Moving yourself and your belongings from one country to another requires careful consideration, but there is another asset that must be moved: your finances.
Day-to-day money management for expats
You’ll need to be able to access your money when you move in order to complete tasks ranging from getting internet access to grocery shopping, so it’s important to set up a bank account as soon as you arrive in your new country. Keeping a bank account open in your home country as an expat, however, is another decision to make. Those who plan to eventually return to their home countries may find it beneficial to keep them open as long as possible, depending on how expensive any fees may be. For those who plan on staying abroad indefinitely, it often depends upon two factors: debts and the difficulty of opening a new account if you ever do return.
Pay your debts before and after moving abroad
Those with debts in their home countries, such as a credit card or student loan, may find it more expensive or difficult to use a foreign bank account to make payments. Transferring money overseas has become far simpler than old-fashioned wire transfers, but these services often come with high transfer fees and unfavourable exchange rates. Keeping an account in your home country is valuable in order to pay off these debts, provided that the banking fees amount to less than the cost of a wire transfer or service.
Note that forgetting about these debts is not a wise option. Not only can creditors follow you overseas — especially if they also operate within the new country — your credit rating in your home country can take a big hit for non-payments, making a move back potentially financially unfeasible. Interest and penalties may also accrue, and the creditors may very well begin legal proceedings to recover the debt; any assets left behind in the country, such as a rental property, could be subject to a charging order.
Arrange debt payments before or as soon as you arrive in your new country, ensuring that no bills are left behind — though you may have cancelled services in your home country, you may receive a bill in your absence that still must be paid.
Expat impact on savings and investments
If you are keeping your bank account in your home country, you may have a savings account as well. Interest accrued on a savings account is considered income, and must be reported when filing taxes in your tax residence. There are numerous other financial products that you may have abroad, however, and they may all be subject to tax.
Pensions held overseas are also often taxed, but may be handled different according to country of origin and country of tax residence. If you are a resident (or were a resident in the past five years) in the UK, for example, you must pay tax on foreign pension payments, while American expats participating in a non-qualified foreign pension plan may be surprised by double taxation. Any other investments become more complicated as well, with each country treating capital gains taxes differently: expats with foreign pensions or investment income may suddenly be subject to double taxation, as well. An expat financial adviser will be able to help wade through the complexity of each country’s varying regulations.
Protect your financial future
Even if you do not yet know whether you will be living abroad for the rest of your life or eventually returning to your home country, planning for the future is key. An OECD study of financial literacy showed that most adults do not save up enough for retirement, and it is due, in part, to a lack of knowledge as well as the complex regulations that comprise pension planning for expats. Moving abroad is a great endeavour, and one that should not be marred by mismanaged finances.