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When life becomes an uphill battle.

Byline: For the average person, saving money seems extremely difficult, given the present financial situation around the world.

Maybe, now, it is better to keep your money buried under your mattress. That's what they used to do in the old days because so many people did not trust banks. A certain amount of mistrust still persists to this day.

Not least because bank officials tend to talk in terms that the average layman cannot understand. They seem to forget that we haven't all taken a degree course in economics. If we had, we'd be sitting on their side of the desk.

And that's another thing. Considering it's our money they are holding (and make it so difficult for us to get our hands on), why are all banks and similar financial institutions so lavishly appointed? They give off every appearance of being spendthrifts, courtesy of the customer. Is it to allow bank officials to work in a luxury which they cannot afford at home?

In the past, the difference in interest rates between deposits and borrowings was minimal, perhaps one to two percentage points. Now, the difference is enormous: you borrow at a very high rate but you deposit your money and get a minimal rate or, as is happening now, zero per cent interest. Yes, I kid you not. If you want to put some of your hard-earned savings into a deposit account, and choose the wrong currency, you could well be quoted a zero rate interest.

Hence my opening remarks. But even with currencies that are able to gain interest, the rates are so low that they do not keep pace with the rate of inflation. Therefore, if your savings are not getting you anything near inflation figures, you are losing money. It's as simple as that.

It may seem that the shenanigans going on about sub-prime debts, mortgage foreclosures and so on taking place in other countries does not affect people in this region, but it would be a wrong assumption. With the global economy as it is, what goes on next door, or in the next street, can and does affect us all. For example, many of us, if not putting money aside for the future (and getting nothing in return for our frugality) will likely send money to our family in another country. That's when the realisation of currency depreciation and escalating costs begin to take effect. It costs more to send the same amount home than before. Yet the same amount (as in previous months) is not enough to keep your family in the same comfort, so the amount sent has to increase. A vicious circle, yes, and one that is going to be very difficult to get out of, if ever.

It used to be said that when the US sneezes, the rest of the world catches cold. I am sure it still applies today. The US economy, still considered the strongest in the world, is able to pull itself out of recessions or slowdowns, as it is still looked to as the guiding force in the financial world.

Hammering

Unfortunately, with financial institutions having taken a hammering of late, the strength of the dollar has been undermined, with its consequential effects on other global currencies. Add to that the cost to American taxpayers of wars in Iraq and Afghanistan primarily, and the country has been running up enormous debts, which help destabilise their economy. In time it is possible things will likely turn round - perhaps with a new president - but in the meantime, the man (or woman) in the street continues to suffer.

Of course there are other places you can put your hard-earned money, but it often means tying up funds for some time, thereby restricting your ability to get to it when perhaps you most need it. Or losing a significant amount on the investment because of penalties for early withdrawal. This especially maybe so if you take out a policy and encash it early. However, if you can afford it - and that is a big "if" - property is always a good investment. That is assuming you think you will not need the money for other purposes for some time. Prices do fluctuate but over, say, a 10-year period (unless you have purchased unwisely) you will be in profit to a greater extent than that gained through any fixed investment.

Wall Street, one of the major financial markets in the world, claims the US is going through a recession. Strictly speaking, it is not, as the traditional definition of a recession is two consecutive quarters (six months) of negative readings on gross domestic product. However, whether it is a recession or a "slowdown" - as data presently indicates - is a matter of mere pedantry. For the average person, in the present financial situation it seems saving money is a Sisyphean task.

[c] Al Nisr Publishing LLC 2007. All rights reserved.

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Publication:Gulf News (United Arab Emirates)
Date:Mar 23, 2008
Words:827
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