Deposit/Invest money in foreign savings accounts?

pecuniam_hominem

This is really random, but I was looking for my next investment opportunity and then I remembered people used to put money in icelandic banks (icesave). I know what didn't end up in a good situation, but I just wondered if it is viable to put money in another country (say Brazil), where you can get 6%+ return?


UK banks return very little interest, so why not put it somewhere else?


It can't be that simple, but has anyone else done it? I guess you would need to think about currency values etc?

verybigchris

There's no benefit to be gained from doing this. Interest rates and inflation are inherently linked, so if you put your money into a currency with higher interest rates it'll also suffer from higher inflation and your seemingly great returns will be devalued when converted back to GBP. In a perfect market with no other factors, the two will cancel each other out completely.

eskbanker

When this question crops up from time to time, I usually point posters back to one of the previous threads where some of the issues are aired:

https://forums.moneysavingexpert.com/discussion/5838916/can-i-open-a-savings-account-abroad

pecuniam_hominem

Thanks for the responses, will check out that other thread.

I guess the same goes for foreign government bonds, e.g india with quite high yields, yet the currency risk is very real.

Malthusian

Correct. It's essentially a currency bet; your return will be mostly determined by how the currency fluctuates and the return from the bond will be neither here nor there.

Governments in those countries don't pay high yields out of the goodness of their hearts. Some of the yield reflects default risk, but if you convert your money to rupees and lend it to a foreign goverment who don't go bust and pay you 6% for three years, it doesn't do you much good if the rupee falls by 20% against the pound over three years.