ABU DHABI // Almost nine in ten expatriates send money back to their home country but financial experts warn they are more savvy ways to keep money safe.
The National's survey questioning expatriates on remittance, among other financial habits, found 86 per cent of employed expats transfer money to their home country. Of those that do, almost half transfer cash on a monthly basis.
When asked why they send money home, about half (48 per cent) per cent said to cover basic need expenses of family members back home such as food, housing, clothing, transportation or medical bills.
Others cited the reason behind transferring money was for future use upon return home or to pay financial commitments back home such as loans and mortgage.
Some felt their money was safer in their home country.
“I think this is mainly due to the fact that individuals are not particularly confident with the banking systems in the Middle East and how the banks are regulated,” said Jessica Cook, private client adviser at AES International, Global Wealth Management, based in Dubai.
“Local laws here in the UAE mean that the government has the right to freeze your bank account without notice, meaning you and or your spouse could be in a position where you have no access to any money.
“Sharia law prevails here and thus with it the Government have ultimate power over your bank account.”
However Ms Cook would err caution in sending money back home.
“Often it can be a costly exercise transferring funds into another currency and the chances are you will be paying tax on the growth of your money back home,” she said. “An alternative option available to expatriates is offshore banking.”
Aside from allowing you to keep your money in a safe jurisdiction, it can bring with it a whole host of additional benefits, she said.
“Benefits such as cheaper and easier currency conversion or discretionary portfolio management, for example,” said Ms Cook. “So the ideal is to have your salary paid into your local account and use this as your working balance. Any surplus capital should then be moved into your offshore bank account.
“A good rule of thumb — If you come from country A, and live in country B, you should bank in country C.”
Many expatriates have expenses in more than one country for mortgage payments, family back home and a variety of other costs, explained Chris Ferguson, the chief executive of Credence Independent Advisors, based in Dubai.
“People seem to view saving in their homeland as safer due to less currency risk, laws that they are used to and brands that they are familiar with,” he said.
“What a lot of consumers here do not seem to understand is that they can use firms based in the UAE to access worldwide investment and savings options that are sometimes better suited to their circumstances than products available in their homeland.”
Financial adviser Tim Denton said there were various reasons why expats were sending money out the country.
“For wealthier expats, the reason is often a concern regarding local inheritance rules if they were to die,” he said. “For these expats, if they are living in Dubai, then the new Dubai International Financial Centre wills and probate laws that will come into force this year will address this concern.”
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About this series:
A study into the saving habits of Emiratis and expatriates found a quarter of all employed residents do not save any of their monthly wage. And 69 per cent have not started planning for retirement. The survey found that only 6 per cent of respondents do not have any financial worries. The majority of people’s wages are spent on rent, followed by groceries and household items leaving some residents dependent on multiple credit cards and longing for financial security. Financial experts advise residents to resist overspending to avoid a struggle when faced with unexpected expenses.
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In this series:
■ High cost of living forces half of expats to consider leaving UAE
■ UAE Minister of Economy backs The National's survey findings
Coverage from March 8th:
■ Survey finds 94% of UAE residents have financial worries
■ Rent is UAE residents' biggest expense, survey finds
■ Survey finds many UAE residents failing to save for retirement
jbell@thenational.ae
