Most bang for the buck

January 30, 2009 2:15 PM

Financefilter: Better to buy sterling now in bulk, or monthly for a year?

Asking for a friend. We have had a look at this, this, and this previous.

Said friend has euro savings. She needs to pay for a course in sterling on a monthly basis starting this month. Having exchanged enough for the current installment already she has lost about 10p per pound purely to the rate disparity. It adds up.

That said, is she better off exchanging the entire fees now at 89p per euro or will it work out as closer to parity if exchanged on a monthly basis throughout the year? Law of averages or something?

If it's relevant, she is intending to relocate to the uk later in the year.

Are there other good options she is missing here? For example would paying by credit card negate bank commissions or anything?

posted by Iteki to work & money (3 comments total)

Not trying to be snarky, but if anyone knows the answer to that question, they are certainly not posting it here, and are probably planning on making gobs of money based on that knowledge. Sort of like asking "should I buy 1000 shares of XYZ stock today, or wait 6 months and buy it?"

Some peoples entire lives/careers are based on hoping to know the answer to similar questions.
posted by jckll at 2:49 PM on January 30

Here's my advice. Then I'll explain why.

1) Your friend should buy enough sterling now to cover half or all of her future tuition.
2) She should hold on to those pound sterling
3) On her next payment:
a) if the pound continues to slip, she should buy enough sterling to cover her payment and pay it. She is now buying sterling at a cheaper price than the ones she originally got.
b) if the pound gets stronger, she should pay out of her pool of pound sterling. This is cheaper than converting more euros.
4) Repeat 3 until the end of the class.
5) Whatever sterling she has left (if any) is now her starting pool on her eventual move.

The above is a sort of dollar-cost-averaging. Its essentially the strategy my wife and I are using. You see, we live in the UK and earn pound sterling. She has significant savings in Euros. I have significant savings in dollars. So, whenever we take a vacation, for example, we have been choosing the 'strong' currency to pay for our trip. Well, its worked out ok for us so far....
posted by vacapinta at 3:01 PM on January 30 [4 favorites]

Thanks, I think she's going to try a variation of that, and I know I will when I find myself in a similar situation!
posted by Iteki at 4:47 PM on January 31