The Tower of Hanoi: Forex edition
July 2, 2015 9:35 PM Subscribe
I am going to spend most of my savings on grad school living costs over the next 3 years. Hope me figure out how to best manage my currencies?
I'm starting a clinical psychology doctorate (yay!) in the UK come September - this not a research PhD but a training degree similar to a PsyD in the US, which means there's almost no funding or scholarship money available. (In fact, all the Brits on the course are salaried NHS employees.)
As an international student, I'll be paying my own way - my parents are helping out with the tuition and rent, and I'll be covering the rest with my savings (about US$47000 in total). The problem is, my money is currently 20% in HKD, 20% in USD and 60% in AUD, and I have to figure out the most strategic way of converting everything to GBP over the next 3 years. I don't really know much about foreign exchange trends except for the most general principles so it'll be great if I can get feedback on whether I'm on the right track with this:
(1) AUD is falling like crazy at the moment, while USD, and by extension the pegged HKD, seem relatively stable against the GBP, so I'm thinking of using up all my HKD and USD first, which will last me for about 1.5 years.
(2) Meanwhile maybe I should put my AUD into some kind of term deposit (or invest it??) instead of leaving it to sit in my account.
(3) The risk is, of course, that AUD will depreciate even more over the next year or two and I would've been better off converting it to GBP from the start. Given that China's economy is slowing down and Australia's mining boom is over, does this seem like a probable scenario?
(4) After graduation it's quite likely that I will return to work in Australia, so that may be another reason to leave my savings in AUD till the last.
I'm starting a clinical psychology doctorate (yay!) in the UK come September - this not a research PhD but a training degree similar to a PsyD in the US, which means there's almost no funding or scholarship money available. (In fact, all the Brits on the course are salaried NHS employees.)
As an international student, I'll be paying my own way - my parents are helping out with the tuition and rent, and I'll be covering the rest with my savings (about US$47000 in total). The problem is, my money is currently 20% in HKD, 20% in USD and 60% in AUD, and I have to figure out the most strategic way of converting everything to GBP over the next 3 years. I don't really know much about foreign exchange trends except for the most general principles so it'll be great if I can get feedback on whether I'm on the right track with this:
(1) AUD is falling like crazy at the moment, while USD, and by extension the pegged HKD, seem relatively stable against the GBP, so I'm thinking of using up all my HKD and USD first, which will last me for about 1.5 years.
(2) Meanwhile maybe I should put my AUD into some kind of term deposit (or invest it??) instead of leaving it to sit in my account.
(3) The risk is, of course, that AUD will depreciate even more over the next year or two and I would've been better off converting it to GBP from the start. Given that China's economy is slowing down and Australia's mining boom is over, does this seem like a probable scenario?
(4) After graduation it's quite likely that I will return to work in Australia, so that may be another reason to leave my savings in AUD till the last.
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There's no clever trading strategy to maximise the value of your different currencies; current "trends" aren't necessarily trends at all, or they may have changed right this instant. All you can do is minimise transaction costs, and protect yourself against exposure to unlikely events (e.g., Australia's economy crashes and your AUD are not convertible).
1) How to get better transaction rates
There are usually much cheaper ways to convert money than via a bank, but you will need a UK bank account to use most of them. I use XE because it gets me a better rate than my bank, and I can use Bpay to make the transactions. It may not be the cheapest way, though; you'd have to research it yourself. Don't use anything that seems the least bit dodgy.
2) What should you convert?
If you're not going to be back in Hong Kong or the USA, then convert those currencies first. Leave the AUD until you know how much of it you're going to need. By the time the HKD and USD run out, you'll be halfway through your course and have a better idea of expenditure rates. Ideally, you calculate your expenses with such precision that you can spend your last £1 on a packet of crisps as you board your plane back home.
3) What if the Aussie crashes?!
It is absolutely possible for the Australian dollar to plummet. I would not be at all surprised if it did, given our reliance on resource extraction in a slowing world economy. About thirteen years ago it was worth less than US 50¢, and we could easily see that again. But we don't know! It might shoot back up to USD $1! So consider what you would do if the Australian dollar crashes. If your answer is "Gosh, I would be screwed" then consider converting enough of your Australian money now, just for the peace of mind.
4) Other advice:
Using an Australian credit card overseas often costs you a swingeingly outrageously extortionate conversion charge. A UK credit card will save you as much as a couple of percent on your purchases. As for any money you leave here, interest rates are so low at the moment that it won't amount to much. I suggest that you only use term deposits if you're sure that you won't need the money unexpectedly, and if you won't need to lodge any paperwork to get the money back - remember, you'll be in the UK!
posted by Joe in Australia at 10:52 PM on July 4, 2015