How Russians Save Money

Recently, I wit­nessed a conver­sation between two friends, a Russian and an American. The American described his monthly ex­penses, adding that he always put aside a certain sum to be added to his sav­ings. "What are you saving for?" asked the Russian friend. "What do you mean?" the American was confused. "What are you saving money for?" "It's just...you know, my savings." "So, for a rainy day?" "I guess you could say that."

The American was con­fused by the question, the Russian — by the answer, perfectly demonstrating the vast difference between the Western and the Russian atti­tudes toward savings. Eve­ryone in the West knows you’re in trouble without a retirement savings account; no one in Russia plans that far ahead.

History. "Older generation Russians — back in the good old Soviet times,before hyperinflations and money reevaluations state defaults — kept their savings accounts in the state savings bank, Sberbank. There was no lack of government propaganda advertising a savings account as the best place for "extra" money. With the fall of the Soviet Union, people saw their lifelong savings reduced to worthless pennies, as the gigantic state-run economy went free-market. This was a lesson that subsequent gener­ations learned well.

In the years following the collapse, Russians subsequently acquired the habit of investing money in home appliances, expensive rugs, and furniture — things with a more solid value than little slips of paper. Then, when foreign currencies made their way to the ex-Communist stronghold, all available cash was converted into dollars — a currency guaranteed to stay stable whatever the quirks of the government. But withdishonest banks and dubious finance firms sprouting up like weeds, money turned out to be much safer in secret stashes under bed mattress­es, in cupboards, and in other such medieval hiding places

What is a piggy bank? In fact, the Russian word for 'jar' is 'banka' which sounds like ‘bаnk’, giving rise to an ancient joke: "Which bank do you keep your money in?" "The glass one." A question recently posted on a popular Russian household advice forum read, “Grandma kept her dollars in a glass jar on the balcony, and they've decayed. Is there any place that will exchange the wad for good money?"

Can Russians trust their banks? Russia defaulted on its loans in August 1998 — sepa­rating recent history into the time "Before the Default" and "After the Default" for many Russians, who once again saw their money devalued by a factor of two. Since then, the country and its people have been climbing out of the financial hole, and banks have been trying hard to entice Russians to loosen the strings on secret purses and stashes and bring their rubles and greenbacks back into cir­culation.

"The level of trust Russians put into the banking system is a variable value that depends on a number of fac­tors," says Guta Bank's Tatyana Litvinova. "It's enough to recall the numerous finan­cial upheavals of the 90s." At the same time, she feels that the level of trust has risen, especially given the current introduction of de­posit insurance. "A potential depositor can estimate a bank's reliability level — it's enough to find out one or another bank's rating, and whether the bank has joi­ned the insurance system." Litvinova says that the fear of losing one's savings is no longer an issue.

A look into future. Still, rapidly changing economic situations that can make or break a family's for­tune have taught Russians to be cautious about planning long-term. In the summer of 2004, brief trouble experi­enced by some Russian banks was hyped up by the press and billed as the next big financial crisis. The paranoia was incredibly easy to stir up among a population used to being, if not swindled, then victimized. Perhaps in the future, Russia will achieve true financial stability — the kind where putting mo­ney in a bank is seen by the people as sensible, natural, and safe, as opposed to risky and meaningless.