny Bank had dropped by almost two thirds from their peak. At the end of February 1943, the directors of the institution suspended new deposits in the Penny Bank for the duration of the war. Existing account holders could keep their funds in the Bank and continue to earn interest but they could not make additional deposits.
The Bank never again re-opened for business. At the request of its managers, the Penny Bank was put into liquidation and ceased operations as of the beginning of August 1948. The winding up of the institution was supervised by the Inspector General of Banks. At that time, total deposits and accrued interest stood at roughly $164,000 in 128,000 accounts. Most of these accounts were dormant. Depositors had the choice of receiving a cheque for their balances or transferring their accounts to the Post Office Savings Bank. Just over $51,000 was so transferred. Deposit liabilities in dormant, unclaimed accounts of less than $1 were immediately extinguished. After paying all remaining liabilities, the Penny Bank gave the residual balance of $101,941.14 to the Toronto Hospital for Sick Children.
Carmichael Family Online, 2017. McMurchy Obituaries, https://carmichaelfamilyonline.wordpress.com/mcmurchy-family/mcmurchy-documents-pictures/mcmurchy-obituraries/.
Debates of the House of Commons, various years.
Debates of the Senate of Canada, various years.
Filey, Mike, 1994. Toronto Sketches 3, The Way We Were, Toronto: Dundurn Press Ltd.
Fred Victor, 2017. Fred Victor Beginnings, http://www.fredvictor.org/home.
Germain, Richard N, 1996. Dollars Through The Doors, A Pre-1930 History of Bank Marketing in America, Westport, CT: Greenwood Press.
Globe (The), 1922. “Penny Bank Banner,” 28 February.
Ottawa Journal (The), 1904. “The Penny Bank in Toronto,” 21 June.
————————–, 1906. “A Philanthropic Institution,” 2 June.
————————–, 1907. “Toronto Penny Bank,” 17 October.
————————–, 1909, “Penny Banks,” 8 January.
————————–, 1909. “Penny Savings Banks,” 2 February.
————————–, 1909. “Penny Banks To Open Here Soon,” 10 February.
————————–, 1909. “Deposits Made Into Penny Banks,” 1 March.
————————–, 1909. “Penny Banks Are Opened,” 28 February.
————————–, 1910. “The Children At Christmas,” 2 December.
————————–, 1912. “Criticism of R.A. Sproule,” 12 February.
————————–, 1921, “Penny Bank’s Directors Will Give A Prize Banner,” 25 January.
————————–, 1921. “Save The Pennies Campaign Coming,” 15 February.
————————–, 1926. ‘Have Never Had Run On The Penny Banks,” 26 February.
————————–, 1927. “Sir William Hearst,” 30 June.
————————–, 1929. “Ontario Children Save A Million,” 9 January.
————————–, 1929. “Penny Bank Bill Passes Senate,” 21 May.
————————–, 1931. “Increase Is Shown Penny Bank Savings,” 17 June.
————————–, 1936. “Says Poor Investments Made By Penny Bank,” 31 March.
————————–, 1939. “Toronto Girl Succeeds Mrs E.E. Topley,” 19 April.
————————–, 1943. “Suspend Deposits in Penny Bank,” 26 February.
————————-, 1948. “End of the Penny Bank,” 22 March.
————————-, 1948. “Ontario Penny Bank Finally Closes Its Doors,” 3 August.