Moving to a new country and learning the lay of the land can be overwhelming – learning the financial system even more so. Living abroad as a migrant, people will quickly discover it is relatively easy to spend and less easy to save money.
More than 7.6 million migrants live in Australia, hundreds of thousands of whom send money to family and friends overseas. Over AUD$6 billion was remitted internationally from Australia in 2020 – money sent to help finance education, medical, housing and living expenses for loved ones.
With inflation increasing globally, three-quarters (75%) of migrants say their recipients’ cost of living has also increased since the start of the year. Research by WorldRemit into the cost of living and inflation pressures immigrants face shows 1 in 3 (32%) of Australian migrants are feeling under pressure to send more money to help their loved ones overseas.
In the last quarter, Australia’s Consumer Price Index hit 6.1% and interest rates now at 2.6%, the WorldRemit study shows many migrants who send money internationally are cutting corners in order to manage their expenses, remittances and savings.
With inflation and cost of living remaining high, here are tips for the hundreds of thousands of Australians who are sending money overseas to renew their savings efforts in a time of global inflation.
1. Make an inflation-friendly budget and savings plan
Revisit your long-term and short-term financial goals. Are you saving for emergencies? Education? A new car? Consider your financial situation and the current economy, then decide what needs to be prioritised and what can be parked.
Once you’ve done this, create an inflation-friendly budget by setting (or resetting) a regular savings amount that is achievable, given your current expenses.
To do this, you’ll need to have a clear picture of your regular costs and spending habits, e.g. rent, monthly bills or remittances. While these must be prioritised, discretionary spending can also be factored into budgets. That is, if these extras don’t go over budget.
While it is important for remitters to make sure they are making daily ends meet for themselves and their families, setting aside a portion of regular income for the future can go a long way to creating a solid safety net and delivering better quality of life.
2. Pay yourself first, automatically
Once you’ve decided on your savings plan, set up your bank account to automatically transfer funds from your checking account to your savings account on a regular basis. Set this up so that you ‘pay yourself’ first, every time your salary comes in – just set and forget.
3. Pay down debt
When interest rates are high, like they are now, debt can seriously weaken the strength of your active saving efforts. Consider regularly allocating a portion of your budget to paying off any debt you owe – not just the interest.
While this is not always possible – especially when times are tight – it is important to have a plan in place to prevent accruing interest and increasing debt even further.
Things to consider: List the amount you owe and the form of the debt, prioritise your debts from highest to lowest interest rates, and make a repayment plan when paying off your debt.
4. Be smart about the costs of sending money back home
Sending money overseas costs money, too. To make every dollar you send count, shop around when choosing a service – both competitive exchange rates and minimal transaction fees are important. Look at the whole picture instead of just one moving part. For example, physical exchange services typically have better exchange rates but higher transaction fees, so it is worth considering online alternatives.
You can also take advantage of discounts and promotions that can be easily found online. WorldRemit, for example, offers zero fees with new users’ first three money transfers.
Your financial choices during your first year of migration can have a lasting impact on your life. Therefore, it is important to make good decisions early on, so you can reap the benefits later on.
Here’s hoping these tips will help you build a successful life in your new country and continue to support your loved ones back home.
*Interim APAC Managing Director, WorldRemit.
