Expat Savings Account – Know Your Options
Expats often get disappointed to find that the UK high street banks they know and love won’t let them open a savings account.
If you are lucky, you’ll be able to hang on to your existing account, but even then, it’s unlikely that you’ll have access to savings and investments.
If you are unlucky yours will be one of the banks that insist on closing your existing account.
But don’t worry if that’s you. It doesn’t mean you don’t have options because you do.
To start with some banks offer expats dedicated savings account so let’s start there.
Dedicated Savings Account
Perhaps the most famous of them all is HSBC and the good news is they offer expats a choice of 16 different savings accounts which you can open in a wide selection of currencies. The bad news is 10 of them have interest rates at or less than 0.01%.
That said, if you have £50,000 to invest and can leave it tucked away for six months you can get a little higher returns for your money with an interest rate of 0.24%.
Another big institution, Lloyds offer an expat savings account, but they are a little less transparent with their rates. Instead of providing actual numbers, they say interest rates vary based on currency, deposit and on the current interest rate in the money markets for money market options.
Alternatively, German challenger bank, Nuri, offers a Bitcoin Interest Account open to expats paying over 4% at the time of writing. Nuri is actually a fully regulated “normal” German bank that allows you buy and sell Bitcoin (& Ethereum) and then essentially stick it in a savings account. Moreover, you don’t need £50,000 to get it.
Nuri want people to see how easy it is to buy cryptocurrency on their Banking platform, so right now you can get €35 when you open a Nuri bank account here and buy some Bitcoin or Ethereum.
Those three banks are available to expats in a lot of different countries.
Another alternative is opening a brokerage account. This would be particularly suitable for people with more of a longer term time horizon.
Brokerage Accounts
You can grow your wealth by investing in stocks and bonds via a brokerage account.
And these days there are a number of stock brokers open to expats (I’ve compares a few here).
Over the long term the returns from stocks and bonds tends to beat savings hands down.
These days investors can put together a great investment portfolio with just a couple of exchange traded funds (ETFs). One that invests in a diversified collection of global stocks and one that invests in bonds.
You can read more about investing in stocks here and bonds here, and you should definitely do your due diligence before investing.
But these days low fee ETFs make it really easy to put together a globally diversified multi asset portfolio. What percentage of stocks compared to bonds and what type of bonds you should choose are both big questions you should read up on.
That said, a general rule of thumb, which I quite like, is the 4% rule. This says you should have 4% of your money in stocks for every year you plan to invest with the rest in bonds.
So if you plan to invest for 5 years, you’d have 20% of your money in stocks. All the rest of your money would be in bonds.
There are lots of different kinds of bonds out there to choose from. However, generally you should invest in government bonds of the country where you intend to spend your money.
Additionally you should pay attention to a bond maturity. On an ETF this is an average of all the bonds in a particular fund. It is called an average weighted maturity.
Generally the longer this is, the more risk you take, but the higher returns you can expect. Some investors like to play it safe and sacrifice bigger returns by going for the shortest maturity, and thus lowest risk. While some investors like to take a chance with the longest duration, and thus highest risk, but biggest possible rewards.
However, for many investors trying to match the maturity to the number of years they expect to save for is a good bet. Notice I said trying to match! This is more of a as-close-as-possible, rather than exact science.
Using Stocks and Bonds to Save Overseas
Here is an example. Let’s say I live in the US but am planning to retire to the UK in 5 years. Ideally, I’d have 20% of my money in a global equity ETF. This would leave 80% of my money in a 5 year UK government bond ETF.
Choosing the global stock ETF is easy. There are loads of them, but I just want the cheapest one. The cheapest I can find (that is truly global with Emerging Markets) is Vanguard All World UCITS ETF (VWRL). This has an Ongoing Charges Figure of 0.22%.
However, for the bonds I can’t find a UK government bond ETF with a maturity of 5 years. The closest I can find is iShares UK Gilts 0-5yr UCITS ETF (IGLS). This has an average weighted maturity of 2.62 years, so I’ll go for that one. It has ongoing charges of 0.07%.
Those two funds in those proportion should see me right for the next five years. All I have to do now is open a brokerage account and add some money.
The Bottom Line
If you are an expat who needs a savings account you won’t have as many options as you did when you were at home, but that doesn’t mean you don’t have any. You do.
You could choose to open a dedicated savings account or you can hold stocks and bonds in a brokerage account to make your money grow for you.