A local bank account can be a lifesaver when relocating abroad.
Relocating abroad is something that many people will do at least once in their lives, and generally speaking, it is a valuable life experience that allows you to experience a new culture, enhance your career prospects and even make you a more well-rounded person.
Even in today’s modern, digitalised world, however, there are certain hurdles that you must jump through and rules to comply with that you must understand if your stay abroad is to be a success.
Chief amongst these challenges will be how shall I manage my finances?
If you are relocating abroad for the long term, let’s say longer than 6 months, then opening a local bank account in the place you are moving to really is a no-brainer.
There are several reasons for this. Firstly, your employer (assuming you will be working when abroad) may wish to pay you in local currency. Secondly, you may need a local bank account if you want to arrange things like a local mobile phone paid for by direct debit, or access to a local currency debit card (to avoid paying foreign exchange fees every time you make a transaction). Thirdly, a local bank account is the perfect way to start building a credit rating abroad so that, in time, you can apply for other financial services like a loan, credit card, or overdraft.
Plus, there are intangible benefits too!
It’s a great way to integrate with the local community, it will help you understand local customs and get to grips with the way things are done in your home, and it gives you extra flexibility. Imagine how useful it would have been to have had a euro denominated bank account post Brexit, when the value of the pound against the euro feel almost 20% in a single day!
Open a local bank account – but keep your country of origin account open!
If you do decide to open a local bank account, that does not mean it is a good idea to close your bank accounts in your country of origin when you move abroad. The overwhelming chances are that you will still have financial commitments at home. A mortgage, perhaps, or other direct debit payments, a loan, credit card, school fees – and of course, taxes to pay.
Anyway, from an admin perspective, it’s an unnecessary and risky move to close your account in your country of origin.
Closing your bank account in your country of origin can create problems when you are ready to move back home. You may find you have trouble gaining access to credit when you return, because with no domestic bank account, your credit rating may well have suffered while you were abroad.
Another factor to consider is that whilst abroad, you are likely to take the occasional, or even frequent trips home (especially if you have emigrated with family, or if you have children attending school in your country of origin). When you travel home, by having a domestic bank account you will save yourself the trouble of having to exchange money and avoid being caught short with no access to your funds.
And of course, the likelihood is that at some stage you will wish to return home. Why go through the rigmarole of first closing, and then struggling to re-open a bank account when you return, when banks are more than happy to keep these accounts open for you, which will keep your domestic financial situation ticking over nicely, as well as helping you when you return for holidays, business trips or school sports days.
Think about where you want your savings to end up!
Another choice you may have to make is whether to keep any money you save in your country of origin bank account (assuming you still have one – and we hope you do!) or your local one.
First of all, you want to make sure that you have sufficient funds in both of your bank accounts at the end of each month to cover the costs of the month ahead. At some stage, you will most likely have direct debits or scheduled monthly payments going out of both accounts, so make sure you always have sufficient resources in both accounts. Consider arranging to move a certain amount from the account your wages are paid into into your other (most likely your country of origin) account each month to cover outgoings.
But you will need to make a decision about where you want to put your savings. Local current accounts may not pay much interest (but always check first), and it is quite straightforward to set up savings accounts overseas, so if the interest rates or tax treatment in your local country are superior to what you can get back home, consider opening a new local savings account.
On the other hand, if you are looking to improve your credit rating in your country of origin or you are saving to buy a house there, for example, perhaps you want to sweep all of your spare funds and savings across to your country of origin account on a regular (monthly) basis.
Before deciding, try to make a list of your longer-term goals and objectives – do you want to educate children at home or abroad, do you want to purchase property at home or abroad, are you looking for the best interest rates, or best loan rates? Planning ahead like this will help you decide whether to save abroad, or at home.
Consider an offshore account to help with money transfer and longer-term savings
An offshore bank account can be a useful resource for any expat to have, but it has to be stressed that it is not an alternative to opening a local account.
An offshore bank account will allow you to move money between currencies without being charged and give you the flexibility to pay bills in both your country of origin and your local currency.
Another advantage is protection from adverse financial conditions either at home or abroad. For example, a few years ago the Greek government prevented people from withdrawing money from their accounts amidst fears it would trigger a “run” on their banks, with everybody trying to withdraw funds at the same time. At times like this, it’s an advantage to have more than one account that you can access cash from.
Currencies do tend to fluctuate in price and an offshore account is a handy way to hedge against this risk.
An offshore account could also be the answer to deciding where to save your money. Many banks offer this service, so it may be worth contacting your current bank if you are planning to move abroad to find out if they offer an offshore banking service. They can offer you specific advice as in this article from Barclays.
It’s worth pointing out at this stage however that if you do want to move large sums of money from one country to another, then the best way will most likely be to make an international money transfer, and the best way to do this is to use our comparison service to find the best rates, the lowest fees, the quickest delivery times, and arrange your transfer with the minimum of fuss. We compare some of the world’s top money transfer brokers and agencies, and we are adding news services all the time!
Final thoughts and recommendations
Hopefully during the course of this piece we have shown that opening a local bank account when moving overseas, whether it’s to manage savings, bills, or spending is a wise idea, but also that it does not have to be a replacement for your country of origin account, which in most cases should be kept open.
Overseas accounts should not be tricky to set up, but obviously a basic knowledge of the local language and a willingness to provide all the right documentation and comply with local laws and regulations, whatever you might think of them, is advisable.
Opening an overseas account can also help ex-pats settle in in more intangible ways – it demonstrates a willingness to get involved in the local community, and in many countries the relationship between you and your local bank (and its management) is still held to be a very important one.
Maintaining good relations and regularly paying into a local account will help stand you in good stead when it comes to making bigger financial commitments, like buying a property, paying school fees, or even asking for a loan or a credit card. It’s a great way to build goodwill.
The key takeaway is to put arranging your finances in the best way possible very close to the top of your list of priorities as you consider moving abroad. Make sure you take your time, and take advice from as many sources as you can; local people, your existing bank, co-workers or friends who have also lived abroad; and make sure that you know exactly what your outgoings and incomings are each month and that you have enough money, in the right accounts, to ensure that they are paid.
If you can do all that, then not only will you make the right impression with your new work colleagues and local community, but you will also have much more time to spend thinking about the more pleasurable aspects of your stay abroad. Good luck!
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