Money Abroad
Holding your savings in one currency and your life in another is a position
Anybody living abroad with money at home has taken a currency bet whether or not they intended to, and doing nothing is a choice with the same consequences as an active one.
By Manish Trivedi3 min read
Doing nothing is not neutral
People think about exchange rates when they transfer money and stop thinking about them the rest of the time, which produces a persistent blind spot. If you earn and spend in one currency while your savings, a property, a pension or a loan sit in another, the relationship between the two is quietly revaluing a large part of your finances every day.
This is not speculation and it is not something you opted into. It is a structural feature of living in one country with assets in another, and it applies to somebody who has never made a currency decision in their life.
The useful frame is not whether to take a view on the rate, which almost nobody can do reliably. It is whether the currency your money is in matches the currency your future obligations are in.
Match the money to the obligation it will pay
The principle that survives most circumstances is simple to state. Money that will be spent in a particular currency is best held in that currency, because then its value in the only terms that matter to you does not move.
Applied to a real life, that means the emergency fund covering local rent belongs in local currency, the savings intended for a house in the country you will retire to belong in that country’s currency, and money whose purpose is genuinely undecided is the only part where the question is open.
Most of the anxiety about exchange rates dissolves when this is done, because you stop watching a number that no longer determines anything you care about. What remains is the genuinely undecided portion, which is smaller than people expect.
Borrowing in a currency you don’t earn is the sharp version
The most dangerous form of this mismatch is a debt. A loan or a mortgage denominated in a currency other than the one your income arrives in means the size of the repayment, measured in your actual earnings, moves without any change in the debt itself.
This has caused serious hardship to households in several countries at various times, and it is worth being blunt about, because the arrangements are often entered into when the rate is favourable and the payments look cheap. The risk is asymmetric and it runs for as long as the loan does.
Anybody in this position, or considering it, should treat it as a matter for qualified advice on their own circumstances rather than for a rule of thumb. That is not evasion. It genuinely depends on the loan, the currencies, the term and what else you hold.
Timing a large conversion is a different problem
Separate from ongoing exposure is the occasional large transfer: the proceeds of a house sale, an inheritance, the savings being moved after a decision to stay. Here the whole amount converts at whatever the rate is on one day, which makes the timing feel enormously consequential.
The honest position is that nobody knows where a rate is going, and a person who waits for a better one is making a forecast whether they call it that or not. Some people reduce the exposure to a single date by converting in instalments over a period, which doesn’t improve the expected outcome and does reduce the regret.
What is worth doing is separating the currency decision from the transfer mechanics, since the two get conflated. The mechanics are a matter of cost and are worth optimising. The timing is a matter of uncertainty and is mostly not.
Review it when your life changes rather than when the news does
The trigger for revisiting all of this should be a change in your own circumstances, not a movement in the rate. Deciding to stay permanently, deciding to return, taking on a long-term commitment somewhere, or acquiring a large asset each change which currency your future obligations are in.
That is a review every few years for most people, which is manageable, and it replaces the far more common habit of checking a rate frequently and acting occasionally at the worst moment.
And where real amounts are involved, it is worth taking qualified advice that covers both countries, since the tax and reporting treatment of holdings abroad is national, technical and subject to change. Nothing here is advice about your own position, and the current official guidance for each country concerned is the place to start.
Common questions
Should I move all my savings to where I live?
Not necessarily, since the sensible test is which currency the money will eventually be spent in rather than where you happen to be now. Money earmarked for local costs belongs locally, and money for a future elsewhere reasonably stays there.
Is it worth waiting for a better exchange rate?
Waiting is a forecast, and few people make those reliably over the periods involved. Converting a large sum in instalments spreads the timing risk without improving the average, which some people find worth the cost in fees.
What about a mortgage in a different currency from my salary?
That is the highest-risk version of a currency mismatch, because the repayment measured in your income can rise substantially without the debt changing. It deserves qualified advice on your specific facts rather than a general rule.
Reporter, Globetrotter Talks
Manish covers arriving, visas & paperwork, money abroad and the questions readers actually send in and is unreasonably interested in the detail nobody else checks.
