One of the biggest money worries for expats is uncertainty over foreign exchange rates.
Any expat who is trying to shift money around the world in two or more currencies understands even slight shifts in rates can lead to losing significant amounts of money.
Take just a few weeks between the start of February 2013 and the end of the following March.
Pitching the three most popular expat currencies against each other saw the Pound rise and fall 2.6% against the Euro, while losing 4.3% against the US Dollar.
Microshifts in foreign exchange rates can lead to losing hundreds or thousands of pounds if too much money is moved at the wrong time.
Six Forex Strategies
Seasoned expats are familiar with three money-saving strategies:
- Stage payments –Any expat planning to buy a property should not shift several thousand pounds, euros or dollars at the same time. Buying property is not an impromptu purchase – it takes planning and time, and so should moving money to get the best rates.
Instead of moving the whole amount in one go and increasing the risk of a loss, transfer smaller amounts regularly on a spot contract when the prevailing rates are in your favour.
- Forward contracts – These can be a gamble but work roughly in the same way as a fixed rate investment or mortgage. If today’s exchange rate is favourable, you can lock the rate for shifting cash at some point in the future.
The problems are rates can move up and down, so you might be caught paying more than if you had waited. The contract is also fixed – once you are in that’s it, you must shift the agreed amount on the agreed day regardless of the circumstances
- Move with the markets – Apps and technology mean any investor can keep up with the latest market rates and movements from a smartphone, tablet or computer. Keep an eye on the movers and shakers and pick the right time to spot or fix a trade
- Banking on banks – Foreign exchange has changed and the market is flooded with FX agencies that will move money at far cheaper rates than the banks while offering the same speed and security.
- Pension pain – Relieve the strain and cash flow problems of switching Pounds to your local currency if you have a UK pension by switching to a tax-effective Qualifying Recognised Overseas Pension Schemes (QROPS) that can drop cash into your bank account in any major currency.
Combining one or more of these foreign exchange strategies will save money, time and stress, so start planning now to minimise any risk or losses.
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