After talking about college education and the cost of it, and credit cards and other credit tools that are available more in the US than in Romania, this week we will talk about the way to earn money through work and investments.
I grew up during a time when all employees were paid in cash - in fact, my mother worked in the department that was in charge of giving out the wages 2 days a month. I remember my mom bringing home new bills, and then exchanging my savings to new crisp bills - the higher the value, the better. I have talked to many American friends who have memories from their childhood regarding saving money, and many of their stories are similar to mine. The main difference is the time of the childhood. My American friends talk about the 1960's and 1970's while my memories date from after 1985 - guess Romania was a little behind in adopting the plastic and the ACH as a method of collecting wages.
During the communist regime, we only have a central bank in the country and all the savings went there - building up a small interest for staying parked in the account. I remember taking a long time to collect an amount that I liked looking at and dreaming about. The system was set up in an artificial way that limited the inflation, therefore the value of money didn't go down much over time.
As soon as the Revolution changed the financial system in Romania - among other things - the inflation hit full force and many Romanians (including me) saw the value of the savings accounts shrink. the new "fashionable" savings accounts became the ones in foreign currency. This was quite profitable for a time - until the interest on in became so low that it lost all its appeal. The main challenge for the Romanians came a little later, when the banks caught on with the appeal of making more money from foreign currencies and started offering loans in foreign currencies. I have friends who are still struggling to pay off loans taken out in Swiss Francs many years ago.
From my experience with the financial system in the United States, I learned to appreciate the stability of the national currency that maintains the values of loans as well as savings on a level that can be easily understood. Since the banks make profits by trading money, the interest on savings is always lower than the interest on loans. This makes sense on a logical level, however much it affects the average Joe or Jane who is trying to make their money work for them.
For now, I will stop the stories of my 2 countries. Next month we will be talking about money tips that can help you keep more of the money you make.
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