Is it sensible to keep savings in a foreign currency?
Given that we live in a world rife with geopolitical risks such as Brexit and potential EU breakup, would you say it's advisable to keep some of cash savings in a foreign currency? Probably not.  Primarily because you don't know what will happen in the fallout of these sorts of political shifts.  You don't know what will happen to banking treaties between the various countries involved. If you can manage to place funds on deposit in a foreign bank/country in a currency other than your home currency and maintain the deposit insurance in that country and not spend too much exchanging your currency then there probably isn't a downside other than liquidity loss. If you're thinking I'll just wire some whatever currency to some bank in some foreign country in which you have no residency or citizenship consideration without considering deposit insurance just so you might protect some of your money from a possible future event I think you should stay away. would you say it's advisable to keep some of cash savings in a foreign currency? This is primarily opinion based.  Given that we live in a world rife with geopolitical risks such as Brexit and potential EU breakup There is no way to predict what will happen in such large events. For example if one keeps funds outside on UK in say Germany in Euro's. The UK may bring in a regulation and clamp down all funds held outside of UK as belonging to Government or tax these at 90% or anything absurd that negates the purpose of keeping funds outside. There are example of developing / under developed economics putting absurd capital controls. Whether UK will do or not is a speculation. If you are going to spend your live in a country, it is best to invest in country. As normal diversification, you can look at keep a small amount invested outside of country. I don't think that it's a good idea to have cash savings in different currencies, unless you know which will be the direction of the wind for that currency. You can suffer a lot of volatility and losses if you just convert your savings to another currency without knowing anything about which direction that pair will take. Today we can see Brexit, but this is a fact that has been discounted by the market, so the currencies are already adjusted to that fact, but we don't know what will happen in the future, maybe Trump will collapse the US economy, or some other economies in Asia will raise to gain more leadership. If you want to invest in an economy, I think that it's a best idea to invest on companies that are working in that country. This is a way of moving your money to other currencies, and at least you can see how is the company performing. Is it sensible to keep savings in a foreign currency? The answer varies from one country to the next, but in the UK (or any other mature economy), I would advise against it. There are better ways to hedge against currency risks with the funds readily available to you through your ISA. You can keep your money relatively safe and liquid without ever paying a currency exchange fee.
If you want to use that money and maybe don't have the time to wait a few years if things should go bad, than you will definitely want to hold a good bunch of your money in the currency you buy most stuff with (so in most cases the currency of the country you live in) even if it is more volatile. "The solution I've come up with is to keep income in CAD, and Accounts Receivable in USD.  Every time I post an invoice it prompts for the exchange rate. I don't know if this is ""correct"" but it seems to be preserving all of the information about the transactions and it makes sense to me.  I'm a programmer, not an accountant though so I'd still appreciate an answer from someone more familiar with this topic." Withdraw your savings as cash and stuff them into your mattress? Less flippantly, would the fees for a safe deposit box at a bank big enough to hold CHF 250'000 be less than the negative interest rate that you'd be penalized with if you kept your money in a normal account? "You are mixing issues here. And it's tough for members to answer without more detail, the current mortgage rate in your country, for one.  It's also interesting to parse out your question. ""I wish to safely invest money. Should I invest in real estate."" But then the text offers that it's not an investment, it's a home to live in. This is where the trouble is. And it effectively creates 2 questions to address.  The real question - Buy vs Rent. I know you mentioned Euros. Fortunately, mortgages aren't going to be too different, lower/higher, and tax consequence, but all can be adjusted. The New York Times offered a beautiful infographing calculator Is It Better to Rent or Buy?  For those not interested in viewing it, they run the math, and the simple punchline is this - The home/rent ratio can have an incredibly wide range. I've read real estate blogs that say the rent should be 2% of the home value. That's a 4 to 1 home/rent (per year). A neighbor rented his higher end home, and the ratio was over 25 to 1. i.e. the rent for the year was about 4% the value of the home. It's this range that makes the choice less than obvious.  The second part of your question is how to stay safely invested if you fear your own currency will collapse. That quickly morphs into too speculative a question. Some will quickly say ""gold"" and others would point out that a stockpile of weapons, ammo, and food would be the best choice to survive that." "Depositum irregulare is a Latin phrase that simply means ""irregular deposit."" It's a concept from ancient Roman contract law that has a very narrow scope and doesn't actually apply to your example. There are two distinct parts to this concept, one dealing with the notion of a deposit and the other with the notion of irregularity. I'll address them both in turn since they're both relevant to the tax issue. I also think that this is an example of the XY problem, since your proposed solution (""give my money to a friend for safekeeping"") isn't the right solution to your actual problem (""how can I keep my money safe""). The currency issue is a complication, but it doesn't change the fact that what you're proposing probably isn't a good solution. The key word in my definition of depositum irregulare is ""contract"". You don't mention a legally binding contract between you and your friend; an oral contract doesn't qualify because in the event of a breach, it's difficult to enforce the agreement. Legally, there isn't any proof of an oral agreement, and emotionally, taking your friend to court might cost you your friendship. I'm not a lawyer, but I would guess that the absence of a contract implies that even though in the eyes of you and your friend, you're giving him the money for ""safekeeping,"" in the eyes of the law, you're simply giving it to him. In the US, you would owe gift taxes on these funds if they're higher than a certain amount. In other words, this isn't really a deposit. It's not like a security deposit, in which the money may be held as collateral in exchange for a service, e.g. not trashing your apartment, or a financial deposit, where the money is held in a regulated financial institution like a bank. This isn't a solution to the problem of keeping your money safe because the lack of a contract means you incur additional risk in the form of legal risk that isn't present in the context of actual deposits. Also, if you don't have an account in the right currency, but your friend does, how are you planning for him to store the money anyway? If you convert your money into his currency, you take on exchange rate risk (unless you hedge, which is another complication). If you don't convert it and simply leave it in his safe, house, car boot, etc. you're still taking on risk because the funds aren't insured in the event of loss.  Furthermore, the money isn't necessarily ""safe"" with your friend even if you ignore all the risks above. Without a written contract, you have little recourse if a) your friend decides to spend the money and not return it, b) your friend runs into financial trouble and creditors make claim to his assets, or c) you get into financial trouble and creditors make claims to your assets. The idea of giving money to another individual for safekeeping during bankruptcy has been tested in US courts and ruled invalid. If you do decide to go ahead with a contract and you do want your money back from your friend eventually, you're in essence loaning him money, and this is a different situation with its own complications. Look at this question and this question before loaning money to a friend. Although this does apply to your situation, it's mostly irrelevant because the ""irregular"" part of the concept of ""irregular deposit"" is a standard feature of currencies and other legal tender. It's part of the fungibility of modern currencies and doesn't have anything to do with taxes if you're only giving your friend physical currency. If you're giving him property, other assets, etc. for ""safekeeping"" it's a different issue entirely, but it's still probably going to be considered a gift or a loan. You're basically correct about what depositum irregulare means, but I think you're overestimating its reach in modern law. In Roman times, it simply refers to a contract in which two parties made an agreement for the depositor to deposit money or goods with the depositee and ""withdraw"" equivalent money or goods sometime in the future. Although this is a feature of the modern deposit banking system, it's one small part alongside contract law, deposit insurance, etc. These other parts add complexity, but they also add security and risk mitigation. Your arrangement with your friend is much simpler, but also much riskier.  And yes, there probably are taxes on what you're proposing because you're basically giving or loaning the money to your friend. Even if you say it's not a loan or a gift, the law may still see it that way. The absence of a contract makes this especially important, because you don't have anything speaking in your favor in the event of a legal dispute besides ""what you meant the money to be."" Furthermore, the money isn't necessarily safe with your friend, and the absence of a contract exacerbates this issue. If you want to keep your money safe, keep it in an account that's covered by deposit insurance. If you don't have an account in that currency, either a) talk to a lawyer who specializes in situation like this and work out a contract, or b) open an account with that currency. As I've stated, I'm not a lawyer, so none of the above should be interpreted as legal advice. That being said, I'll reiterate again that the concept of depositum irregulare is a concept from ancient Roman law. Trying to apply it within a modern legal system without a contract is a potential recipe for disaster. If you need a legal solution to this problem (not that you do; I think what you're looking for is a bank), talk to a lawyer who understands modern law, since ancient Roman law isn't applicable to and won't pass muster in a modern-day court." Firstly, I think you need to separate your question into two parts: If you are Chinese, live in China and intend to stay in China for most of your life then the default answer to question 1 should be Renminbi.  Question 2 is not as important, you can hold USD in almost any country in the world. Any investment you hold has risk, which may include market risk, credit risk, liquidity risk, inflation risk etc. Holding USD will expose you to exchange rate fluctuations as well.  If the Renminbi rises in value against the dollar your returns in USD will be reduced by the same amount (remember that for currency fluctuations you have to multiply the percentages, see here for a good explanation). The first thing you probably want to do is find out exactly what the assets are in the 理财 you have invested in.  The fact that there is a 'risk level' (even if it is only 2) would suggest to me that the fund is investing in some combination of bonds and stocks which means that your returns are not guaranteed and could make a loss. Interest rates on deposit accounts are mandated by the government in China, and the current 12 month deposit rate on RMB is 3%.  To earn over 3%, GEB must be investing your assets in something else (I'm guessing bonds).  Bear in mind that 1.5 years is a very short amount of time in investments, so don't assume this return will continue!  I'm afraid I've only been studying Chinese for a year, so I can't really help you much with the link you've sent through - you may want to check if there is any guaranteed minimum return, which can be the case in more complex structured products. Ultimately you will need to pick an investment which you feel gives you the best combination of risk and return for your situation, there are a huge amount of options to choose between.  The 4-5% you are earning right now is not a huge risk premium on the 3% you could earn in China from a time deposit, but in the current environment you may struggle to beat it without taking on more risk.  Before considering that though - understand how much risk you already have with GEB. "I would keep some money in the U.S. and some money in India. That way, in case ""something bad"" happens in one country, you will still have money in the other." I haven't seen this answer, and I do not know the legality of it, as it could raise red flags as to money laundering, but about the only way to get around the exchange rate spreads and fees is to enter into transactions with a private acquaintance who has Euros and needs Dollars. The problem here is that you are taking on the settlement risk in the sense that you have to trust that they will deposit the euros into your French account when you deposit dollars into their US account. If you work this out with a relative or very close friend, then the risk should be minimal, however a more casual acquaintance may be more apt to walk away from the transaction and disappear with your Euros and your Dollars. Really the only other option would be to be compensated for services rendered in Euros, but that would have tax implications and the fees of an international tax attorney would probably outstrip any savings from Forex spreads and fees not paid. "You might convert all your money in local currency but you need take care of following tips while studying abroad.Here are some money tips that can be useful during a trip abroad. Know about fees :- When you use a debit card or credit card in a foreign country, there are generally two types of transaction fees that may apply: Understand exchange rates :- The exchange rate lets you know the amount of nearby money you can get for each U.S. dollar, missing any expenses. There are ""sell"" rates for individuals who are trading U.S. dollars for foreign currency, and, the other way around, ""purchase"" rates. It's a smart thought to recognize what the neighborhood money is worth in dollars so you can comprehend the estimation of your buys abroad.  Sites like X-Rates offer a currency converter that gives the current exchange rate, so you can make speedy comparisons. You can utilize it to get a feel for how much certain amount (say $1, $10, $25, $50, $100) are worth in local currency. Remember that rates fluctuate, so you will be unable to suspect precisely the amount of a buy made in a foreign currency will cost you in U.S. dollars. To get cash, check for buddy banks abroad:- If you already have an account with a large bank or credit union in the U.S., you may have an advantage.  Being a client of a big financial institution with a large ATM system may make it easier to find a subsidiary cash machine and stay away from an out-of-system charge.  Bank of America, for example, is a part of the Global ATM Alliance, which lets clients of taking an interest banks use their debit cards to withdraw money at any Alliance ATM without paying the machine's operator an access fee, in spite of the fact that you may at present be charged for converting dollars into local currency used for purchases.  Citibank is another well known bank for travelers because it has 45,000 ATMs in more than 30 countries, including popular study-abroad destinations such as the U.K., Italy and Spain. ATMs in a foreign country may allow withdrawals just from a financial records, and not from savings so make sure to keep an adequate checking balance. Also, ATM withdrawal limits will apply just as they do in the U.S., but the amount may vary based on the local currency and exchange rates. Weigh the benefits of other banks :- For general needs, online banks and even foreign banks can also be good options.  With online banks, you don’t have to visit physical branches, and these institutions typically have lower fees. Use our checking account tool to find one that’s a good fit. Foreign banks:- Many American debit cards may not work in Europe, Asia and Latin America, especially those that don’t have an EMV chip that help prevent fraud. Or some cards may work at one ATM, but not another. One option for students who expect a more extended stay in a foreign country is to open a new account at a local bank. This will let you have better access to ATMs, and to make purchases more easily and without as many fees. See our chart below for the names of the largest banks in several countries. Guard against fraud and identity theft:- One of the most important things you can do as you plan your trip is to let your bank know that you’ll be abroad. Include exact countries and dates, when possible, to avoid having your card flagged for fraud. Unfortunately, incidents may still arise despite providing ample warning to your bank. Bring a backup credit card or debit card so you can still access some sort of money in case one is canceled. Passports are also critical — not just for traveling from place to place, but also as identification to open a bank account and for everyday purposes. You’ll want to make two photocopies and give one to a friend or family member to keep at home and put the other in a separate, secure location, just in case your actual passport is lost or stolen." "You might find some of the answers here helpful; the question is different, but has some similar concerns, such as a changing economic environment. What approach should I take to best protect my wealth against currency   devaluation & poor growth prospects. I want to avoid selling off any   more of my local index funds in a panic as I want to hold long term.   Does my portfolio balance make sense? Good question; I can't even get US banks to answer questions like this, such as ""What happens if they try to nationalize all bank accounts like in the Soviet Union?""  Response: it'll never happen. The question was what if! I think that your portfolio carries a lot of risk, but also offsets what you're worried about.  Outside of government confiscation of foreign accounts (if your foreign investments are held through a local brokerage), you should be good.  What to do about government confiscation?  Even the US government (in 1933) confiscated physical gold (and they made it illegal to own) - so even physical resources can be confiscated during hard times. Quite a large portion of my foreign investments have been bought at an   expensive time when our currency is already around historic lows,   which does concern me in the event that it strengthens in future. What   strategy should I take in the future if/when my local currency starts   the strengthen...do I hold my foreign investments through it and just   trust in cost averaging long term, or try sell them off to avoid the   devaluation? Are these foreign investments a hedge?  If so, then you shouldn't worry if your currency does strengthen; they serve the purpose of hedging the local environment.  If these investments are not a hedge, then timing will matter and you'll want to sell and buy your currency before it does strengthen.  The risk on this latter point is that your timing will be wrong." I think your approach of looking exclusively at USD deposits is a prudent one. Here are my responses to your questions. 1) It is highly unlikely that a USD deposit abroad be converted to local currency upon withdrawal. The reason for offering a deposit in a particular currency in the first place is that the bank wants to attract funds in this currency. 2) Interest rate is a function of various risks mostly supply and demand, central bank policy, perceived risk etc. In recent years low-interest rate policy as led by U.S., European and Japanese central banks has led particularly low yields in certain countries disregarding their level of risk, which can vary substantially (thus e.g. Eastern Europe has very low yields at the moment in spite of its perceived higher risk). Some countries offer depository insurance.  3) I would focus on banks which are among the largest in the country and boast good corporate governance i.e. their ownership is clean and transparent and they are true to their business purpose. Thus, ownership is key, then come financials. Country depository insurance, low external threat (low war risk) is also important. Most banks require a personal visit in order to open the account, thus I wouldn't split much further than 2-3 banks, assuming these are good quality. "The danger to your savings depends on how much sovereign debt your bank is holding.  If the government defaults then the bank - if it is holding a lot of sovereign debt - could be short funds and not able to meet its obligations. I believe default is the best option for the Euro long term but it will be painful in the short term.  Yes, historically governments have shut down banks to prevent people from withdrawing their money in times of crisis.  See Argentina circa 2001 or US during Great Depression.  The government prevented people from withdrawing their money and people could do nothing while their money rapidly lost value. (See the emergency banking act where Title I, Section 4 authorizes the US president:""To make it illegal for a bank to do business during a national emergency (per section 2) without the approval of the President.""  FDR declared a banking holiday four days before the act was approved by Congress.  This documentary on the crisis in Argentina follows a woman as she tries to withdraw her savings from her bank but the government has prevented her from withdrawing her money.) If the printing press is chosen to avoid default then this will allow banks and governments to meet their obligations.  This, however, comes at the cost of a seriously debased euro (i.e. higher prices).  The euro could then soon become a hot potato as everyone tries to get rid of them before the ECB prints more.  The US dollar could meet the same fate. What can you do to avert these risks?  Yes, you could exchange into another currency.  Unfortunately the printing presses of most of the major central banks today are in overdrive.  This may preserve your savings temporarily. I would purchase some gold or silver coins and keep them in your possession.  This isolates you from the banking system and gold and silver have value anywhere you go.  The coins are also portable in case things really start to get interesting.  Attempt to purchase the coins with cash so there is no record of the purchase.  This may not be possible." I'd have anything you would need for maybe 3-6 months stored up: food, fuel, toiletries, other incidentals.  What might replace the currency after the Euro collapses will be the least of your concerns when it does collapse. If your savings are in USD and will be making purchases using USD, then it will no longer go as far as it used to. I assume most Americans currently have their savings accounts in USD, so the value of those accounts will decrease. If you have investments in stocks or foreign currencies, your exposure may be less, but it depends. For example, stocks in companies that hold a lot of USD will also be hit hard, as will be currencies of nations that are still holding a lot of USD if the value of the USD is crashing.  If you have a lot of debt measured in USD, while have a lot of assets that have nothing to do with USD, then you might make out like a bandit, since if you assume the value of the USD is falling, then it would become easier to sell off your other assets to pay off the debt. "Hi I'm the writer thanks for the read and the comment. With the statement you quoted, I'm trying to dispute the claim that ""people these days can't afford a house because they would have to pay their entire salary just to afford the mortgage,"" which I think is quite common in some circles. The data makes no statement as to whether home ownership is more affordable or not, but simply shows that those buying property are using around the same percentage of their income to pay for it, which the data clearly shows to be true.   https://fred.stlouisfed.org/series/RHORUSQ156N  As it turns out, home ownership levels have remained within ~5% of their 1980 levels based on percentage of the total population. I think there is an major classification flaw when comparing only sales because a great deal of people inherit property with no sale ever being made."