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International money transfers and how to manage multiple currencies when you live abroad

Virtually every expat has to make international payments, whether transferring small regular amounts or making large one-off payments. Excellent currency management is essential for anybody with assets in more than one country and can make a huge difference to your wealth.

Written on 7 July 2023

Expats of any nationality must take currency management seriously, it can have a huge impact on your wealth management strategy, and have a positive impact on your finances when managed correctly. Conversely, poor currency management can be expensive and result in unnecessary charges, fees and loss of earnings.

Below we explore different elements of international payments and currency management for expats. If you need any assistance, whatever the size of your money transfers, request a free introduction to one of our trusted partners and we will connect you with a specialist who will help you manage your currency risks.

Expat currency risks 

Currency fluctuations

A change in exchange rate can instantly change an expat’s life, especially if you earn in one currency, but spend in another.

Exchange rates are directly linked to economic performance and are trading in a similar way to stocks and shares. The more attractive the currency, the more it is in demand and the greater the value will be. Of course, the opposite is also true which leads to the currency being devalued.

If the base currency of their pay matches their home country then this is useful for saving money that can be used when they return home but if the value of their host country’s currency changes significantly while they are living overseas then they may suddenly find life very expensive and may begin to erode their savings in order to maintain a suitable quality of life.

Given that currency exchange can be both beneficial and detrimental, being in control of your finances and understanding the ongoing situations can increase the chance of being able to benefit from currency exchange, while lack of awareness can have massive consequences.

Currency Hedging

Currency hedging allows you to compensate for any shifts in the value of a currency by acknowledging that a movement in value of one currency will have an impact on the value of another. Expats who use currency hedging will make investments that are aimed at counteracting the impact that a currency movement could have on their savings and do this with the explicit intention of minimizing the exposure that an unfavourable shift in the money market could have.  While this type of strategy can certainly assist to manage the risk and prevent major financial fallout from significant currency fluctuations it does have its flaws:

  • You have to know what you're doing.
    Adequately hedging currency in a manner that negates risk can be very complicated and should therefore only be attempted with the support of a qualified financial adviser.
  • It can be expensive in itself.
    Establishing and maintaining the financial instruments that are required to implement an adequate hedging system will be costly and their costs need to be weighed against any benefits they provide.

Personal and private pensions

If you are an expat with a UK pension, you may receive your pension in sterling and then convert to your local currency which means that you are at risk from exchange rate fluctuations - and over the years the £GBP has weakened against other currencies meaning that your pension is actually worth less than if you lived in the UK.

As with other areas of investment, you do have options to counter this including QROPS, QNUPS and SIPP. These pension schemes allow expats to move their pensions offshore before they retire thus avoiding currency risks on their pension funds.

Multiple currency approaches for expats

It is always best to plan before you move abroad, but of course, often it is simply to late. Once you're overseas, you will have to trust the bill payment and money transfer systems you have put in place to make sure you meet your obligations.

Often traditionally simple payments such as utilities and insurance can lead to significant amounts of frustration for people new to a different country. Quite often expats also still have assets and expenditure at home and many expats rely on friends and family to handle their UK responsibilities.

It is possible to reduce the stress and frustration by choosing an international and domestic service provider, which can include the major banks and online service providers. Other options available include:

Maintain your UK bank and credit card accounts

Maintaining your UK bank accounts means that you will be able to arrange for regular bills to be paid in British Pounds, eliminating currency risk. You can still manage your accounts easily online, paying bills by direct debit or standing order, although it is still important to inform your bank that you will be out of the country. 

Even if you don't have any expenditure back home, it makes sense to maintain your UK accounts because most high street banks provide a range of international services which you can tap into. By maintaining your UK accounts you will also keep your credit rating active and this will be useful for when you repatriate to the UK.

Multiple Currency Accounts

When you are being paid in one currency but are spending money in another, then you need a facility to change currencies quickly and cheaply. A multiple currency account provides the ability to switch in and out of different currencies – for example if you are paid a pension in British pounds but you have retired to Florida where you will spend US dollars. All of the major British banks provide these accounts.

Prepaid Debit & Credit Cards

There are an increasing number of prepaid debit and credit cards available on the international market which will allow you to establish a payment mechanism in one of the popular currencies. Typically you can source a card which is denominated in US dollars, GBP pounds, Euros and other major currencies, which can then be used to make payments by telephone or using an online system.

Get specialist help to ensure you are making the most from foreign exchange rates

Whether you are making large, one-off international money payments, or you are transferring regular amounts getting expert advice to help you mitigate volatile exchange rates could ensure you make the most of your wealth.

Many expats are still simply doing international money transfers via their banks and exposing themselves to exchange rate fluctuations and unnecessary bank charges.

Speaking to an expert could enable you to fix exchange rates for up to two years, ensuring you can accurately plan how you manage your wealth.

Our trusted partners are experienced in helping expats around the world use foreign exchange rates to their advantage and have access to all the tools and services you will need.

When you request a free introduction, we will evaluate your enquiry and hand-pick our best partner then ask them to contact you and arrange a free initial consultation to explore your situation and provide you with basic information to help get you started. If you wish to proceed with their advice or services, they will also detail what they can provide and all fees, without any obligation to proceed.

It only takes a few minutes to make your request, but it is a risk-free way of getting help and guidance from a trusted expert which could potentially enhance your wealth management strategy.

Request a free introduction to one of our trusted currency and international payment partners >

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