The Great Depression
My grandfather had many investments in the stock market and private businesses in the early 1900‘s. During the depression he lost everything. He had no use for banks and financial institutions for good reason. During the depression when he was late with his mortgage payment, he told the bank to take it out of his checking and savings accounts. They told him they had no money reserves to cover his checking and savings accounts, that the mortgage was a separate financial instrument, and he would lose his home if he couldn’t come up with his payment.
For that reason, he and his whole generation had little or no faith in banks. That’s why many of them hoarded their money and literally buried it in coffee cans in their backyards or hid it wherever they could. He explained to me that banks did not exist to serve me; that they operated under the notion that I was there to serve as their customer; that is to fund them.
Grandpa Told Me Some People are so Dumb They Actually…
I remember Grandpa telling me that some people are so dumb that they actually borrow money to buy an automobile. That was entirely foreign to him. He taught me to only do business with banks when I had to. That’s the best advice I ever got. Banks are in the business of maximizing their profits and should be - they owe that to their stockholders. And you should be working hard to maximize your profits and the best way to do that is to minimize your costs and expenses and save and invest.
Finance Companies Are Not Your Friends
The financial industry (banks, finance companies, loan operations) and the US Government are entities from which you need to protect yourself, for your entire adult life. They are not your friends. They only want your hard earned cash and are willing to spend an incredible amount of time, effort, and money developing ways of separating you from it. If you are not careful, soon you’ll find yourself head-over-heels in debt. The financial industry, through their advertising, attempts to cause you to feel guilty if you don’t do business with them. They want you to feel good about borrowing money and subsequently paying interest and they try to cause that to happen without you even realizing it.
Their mantra: you owe it to yourself, it will be good for your family, and you deserve it. It’s the old hype - enjoy it now, no interest for 2 years, zero percent interest, and on and on. There is not now nor has there ever been a free lunch, so don‘t be fooled. They manage to drain your wallet via overdraft protection, late payment fees, and interest increase wording buried deep in the small print of the contract you signed when you opened the account.
And never, never, never do business with a pay day loan, cash advance, or title loan operation. You can end up having to pay as much as 300% interest and, if you have a little bad luck, you can easily lose your automobile.
Thomas Jefferson said in 1802:
“I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around the banks will deprive the people of all property until their children wake up homeless on the continent their fathers conquered.”
That warning is just as appropriate today as it was over 200 years ago.
Next: Lesson Three: On Savings - Save, Invest, and Always Pay Cash
