Exchange Rate Roulette

Living and working in a foreign country is an amazing and thrilling thing, but it does not come without its headaches. For many British expats who are living in Europe for the benefit of constant sunshine and ripe fruit, this is not news to them – their incomes are at the mercy of continually shifting exchange rates. This week the European currency took a hit because of the global recession and the international market’s recognition that lots of debt is not a good thing: the nation of Greece is in a bad way. So what’s the big deal?

Well, when currencies fluctuate in value due to speculation and market forces, it affects people in a very direct way – suddenly their cash is either more valuable or less valuable. In the case of the British expats, their UK pounds are worth slightly more in Euro’s this week than they were last week. For people on a fixed income such as retirees, this is a big deal. For British tourists, who stayed away from their favorite continental holiday destinations last summer, this is great news! I for one will be buying some Euro’s this week, in an effort to stock up. And of course, I will be secretly hoping that the Euro weakens further in a couple of weeks, when I can buy some more.

This kind of exchange rate gambling is nothing new to me. I am used to keeping a close eye on currencies because I need to send money to a foreign account on a monthly basis. Because I was educated in the USA I have a lot of student debt - so much that it is not practical to get a UK loan and transfer the debt over here. So I need to buy US dollars each month and transfer them into my US account.

In the USA, we are required to begin our student loan repayments 6 months after we graduate, regardless of what wage we happen to be earning. In the UK, students are not expected to begin repayments until they are earning a certain threshold. This sounds good in theory, but in practice it allows many students to postpone the inevitable of getting a proper job and go ‘traveling’ (which is really just one big holiday to former British Empire/Commonwealth countries!). Indeed, some British students do not ‘settle down’ and make that cross-over from adolescence to adulthood until they are pushing 30. We Americans do not have this luxury, and we have to put our nose to the grindstone straight away in order to bag a decent job before the 6 month student loan ticking time bomb goes off.

For the first 3 years I was working in the UK I was very lucky. The exchange rate was great for buying dollars – I got 2 dollars for every pound! Oh, those were the days – everything was half price! When Husband and I were in the states visiting friends and family we would stay in fancy hotels and jokingly call each other Mr. and Mrs. Rich. We once found a great bicycle shop and went a bit overboard – we walked away with $800 worth of gear, pedals, shoes, clothes, lights, parts and repair kit! When we got home, our credit card bills were just £200 each. A total bargain! Husband was astonished; he had never before spent so much money in a single shop in his life and he was in complete awe over his US shopping experience.

But the good times did not last. About 18 months ago the British pound began to fall. Suddenly, within a couple of months, the money I was sending back to the USA (which during the boom years was more than my monthly loan payment) was not enough; and I could not afford to send any more! I worked out that if the exchange rate went below $1.40 for £1 that I would absolutely need to increase my monthly transfer amount. Miraculously, it never really went below $1.40.

The US/UK currencies stabilized around $1.50 and for a while I accepted that the good times were over. I had a small buffer in my US account to make up for the shortcomings in my monthly transfer, so I kept an eye on it but tried not to think about it too much. Then, the unexpected happened – the pound began to rise again against the dollar! As soon as it reached $1.60 I took a gamble: I took my UK savings and bought lots of dollars in an attempt to get a decent exchange rate and protect myself from a future crash. It was a risk – what if the currency got even stronger – but I was willing to take it. And I am glad that I did. Just this week the pound fell again against the dollar to be back around $1.50. It is enough to drive a person completely insane.

But I suppose it is a small price to pay for living abroad and for having a decent education. In the USA we’re conditioned to think that it is normal to spend between $10,000 and $25,000 per year for undergraduate study. And we do not have the streamlined 3 year undergraduate course advantage in the USA like they do in the UK – no, it can take an American undergraduate 4-5 years to complete their degree, provided that they do not switch majors too many times. I changed majors twice, studied abroad and went to grad school.It is safe to say that my total debt is a whopper.

But we Americans are taught that this is normal, so we do not really think about the debt we are accumulating. And if we want a high paying job, we need an education. You get what you pay for, therefore it is viewed as a necessary evil. This is something that UK students are just coming to grasps with, with the introduction of tuition fees - which, after years and years of free university education in the UK, they feel are unfair. But if you want to retain the best academics and have access to the best facilities you need to pay for it. And when you compare them, there is no doubt that the UK system is much friendlier on students’ pockets. US universities allow students to amble on as undergraduates taking classes that do not add up to a degree, happily charging them tuition and fees, without an end in sight. You can’t help but think that the US approach is taking students for a very expensive ride. And here is a chilling thought – no one in the world pays more for higher education than we do in the USA!

So as I chip away at my student debt, with the added complication of foreign currency exchange rates, I can’t help but feel annoyed: I chose to be educated through one of the most expensive systems in the world, rather than in the UK where it would have been cheaper overall. D’oh!

Leila Lacrosse


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