As an expat, managing your finances presents a unique set of opportunities - and considerations. Many expats find themselves saving more than they did before they moved abroad thanks to higher income, and the often lower cost of living, as well potential tax efficiencies while abroad. It makes sense to take advantage of this to grow and protect your wealth.
Moving money between countries, dealing with multiple currencies and managing your finances in the home country you've come from, and the host country you're living in adds a layer of complexity.
If you find you're going around in circles when trying to decide the best way to grow and protect your wealth, this guide can help you work out what's right for your needs - spoiler alert - it's often a combination of both saving and investing.
For short term goals, a savings account remains the best way to maintain access to your cash. You can add to your savings in one-off or regular payments. And if you use an easy-access account, you can get back what you put in - plus the interest you've earned - whenever you want it.
Aside from accessibility, perhaps the biggest benefit of having a savings account is that it's safe. Savings accounts offer a secure place to store your capital whilst earning a fixed rate of interest. Some savings accounts allow cash to be deposited and withdrawn at any time, meaning it's always available for emergencies.
HSBC Bank plc, Jersey Branch is a participant in the Jersey Bank Depositor Compensation Scheme. The Scheme offers protection for eligible deposits of up to £50,000. The maximum amount of compensation in any 5-year period is capped at £100,000,000. Full details of the scheme and banking groups covered are available on the States of Jersey website.
So, is saving risk-free? Not exactly. Interest rates have been low for years so the return you'll get on your money will be very modest. There's also a real 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. While this may not always be the case depending on where you are in the world, it's worth keeping an eye on inflation rates as this 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.
Forgetting to put money away each month is often the reason people don't save. If you take the need to remember out of the equation, you could reach your goals.
Whichever type of account you use to save your money, make it automatic. Set up a standing order and have it come out of your current account and into your savings account on pay day. That way, you can set it and forget it, knowing your saving habit will take care of itself.
With investing, the process can work in exactly the same way. You can set an amount to be invested on a monthly basis.
One of the first measures of being financially fit is having an emergency fund. The idea is to have 6 months' worth of living costs within easy reach to cover any unexpected expenses.
As it's hard to predict if and when you'll need this money, emergencies should always be the first thing you save for. Make sure the money's kept in an instant-access account so you can get to it if you need to. And avoid the temptation to dip into it for non-emergencies - like a holiday, for example.
Once you've got your emergency fund, take your savings habit to the next level by working out exactly what else you're saving for, whether that's moving back home, or buying property overseas. Whatever your goal, be mindful of when you think you'll want to spend the money.
If you're planning to achieve your goal within five years, be it putting down a deposit, or covering the cost of relocating, it makes sense to keep your money in a savings account. If you were to invest it, you could potentially suffer short-term losses and not be able to access your money as quickly and easily as you may need it.
It's important to consider, not all savings accounts are the same. Compare the interest rates on different savings accounts and the fixed period of time you want to put your money away for.
If you've got an adequate emergency fund in place, you might consider switching some of your monthly savings contributions into an investment fund.
Investing should always be seen as a long-term strategy of 5 years or more. The longer you invest for, the longer your pot will have to recover from any market falls. Over the long term, investing offers the potential to earn better returns than saving. But it's important to remember there are no guarantees - your money can go down as well as up in value, so you could get back less than you invest. Our wealth growth calculator can help guide you, whatever – and wherever – your goals may be.
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 are aiming for.
Saving for your children's education is even more important for expats as you'll want to ensure continuity and quality of schooling for them, wherever you go. It's worthwhile researching the costs of international education - sending your child to an international school, or as they get older, overseas to university - and seeking financial advice to help meet those costs.
As an expatriate, you may plan to live somewhere for a couple of years and then return home, but life is full of surprises. Perhaps, just as you think you are approaching the end of your posting, a new opportunity arises and instead of going home you move to another new country.
As you move round the world you could end up with lots of different pots of money in different countries - and different currencies. Look at whether your financial service provider offers the flexibility to continue with them if you move to another part of the world.
It's important to understand your tax situation as there may be advantages to working away from your home country. In addition, currency fluctuations can have a big impact on your savings and investments. Saving/investing in the currency linked to your long term plans - if you're buying a property overseas, for example - makes sense to avoid the impact of adverse foreign exchange movements.
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.
Short term goals (Less than 5 years) |
Medium term goals (5-10 years) |
Long term goals (10 years or more) |
|---|---|---|
For money you'll need within the next 5 years, such as a deposit on a house or a holiday, saving makes sense because if you invest for under 5 years, your investment may not have enough time to make up any fall in value. |
If you're planning to put money away for 5-10 years, to pay for a child's wedding, perhaps, or take the trip of a lifetime, or to buy a property in the longer term (such as when you return back home), saving could still make sense - although if you're prepared to take some risk, investing could earn you a greater return on your money.
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For money you're not going to need for 10 years or more, such as your retirement, taking a degree of investment risk could earn you a greater return - compared with savings, whose value gets eroded by inflation over time. |
Short term goals (Less than 5 years) |
For money you'll need within the next 5 years, such as a deposit on a house or a holiday, saving makes sense because if you invest for under 5 years, your investment may not have enough time to make up any fall in value. |
For money you'll need within the next 5 years, such as a deposit on a house or a holiday, saving makes sense because if you invest for under 5 years, your investment may not have enough time to make up any fall in value. |
|---|---|---|
Medium term goals (5-10 years) |
If you're planning to put money away for 5-10 years, to pay for a child's wedding, perhaps, or take the trip of a lifetime, or to buy a property in the longer term (such as when you return back home), saving could still make sense - although if you're prepared to take some risk, investing could earn you a greater return on your money.
|
If you're planning to put money away for 5-10 years, to pay for a child's wedding, perhaps, or take the trip of a lifetime, or to buy a property in the longer term (such as when you return back home), saving could still make sense - although if you're prepared to take some risk, investing could earn you a greater return on your money.
|
Long term goals (10 years or more) |
For money you're not going to need for 10 years or more, such as your retirement, taking a degree of investment risk could earn you a greater return - compared with savings, whose value gets eroded by inflation over time. |
For money you're not going to need for 10 years or more, such as your retirement, taking a degree of investment risk could earn you a greater return - compared with savings, whose value gets eroded by inflation over time. |
If you're living abroad, or you're due to move, 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 a total first-timer.
HSBC Bank plc, Jersey Branch has prepared this article based on publicly available information at the time of preparation from sources it believes to be reliable but it has not independently verified such information.
The HSBC Bank plc, Jersey Branch and the HSBC Group are not responsible for any loss, damage, liabilities or other consequences of any kind that you may incur or suffer as a result of, arising from or relating to your use of or reliance on this article. The contents of this article are subject to change without notice. HSBC Bank plc, Jersey Branch and the HSBC Group give no guarantee, representation or warranty as to the accuracy, timeliness or completeness of this article.
This article is not investment advice or a recommendation nor is it intended to sell investments or services or solicit purchases or subscriptions for them. This article should not be used as the basis for any decision on taxation, estate, trusts or legacy planning. You should not use or rely on this article in making any investment decision. HSBC Bank plc, Jersey Branch and the HSBC Group are not responsible for such use or reliance by you.
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You should consult your professional advisor in your jurisdiction if you have any questions regarding the contents of this article.
