If you are thinking about living the expat lifestyle, expat saving plans are key to achieving your goals. Managing the money as an expat offers a diverse collection of rewards – and considerations.
Many expats find themselves saving more when they go overseas, owing to increased wages and, in many cases, reduced housing costs, as well as possible tax efficiencies while abroad.
It makes sense to take advantage of this opportunity to increase and preserve your capital. Moving currency between nations, coping with different currencies, and handling the investments in both your home country and the host country adds a layer of difficulty.
If you find yourself running in loops when deciding how to build and secure your money, this step-by-step guide to saving money will assist you in developing an easy and practical plan for saving for both of your short- and long-term savings goals.
1. The best time to save is now
Whatever the length of your stay overseas, there is never a better time to start moving money into an expat monthly savings account.
The earlier you start investing, regardless of your age, the greater the opportunity for success. Compound investments, for example, imply that if you begin investing now, you will not only have the time to collect interest, but you will still have the ability to enjoy compound returns (the interest you earn on your interest).
Wherever possible, set aside as much as 15-30% of your salary—it will reduce your purchasing power in the short term, but you will have more flexibility and control in the long run.
And the best thing about an expat daily investment package is that it is adaptable enough to meet almost anyone’s financial goals: if you want to save for a second home, a yacht, school tuition, or anything else, you can make it work for you.
However, as with any part of financial planning, starting the process of setting up your expat monthly investments necessitates an examination of your priorities, schedule, and options. This is a method that is better carried out with the assistance of an accomplished financial planner or investment advisor.
2. Is there a safe place to keep your money?
Aside from simplicity, perhaps the most important advantage of having an expat saving plans is that it is a personal future safety net. Savings plans are a safe spot to keep your money while enjoying a guaranteed rate of interest. Any savings accounts allow cash to be deposited and withdrawn at any time, ensuring that funds are still available in case of an emergency.
There is still a real possibility that inflation will erode the purchasing power of your investments over time. In other words, the more you save your money, the less it can buy you. Although this may not necessarily be the case based on where you are in the world, it is important to keep an eye on inflation rates because they can have a significant effect on any investments you have in a specific currency. If the currency in which you save has a low rate of inflation, your savings will lose even more value over time.
In particular for expats, exchange rate fluctuations may have a significant effect on your finances and assets. To stop the negative consequences, keep a savings account in the most commonly used currency. If you fly often or live in several locations, try investing in a variety of currencies.
3. Make saving a habit
People also fail to invest and they forget to set money aside each month. If you remove the desire to remember from the equation, you will be able to achieve your goals even more quickly.
Set-up your savings account, regardless of the sort, automatically. Set up a standing order or Direct Debit to have money deducted from your checking account and deposited into your bank account on pay day. You should then set it and forget it, trusting that your saving habit will take care of itself.
When it comes to saving, the process can be very similar. A set sum may be spent on a monthly basis, lowering total risk. When looking at the long run, keep in mind that time in the bank is more reliable than trying to time the market.
4. Maintain a special insurance fund
Growing an emergency fund is one of the first indicators of financial fitness. The aim is to have between 3 and 6 months’ worth of living expenses on hand to offset any unforeseen expenses.
Since it is difficult to determine when and whether you would need this money, emergencies should always be the first thing you save for. Make sure the money is stored in an instant-access account so you can access it quickly if necessary. And resist the urge to use it for non-emergencies, such as a vacation. The money you save now may be used to finance a larger or more permanent transfer in the future.
Define when you choose to get access to your funds.
If you’ve established your emergency fund, take your savings habit to the next step by determining what else you’re saving for, whether it’s relocating back home or purchasing property abroad. Whatever your target, think about when you’ll want to invest the money.
If you want to reach that target within five years, whether it’s setting down a deposit or paying the expense of relocating, it’s a good idea to keep your money in a savings account. If you spend it, you risk incurring short-term risks and not having enough cash on hand when you need it.
Keep in mind that not all retirement accounts are created equal. In exchange for putting your money away for a set amount of time, you will be able to receive a marginally higher interest rate for a fixed rate account or a daily savings account.
5. Invest in your long-term goals
If you have a sufficient emergency fund, you might want to consider putting some of your monthly savings payments into an investment fund.
Investing can still be seen as a 5-year or longer-term approach. The more you spend, the more time your fund has to rebound from any market downturns. Investing can gain higher returns than saving over the long run. However, it is important to note that there are no promises – your capital will lose value as well as gain value, so you can get less than you invested. Whatever – and whenever – your ambitions are, our wealth development simulator will help you prepare accordingly.
There are several ways to invest, and most of them require some kind of charge or tax. You can invest in shares, which are a tiny slice of an actual firm, or funds, which are a ready-made basket of stocks handled for you by a specialist.
When you spend, you are investing your money into something that you hope will appreciate over time. That means you’re vulnerable to a particular form of risk – market risk – and the valuation of your investment will fluctuate. Remember that the projected returns will fluctuate and are not assured, and you can get less than you invested.
As a result, you can plan to save for at least 5 years. A longer timeline allows the investment more time to rebound if the valuation falls. You can control the risk you take by planning when you’ll need access to your money.
It is important to note that not all investment risk is the same. And the advantage of having a predetermined level of risk is that you can make more money than you can with a savings account. Our wealth growth simulator will assist you in understanding the costs and benefits of various degrees of investment risk.
6. Extra considerations for expats
6.1. Planning for Education Fees
Saving for your children’s education is especially relevant for expats because you would want to ensure consistency and standard of education for them everywhere you go. It is worthwhile to study the costs of foreign schooling – sending your child to an international school or, to university abroad – and seek financial support to help cover those expenses.
6.2. Flexibility in accordance with your way of life
As an expatriate, you may plan to stay elsewhere for a few years before returning home, but life is full of surprises. Maybe, just as you think your posting is coming to an end, a new chance emerges, and instead of returning home, you relocate to a new country.
When you travel around the globe, you can end up with a variety of different pots of money in various countries – and currencies. Examine if the financial service company allows you to continue working with them once you relocate to another region of the country.
6.3. Consider the effect of taxes and currencies
It is important to consider the tax situation and there could be benefits of living outside of your home country. Furthermore, currency volatility may have a major effect on your savings and investments. To avoid the effects of unfavourable foreign exchange fluctuations, it makes sense to save/invest in the currency related to your long-term goals.
7. Understand the True Cost
Moving to a foreign world that uses a different currency from your home country presents its own set of challenges. You may find yourself swiping your card and paying for anything without understanding the true cost. Did you actually pay €10 for a cup of coffee at your local hangout?
There is an optimized currency converter that allows you to see currency exchange rates. To get an instant translation, simply input the number in the local currency and then pick your home currency. This will give you a greater idea of the real expense and worth.
8. Clear The Credit Cards
Before you can start saving money, you must first pay off any outstanding balances on your credit cards. This way, whatever amount you save is real money earned rather than money used to pay off loans.
When the credit cards have a zero balance, the money that was formerly expended repaying credit cards or paying interest payments will be transferred to a savings account.
Expat saving plans is important for ensuring financial stability in an uncertain future. The expat may have landed a fantastically well-paying job, but they must also do whatever they can to prevent major financial difficulties since they will be managing their money in two countries with different economies and currencies.
One of the key reasons for expats to relocate abroad for jobs is to earn far more money than they would otherwise, which could, in principle, provide them with a fantastic chance to save money.
Speaking with other expats in person or through blogs and online platforms may be a successful way to collect information; and creative advice unique to the country of origin or destination.
An acquaintance may be proud to tell you how they managed to transport their favourite armchair for free or where they got the best deal on gasoline.
Tenzing Pacific Services – The No.1 Insurance & Savings Agency
If you’d like to talk about the opportunities to you as an expat living in Asia, contact Tenzing Pacific Services.
Tenzing Pacific Services has been providing insurance and banking services to both personal and corporate customers since 2012.
“We provide holistic advisory services to assist our customers in protecting what is most important to them and achieving their financial objectives. Thousands of clients in South East Asia depend on us for insurance and personal finance advice; we provide risk assessment guidance on personal and technical risks to each customer. Our informed appraisal assists clients in making better financial planning and safety choices. Since we are independent of insurance providers and financial firms, we will still put our clients’ interests first. This ensures that the customers are their first priority, and the customer wishes come first.”