To be an investor you must first accumulate funds for investment, and safety in your savings plan is the first consideration. This will immediately limit the number of media into which such funds may be placed. After you have accumulated a sufficient amount, then will be the time to consider whether higher risks are justified.

How much should be the goal before further investment, with attendant higher risks, is attempted? The answer cannot be given in the form of an exact amount, because your total income and expenditures will have a bearing upon it; but most authorities agree that a "nest egg" or "rainy day fund" must first be obtained which is the equivalent of at least three months' salary.

In other words, investment for the person of modest means is a series of steps: the gradual accumulation of surplus cash as a "rainy day" or emergency fund; the accumulation of an additional fund for investment; and the placing of this fund in investments which may entail somewhat higher risks.

Mutual Savings Banks

These banks are quite different from commercial banks, inasmuch as there are no stockholders and the depositors themselves receive, as dividends upon their deposits, all funds in excess of the costs of doing business and the amounts transferred to surplus.

This form of savings bank has several advantages, among which the following are worthy of mention:
It is a safe place for the deposit of surplus funds.
It issues various combinations of life insurance at very low rates.

The Federal Deposit Insurance Corporation membership offers $10,000 maximum insurance (as it does for other types of banks) on each deposit account for some of these banks; in three states (Massachusetts, Connecticut, New Hampshire) the banks contribute to a central fund which provides similar protection.

Since these banks are state regulated, they will be subjected to frequent examination, which, in turn, protects the depositors.

Commercial Banks

The modern commercial bank, with its various departments and services, may be considered as applying modern merchandising methods to the banking business.

The savings or thrift account, as operated by most banks, is an excellent depository for surplus funds. The interest rate varies with general business and money conditions, but is about 3 per cent at present, usually credited semiannually, and compounded if not withdrawn. The account is insured up to $10,000 by any bank which is a member of the Federal Deposit Insurance Corporation. Over 90 per cent of present day commercial banks are members of the organization.

Many people complain that the rate of interest of about 3 per cent is too low. They forget that a high degree of safety will always be coupled with a low rate of return and that this is a fundamental principle of all investment.

Building and Loan Associations

These are locally owned, privately managed thrift and finance corporations. The savers really become stockholders, since they purchase shares in the company with their deposits. Some of these associations even offer installment accounts, whereby the depositor may buy shares on the installment plan. Their savings accounts are similar to those of banks, but they often pay a higher rate (32 to 42 per cent), because a larger percentage of their loans are invested in long-term home mortgages which carry a higher interest rate.

Most of them are state chartered, but some are federal chartered and will carry the word "Federal" in their titles. Those which are federal are members of the Federal Savings and Loan Insurance Corporation, which provides an insurance of $10,000 maximum per account per person, similar to that in savings banks. Some state charters require membership in the Federal Home Loan Banking System as well. The depositor should find out in all cases; the information is readily available.

As in the case of savings banks, these institutions are not required to pay out money on demand, but usually do so.

Any of these institutions are a good place to start in your investing.