High interest rates are appealing but there’s a sting in the tail. 

Just about every Ex-pat I meet in Turkey think they can live comfortably by depositing a sizeable amount of cash in a Turkish bank and living off the interest.  I think it is an illusion, and in time an expensive one. 
 
Let us consider the typical reasoning.  Interest rates in the UK and Europe are low, almost abysmal.  Where then asks the ex-pat Brit can he deposit his money and make a decent return?  Turkey, with its mouth-watering interest rates.  If an ex-pat can leave a large pot of money in the bank, he calculates he can live off the interest to pay off his living expenses and leave his capital untouched.  This is true to start off with; but if the Brit had deposited his money say 4 or 5 years ago, a bottle of Efes (as an example) around the typical bar was 1.5YTL; it is now 3YTL.  Your purchasing power has decreased by 50% in those years.  Ditto for all the other expenses like rent, electric, water, telephone, dolmus fares, taxis etc.  They have all increased by a similar amount.  It’s called inflation.  The money your interest gives you is buying you less and less as time goes by.  Worse than this, the untouched deposited capital that you think is perfectly safe is now only worth half what it was; it has half the purchasing power.
 
The net effect of this is, after the first six months or year you think you are a smart customer “investing” your money in Turkey.  After about 3 years you may be feeling the pinch and have an inkling something is wrong; after 5 years you are horrified and can see clearly what is wrong and where this is headed; and after 10 years you could be destitute.
 
Inflation is the bane of savings. It is invidious and insidious.  So, be a smart and plan your finances carefully.

Michael Sullivan

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