How to Save and Invest Money While Living Abroad

1. Build a Solid Budget Based on Local Cost of Living

A budget is the foundation of financial success, and it’s even more critical when living abroad, where expenses may fluctuate due to changes in cost of living, currency, and taxation.

• Understand Your Living Expenses: Take the time to research the local cost of living, including rent, utilities, groceries, healthcare, transportation, and entertainment. Use this information to create a budget that reflects your new reality.
• Factor in Currency Exchange: If you are earning or saving money in a different currency, consider how fluctuations in exchange rates may affect your income and spending power. Use tools like XE or OANDA to track exchange rates.
• Plan for Remittances: If you regularly send money back home, ensure this is factored into your monthly budget as a fixed expense. Research low-cost remittance services to reduce fees and maximize the amount sent home.
• Prioritize Saving: Set a goal for how much you’d like to save each month. Automate your savings by setting up a direct deposit to a savings account or investment fund to ensure you are consistently putting money aside.

2. Open International Bank Accounts and Investment Accounts

One of the key financial moves to make while living abroad is to open the right types of bank accounts that make managing your money easier across borders.

• Local Bank Account: Open a local bank account in your host country to handle day-to-day expenses and avoid hefty foreign transaction fees. Many countries offer expat-friendly banking services that cater to international customers.
• Foreign Currency Accounts: Consider opening a foreign currency account that allows you to hold multiple currencies if you are frequently transferring money between countries. These accounts can help you manage exchange rate risks and save money on conversions.
• Offshore or International Investment Accounts: Many expatriates benefit from opening offshore investment accounts that allow you to invest globally in different currencies. Companies like HSBC Expat, Schwab International, and TD Ameritrade offer investment platforms for those living abroad, providing access to stocks, bonds, mutual funds, and ETFs worldwide.

3. Maximize Retirement Savings

Saving for retirement while living abroad requires careful planning, especially if you’re not contributing to a pension scheme in your host country.

• Contribute to Retirement Accounts in Your Host Country: Check whether your host country offers pension plans or retirement savings schemes for expatriates. These may come with tax benefits or matching contributions from your employer.
• Maintain Contributions to Home-Country Retirement Accounts: If possible, continue contributing to retirement accounts in your home country, such as a 401(k), IRA, or Roth IRA in the U.S., or a personal pension in the U.K. This can ensure you’re building a retirement nest egg, regardless of where you’re living.
• Explore International Pension Plans: Some financial institutions offer international pension plans that allow expats to contribute and save for retirement while abroad. These plans offer flexibility and tax efficiency for those with global incomes.
• Plan for Long-Term Residency: If you plan to retire abroad, research the retirement laws and benefits of your host country. Some countries offer favorable conditions for retirees, such as reduced taxes, affordable healthcare, or residency perks.

4. Take Advantage of Tax-Efficient Investments

Tax planning is an essential part of financial management for expatriates. Depending on your residency status and income sources, you may be subject to taxes in both your home and host countries.

• Understand Double Taxation Agreements: Many countries have double taxation agreements (DTAs) that prevent you from paying taxes on the same income in two countries. Research the tax treaty between your home and host country to maximize tax efficiency.
• Tax-Deferred Accounts: Look into tax-deferred investment accounts, such as retirement accounts, where your earnings grow tax-free until withdrawal. These accounts are often advantageous for expatriates since they can reduce your tax burden while you save and invest.
• Explore Offshore Investment Opportunities: Offshore accounts and investment funds can offer tax advantages for expatriates, such as deferred taxes on capital gains or dividends. Be sure to comply with reporting regulations to avoid penalties.
• Hire a Tax Advisor: Tax laws can be complicated for expats, especially those earning income in multiple countries. Consider hiring a tax advisor who specializes in international taxation to help you navigate your tax obligations and avoid costly mistakes.

5. Diversify Your Investments Across Multiple Markets

Investment diversification is key to building wealth, especially when you live abroad and are exposed to different economic conditions, currencies, and risks.

• Invest in Both Host and Home Country Markets: If possible, invest in assets both in your host country and home country to spread your risk across different economies. This could include real estate, stocks, or bonds in either location.
• Explore Global Investment Opportunities: Living abroad gives you access to international markets, which can diversify your portfolio. Consider investing in foreign stocks, global mutual funds, or exchange-traded funds (ETFs) that provide exposure to a wide range of industries and countries.
• Consider Real Estate Investments: Many expatriates choose to invest in real estate, either in their host country, home country, or another country altogether. Real estate can offer both rental income and long-term capital appreciation, making it an attractive investment option.

6. Send Money Home with Low-Cost Remittance Services

Sending money back home to family or to invest in property or businesses is a common practice for many expatriates. However, remittance fees and exchange rates can eat into the money you send.

• Use Low-Cost Transfer Services: Avoid traditional bank transfers, which often come with high fees and poor exchange rates. Instead, use online remittance services like TransferWise (Wise), WorldRemit, PayPal, or Remitly that offer lower fees and better rates.
• Leverage Currency Fluctuations: If you are transferring large sums, time your remittances to coincide with favorable exchange rates. Monitoring exchange rate trends can help you make transfers when your money has the highest value.
• Consider Bulk Transfers: If you send money frequently, it may be more cost-effective to send larger sums less often. Many remittance services charge flat fees, meaning you can save on fees by reducing the number of transactions.

7. Protect Your Wealth with Insurance and Legal Safeguards

Living abroad can expose you to additional financial risks, from changes in health coverage to different inheritance laws. Protecting your wealth is a crucial part of financial planning.

• Get Health Insurance: If your host country doesn’t provide adequate healthcare, invest in private health insurance that covers both local and international medical care. Health issues can arise unexpectedly, and having comprehensive coverage can save you from financial stress.
• Protect Your Income with Life and Disability Insurance: If you have dependents or financial obligations in your home or host country, ensure you have life insurance to protect your loved ones in case of unexpected death. Disability insurance can also safeguard your income if you become unable to work.
• Update Your Will: If you own property or have assets in different countries, it’s important to update your will to reflect your current financial situation and protect your beneficiaries. Seek legal advice to ensure your will complies with the inheritance laws of both your home and host country.