Question of the Week: Opening savings accounts abroad

MSE_Martin

Q. When I was in Turkey/Thailand etc I saw savings offering 10% interest. Any reason I shouldn’t save there to earn more? (amalgamated question from many).

Martin's A. Saving means putting your money away with no risk (ignoring the banks going bust issue). Yet what you're suggesting is more akin to investing as there are a number of substantial risks.

The first's the exchange rate. If it's in a foreign currency, unless you’re planning to spend it there you'll need to convert it back at some point. So imagine after a year you’ve earned 10% interest, but the currency's dropped by 20%; it means you've actually lost just over 10%. Though the other way round it'd be in your favour.

Next is the fact cash in UK banks is protected by the government up to £50,000 per person per financial institution (see Safe Savings). Yet money overseas means you're reliant on a foreign govt.and its attitude to savers from overseas.

Then there's tax, foreign regulations, limit on capital movements and more. So while it isn't a "don’t do" as frankly it's beyond my expertise, it is a "know it's a risk."



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