When you move to another country you will have a major decision to make about what to do with your money. Obviously, your day-to-day expenses will be in the currency of the country you’re moving to – but it may be that all or part of your income is coming to you in another currency and it will almost certainly be that your savings and investments will be kept in another currency.
Should you bring your money with you when you move abroad or is it better to leave all or part of it ‘back home’?
Should you bring your money with you?
The most important factor in deciding whether or not to bring your money with you is whether you are going to be remaining in your new country on a permanent or at least a very long-term basis.
If you are making this country your new home, then there is a lot to be said for thinking about your finances in terms of its currency. This means measuring your income and your wealth in that currency rather than in the currency of your former home.
This means that your income and savings will be measured in the same currency that you’re spending, so avoiding the huge risk incurred by those who are dependent upon another currency that the relative values of the two currencies will change – possibly dramatically.
I’ll use euro and sterling as examples.
If you have monthly living expenses of (say) €3,000 but you are receiving most of your income measured in (say) pounds sterling you are very exposed if the exchange rate changes dramatically. A quick look at the last few years highlights the problem. During the last ten years there have been times when the British pound was worth over €1.50 and there have been times when it has been worth as little as €1.03. This means that if you enjoyed a rock-solid income of £3,000 per month you would sometimes have had only €3,000 available to you and at other times you would have had €4,500 available to you. This, of course, makes a dramatic difference to your lifestyle.
Now, if you are receiving a pension or a salary from another country it may be that there is little you can do about having that converted to a euro equivalent and paid to you in euro – except, of course, exchanging the money when it arrives.
However, if you are exposed to this risk, it increases the risk still further if your savings and investments are still kept in British pounds.
If you are going to be living in your new country long-term it seems to me to make sense to reinvest all or part of those savings in investments denominated and measured in the currency that country uses. Choosing what those investments should be required careful thought and, usually, some good advice.
If you are wealthy enough to have a large sum to invest then there may well be good arguments for diversifying the currencies in which you hold those investments. For example, you might decide to keep a portion of your wealth in euro (probably the largest part) but hedge against the risk of the euro falling in value by having parts of your investments in dollars, British pounds, Japanese yen etc.
Again, this decision has huge implications for your financial security and you should make it after taking appropriate advice.
Keeping money ‘back home’
Many people decide to keep some money ‘back home’ even though they fully intend to make a new life in another country. Often they will visit home and it can be very convenient to have a local bank account, credit card etc. Some seem to suffer from amnesia when it comes to declaring the money they receive in these bank accounts to the tax authorities in their new home! This is, of course, illegal.
If you do not intend to stay in another country on a long-term basis, then it is almost certainly better to keep all or a large part of your wealth denominated in the currency of the country to which you intend to return. This, of course, is subject to the general point that if you have substantial wealth you may want to spread your investments between various currencies as part of your general investment strategy.
When should I move the money?
One problem that arises regularly and which makes your planning more difficult is that a percentage of people move abroad – either to retire or to work – thinking that it is going to be a permanent move but then find that their job comes to an end, their business does not prosper or that they do not like living in the new country. If they have moved their investments into another currency and then moved back home, they face the same problem in reverse – and so it’s probably a good idea to let your plan develop over time and not to immediately jump into the process of reorganizing your entire financial life.
What do I mean by “over time”? Typically, I would suggest that you might want to leave things for a year or so before making any major decisions as to your future investment plans. You will probably want to move some funds to your new country during this period but you should not be leaping into moving all of them.
Of course, if you believe that your currency is going to crash in value during the forthcoming year, you might be tempted to jump ship now rather than to suffer significant loss. Whether to do this is a decision that only you can make and you will probably find that you can get little guidance from your financial adviser because they tend not to be in the business of forecasting the movements of exchange rates.
The most important thing is that, if you do decide to allow a bit of time to go past before finalising your plan, you do make a diary note and act when that period has expired.
Factors to consider
So much for the theory. However, when it comes to deciding whether to move your money, there may be a couple of very practical points that will have a big impact on your decision.
It is likely that you will have chosen many of your investments because they are tax-efficient in your own country. If you’re no longer resident in that country and no longer paying tax in that country then those investments will probably lose all of their tax benefits and, stripped bare, they could look like pretty poor investments. In these cases, it is probably prudent to think about reinvesting as soon as possible; and the funds from these investments are probably the prime candidates for the money that you will immediately bring with you to your new home.
You should also not forget that some of your investments back home may simply not be permitted to people who are not resident in your old country. It may be illegal for somebody living in your new country to hold those investments. These, too, will therefore need your urgent attention. This will involve discussions with your financial advisers back home. In fact, the best course of action is usually to have either your financial adviser in the new country coordinate the whole exercise and to contact your financial adviser back home on your behalf; or to have your financial adviser back home to coordinate the whole exercise and contact your adviser in your new country. Which works best will depend upon your person circumstances – usually upon where you have or will have most your investments.
One final point when it comes to thinking about your investment plans is that you should not necessarily be worried about relocating your investments. There many excellent investment opportunities around the world. The trouble is that, however canny you are as an investor and however well you understand your investment portfolio back home, you’re unlikely to know very much about the options available to you in a brand new country – and so you will need good financial advice when it comes to making these decisions.
Where do you get that advice? The most important thing is to make sure that you are dealing with a bona fide qualified and registered financial adviser. Better still, it should ideally be somebody who has already given satisfactory service to people you know. It should also be somebody with whom you feel personally comfortable.
Moving money to another country
The most important thing to remember is that only a fool or someone with money to burn uses their ordinary bank to transfer money to another country. The savings you can make by using a good foreign exchange (FX) dealer can be huge – 1% or more of the amount that you’re transferring.
See our Guide to Foreign Exchange (FX).
What to do with the money when it arrives
The way in which you should reinvest your funds is, of course, entirely up to you and depends entirely upon your personal circumstances.
Many reputable and qualified financial advisers offer a free initial consultation so that you can explore, at least a little, some of the options that might be available to you. Just as importantly, it gives you the opportunity to decide whether you could work with this person and then the opportunity to decide whether they would like to have you as a client.
These meetings are completely without obligation on either side. They will not be detailed enough to allow you to make an investment plan but they will definitely help point you in the right direction.
Even if you’ve made the decision not to make any final dispositions of your investments until a year or so after you’ve arrived in your new home, it’s probably a good idea to get the ball rolling by seeing a financial adviser as soon as possible after you arrive in the country.