Moving abroad means uprooting your life and transferring everything you have to a foreign country – including your finances – which can be both risky and expensive.
So, what are the costs of doing this, and how much should you save before you head off to start your new life? We got in touch with some experts to give some clarity on this.
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Your employment status abroad makes a difference
According to Heleen Oosthuizen, an attorney who recently moved to Maryland, USA, with her family, how much you should save before moving abroad is a personal question which depends on various factors.
“We’ve all heard the stories about the student who moved to New York with a backpack and R1,000 who’s now living in Beverly Hills. But chances are if you’re reading this, you don’t have that kind of risk appetite, and you’d want to make sure you and your family have a roof over your head and can comfortably settle in to your new destination,” says Oosthuizen.
She believes that the biggest factor that would influence the amount of money you need to save before moving abroad is whether you and your spouse can secure a job before you leave South Africa.
“If this is the case, your nest egg can be considerably smaller because you will earn a salary the moment you arrive. Besides this, your new employer may provide relocation assistance, which can include a stipend to cover moving costs, arranging for a spouse's visa, and arranging housing for a month,” says Oosthuizen.
What if you don’t have a job yet?
Oosthuizen points out that if you’re unable to secure employment before you leave the country, you’ll have to save up at least six months’ worth of living expenses. This should allow you enough time to adjust to the new environment and secure a job.
According to Lisa Bathurst, director of Hurst and Wills, how much you should save up beforehand depends on whether you’re moving to a foreign country on your own or with your family.
“If you’re going by yourself, then three months’ living costs should be enough. But if you are going with your family, you’d want additional securities and enough saved up to fund six months, which would include rent and schools,” says Bathurst.
Prepare to not have a credit score abroad
Oosthuizen highlights that the one thing people don’t realise when moving abroad is that they won’t have any credit record in their new country.
“This will make tasks like buying a car, opening a cellphone account, or even renting a house challenging because all these transactions require you to have a payment history. So, when moving abroad, you need to have enough cash to buy a car – or pay higher interest rates if you can get a loan based on your South African credit record – and pay a bigger deposit on a rental property,” says Oosthuizen.
Bathurst agrees that lacking a credit history abroad could be a costly matter. She explains that you may well have to pay up to six months of rent upfront because landlords want some sort of security as a deposit.
To find out more about credit scores, click here.
Which costs should you consider?
Other than your normal day-to-day expenses, Oosthuizen recommends you research the following points before you make your big move:
- Setting up your home: Are you shipping a container with your belongings abroad or are you starting over and buying everything new? Both these options have two big price tags on them and should not be underestimated.
- Taxes: In the US for example you pay state, county, and federal taxes, so make sure you know what the implications are when you’re choosing your destination country. Also, each state in the US has a different sales tax (similar to VAT). This is not added to the advertised price so it can be very misleading when you get to the cash register and your shopping is 10% more expensive than what you budgeted for.
- Cost of childcare: If both spouses are working, this is something that needs to be carefully researched because even though you don’t pay school fees in the US (for public schools), there’s a 3-month summer vacation during which time you have to find care/camps for your kids. Your toddler’s nanny/daycare can also cost you anything between $13 and $20 per hour.
- Cost of tertiary education: Depending on the country (especially the US), this might be a big-ticket item that should not be underestimated.
Moving your furniture abroad
According to Bathurst, it’s expensive to pack up a house and move everything overseas. The cost of storing your belongings if your property isn’t ready or you haven’t found somewhere to live yet, could be exponential.
“Storage costs overseas are very expensive. You might have duty and custom import duties, or perhaps you need to transport your pets which is notoriously expensive,” says Bathurst.
On the other hand, she says that if you’re not taking all your furniture, then you may buy this and appliances abroad.
“Different countries provide different things when you rent a place. For example, in Europe and in parts of the UK, the property will normally be equipped with big appliances, such as fridges, stoves, ovens, freezers, and washing machines,” says Bathurst.
Save abroad, not locally
According to Hedley Lamarque, certified financial planner at BDO Wealth Advisers, you should send your money offshore now since it’s going to be utilised there.
“A good tactic would be to phase in the investment over a time period, such as six months. Also take into account the rand forex averaging over this period, as it is impossible to time the market to get the best exchange rate,” says Lamarque.
She explains that the basic costs would be similar if you use a financial adviser. In other words, the adviser fees, platform or admin fees, and the actual fund manager fees.
“For retirement vehicles, you could take out the full amount and pay tax according to the lump sum tables and invest as a person deems fit offshore. Alternatively, you would leave the retirement fund in South Africa and convert the retirement fund into a living annuity at the age of 55,” says Lamarque.
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