Managing your money effectively can help you achieve your financial goals as an expat.
As an expat, managing your finances presents a unique set of opportunities – and considerations.
Some expats find they can save more than they did before they moved – especially if they’re receiving a higher income and have lower living costs or potential tax efficiencies.
But there can lots of things to juggle, such as:
Moving money between countries
Dealing with multiple currencies
Managing your finances in the country you’ve come from and the host country where you’re living
Here, we look at how to manage your money and reach your financial goals.
Open a savings account
For short-term goals, a savings account remains a great way to maintain access to your money while keeping it separate from your spending account.
Depending on the type of savings account you have, you may be able to add to your savings in one-off or regular payments. Some savings accounts also allow cash to be deposited and withdrawn at any time, meaning it’s always available for emergencies.
Perhaps the biggest benefit of having a savings account is that it’s safe. Savings accounts offer a secure place to store your capital while earning a fixed rate of interest.
HSBC Expat is a participant in the Jersey Bank Depositors Compensation Scheme. The Scheme aims to provide protection for eligible depositors of up to £50,000. For further information please visit www.jrdca.org.je/jdcs www.jrdca.org.je/jdcs This link will open in a new window
Is saving risk-free?
Not exactly. Interest rates can go up and down, and there’s a risk that inflation could mean the spending power of your savings is eroded over time. In other words, your money could buy you less, the longer you save it.
It’s worth keeping an eye on inflation rates as they could have a big impact on any savings you have in a particular currency. Make sure the currency you save in has low rates of inflation or your money could lose even more value over time.
For expats in particular, exchange rate fluctuations can also have a big impact on your savings and investments. To avoid any adverse effects, make sure you have a savings account in your most frequently used currency. If you travel a lot or live in several places, consider saving in a range of currencies.
Keep your emergency savings separate
Building an emergency fund of around 3 to 6 months’ worth of living expenses can help cover any unexpected costs. Saving for emergencies should be a priority because it’s hard to predict when you might need this money.
Make sure the money’s kept in an account you can get to easily if you need to. And avoid the temptation to dip into it for non-emergencies – like a holiday, for example.
Define when you want to access your money
Once you have your emergency fund, look at what else you want to save for, whether that’s moving back home or buying property – and think about when you’ll need the money.
If you’re planning to achieve your goal within 5 years, it makes sense to keep your money in a savings account.
It’s important to consider that not all savings accounts are the same. Compare the interest rates on different savings accounts and the fixed period you want to put your money away for.
Investing your money may also not be suitable for a short-term goal. You could potentially suffer short-term losses and not be able to access your money as quickly and easily as you may need to. Investing should always be seen as a long-term strategy of 5 years or more.
Invest towards long-term goals
If you have an adequate emergency fund in place, you might consider switching some of your monthly savings contributions into an investment fund.
Investing should be for the long term as the value of your investment can, and will rise and fall. The longer you invest, the more time you have to potentially recover from any dips in the market.
Over the long term, investing offers the potential to earn better returns than simply saving. However, there are no guarantees. The value of your investments can go down as well as up, and you could get back less than you invest.
Our wealth growth calculator can help guide you, whatever – and wherever – your goals may be.
Extra things to think about for expats
Retirement planning
A common issue faced by expats is paying into a pension scheme. You might not be able to pay into a scheme in your home country, but you’ll want to avoid creating small pension pots in numerous countries around the world. So, you may need help working out how you can achieve the retirement you’re aiming for.
Education fees planning
Saving for your children’s education is even more important for expats. If you’re moving country, school fees may differ and you need to be prepared for that. It’s worthwhile researching the costs of international education – sending your child to an international school, or paying for international university student fees – and seeking financial advice to help meet those costs.
Flexibility in line with your lifestyle
As an expat, you may plan to live somewhere for a couple of years and then return home, but life is full of surprises. Just as you think you’re approaching the end of your posting, a new opportunity could arise and instead of going home, you move to another new country.
As you move round the world, you could end up with several pots of money in different countries – and currencies. Look at whether your financial service provider offers the flexibility to continue with them if you move to another part of the world.
Explore: What is offshore banking?
Think about the impact of tax and currencies
It’s important to understand your tax situation as there may be advantages to working away from your home country. Also, currency fluctuations can affect your savings and investments. Saving or investing in the currency linked to your long-term plans – if you’re buying a property outside your home country, for example – makes sense to potentially avoid the impact of adverse foreign exchange movements.
Explore: Learn more about financial planning for expats in our guide
Which comes out top – saving or investments?
It’s really a question of which combination is right for you. The chances are you’ve got more than one goal you’d like to put your money towards. The golden rule is to save for what’s around the corner and invest for the future.
Sort your financial goals into short-term and long-term aspirations to help you decide the best way to manage your money.
Managing your savings and investments with HSBC Expat
Our award-winning services for expats will help keep your money working as hard as ever. We’ve got plenty of options for managing your wealth, whether you’re a seasoned investor or you’re new to investing.
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