subject: Lee Byers Guidance On Hidden Costs Of Managing And Moving Money Abroad [print this page] When I moved abroad thirteen years ago all I was focused on was the adventure! I had no idea quite how expensive my relocation was going to be! Sure, Id factored in removal costs and even the cost of an aeroplane ticket for meI knew Id have to pay rent and even possibly fork out to get all my permissions in place. But what I hadnt factored in however, was the fact that just managing my money on a month-to-month basis was going to erode serious amounts from my regular wage packet!
The hidden costs associated with just managing and moving money abroad are shockingand I am the sort of person who has a real problem with paying for a bank account! I just dont see why I should have to pay to put my money in a bank when the bank benefits from my custom. So, as you can imagine, when I realised just how much it was costing me to move money internationally I nearly had a meltdown.
Perhaps youre not quite as obsessed with looking after the pennies as I am which may in fact be a more healthy way to lead your life however, are you aware of the fact that you can be charged up to 5 times for just sending money home? The good news is there are some easy peasy ways around this, and if you read on you will discover how you can save yourself a pretty penny with international money management and even better, its simple to start saving!
Most expats I know have an account back in the UK and a bank account in their new nation of residence. (Some also have an international (offshore account) if theyre more interested in the ongoing management of their cashmore about that in a moment.)
So, if youre a typical expat you will earn money in your new country which will be paid into your local bank account, this money will be used by you to live day-to-day and to pay local bills. Chances are however, you will also transfer money from this account back to the UK to service debts such as a mortgage, or to just save cash so that its not all spent every month.
So heres the ugly truth about the way you manage your money
Your bank may charge you
1) a commission fee and
2) a transfer fee for making an international transfer to the UK. A commission fee may be a percentage of the amount youre transferring, and the transfer fee is likely to be a fixed amount.
You will also have to
3) convert your currency, and chances are youll receive tourist rates from your bank which could be as much as a few percent away from the best rate.
You may also be
4) charged by any handling bank in betweenand finally, you may be 5) charged by your bank in the UK for receiving international funds.
In total, you could lose a significant chunk of the transfer every single time just to make this very simple yet essential money movementand it doesnt stop there!
If you move money from the UK abroad to top up your wages or because youre in receipt of your pension or investment income in the UK but youve relocated overseas, you will be charged to move that money out of Britain too. Youll have the same transfer and commission fees, the same conversion and international receipt fees too
So, every single time you need to move your money you could be hit with charges. You can think of it like a tax on your new life abroad and its not very nice is it?
Some expats I know attempt to manage all their money through their old UK bank account in a bid to avoid this issue but the truth is, they are hit even harder because they withdraw money from international ATMs and get stung every time they do with fees and poor conversion rates!
Personally I want to stop this injustice!
The good news is that there are better ways to manage your money when youre living abroad, and cheaper ways to transfer your funds around the world.
The first option you could consider is an international bank account. Instead of having an onshore account in your new nation and one back in the UK you can consolidate and have a single offshore/international account. The likes of HSBC, Barclays, Lloyds etc., all offer such account types to expats.
These accounts may however, come with a fee attached! So, do your homework carefully. Premier offerings from the banks come with lots of bells and whistles you may not need so look carefully at the account types and ensure you find one that will allow you to receive money from your employer or pension, fulfil financial obligations in your new nation and your old home country all without ridiculous fees being applicable.
If you cant find an account thats flexible enough or you really have need or desire to keep your accounts in the UK and in your new nation open, dont worry, there are still ways you can save money when you transfer money abroad or back home
You need to do some research, but the foreign currency brokers that are now all over the Internet and the high street all offer a range of options to you. Firstly they generally apply low or no charges for the movement of money, secondly they give you far better rates of exchange than the banks. Thirdly and perhaps most importantly for anyone making regular transfers of money internationally you can forward set the rate of exchange your money will benefit from by using what are called forward contracts.
These allow you to work with a currency broker to determine when the currencies youre interested in reach a good point at which to convert. You then buy in at this point and fix so that for the next X number of months, you will be able to benefit from this specific exchange rate. (X being the number of months you decide to fix for, with most brokers allowing you to fix for up to 2 years).
You usually have to deposit some money with the brokerage (often up to 10% of the total transfer amount for the duration you have fixed for) and you dont receive interest on this money however. So, it will be up to you to weigh up the financial savings you may make, and base your decision accordingly.
For any infrequent or one off international movements/payments, always go to an FX broker and ask them what rate of exchange you can get and whether there will be any fees incurred as stated, many brokers charge no fees for the international movement of your money.
Last but not least another word about offshore accounts it may be possible for you to combine an offshore bank and savings account, and to have interest paid on the money you dont spend each month. Whilst no one advertises such options, speak to your preferred bank about it.
I bank with HSBC, and I have a savings account directly linked to my current account, whilst the interest earned on the savings account isnt massive because its instant access, at least I get something for them having the benefit of my money gracing their coffers! I am sure all the leading institutions offer a similar options.just approach them directly and ask.
Some banks also offer premier account customers fee free international transfers, and better rates of exchange on currency conversion.
But as previously stated, you usually incur a monthly fee for such an account.
Finally, as regular readers will already know, at Lee Byers were not qualified to offer financial advice, so this article does not constitute advice. Be sure to speak to a regulated, qualified and experienced financial adviser before you take any action that could affect your wealth status.
