Ten Financial Lessons Expats Must Learn From Cyprus Written by Rhiannon Davies Wednesday, 03 April 2013
ImageWho could have predicted the Cypriot fall from financial grace? Who could have foreseen the real risk that expatriates living in and banking on Cyprus were exposing their wealth to? Who could have envisaged the raid on savings to recapitalise an ailing economy?
Well, the sad fact of the matter is that there were warnings penned about the Cypriot economy well before it all but imploded. However, so much negative news has been pedalled about the state of the global economy that we have all become immune to such counsel.
What’s more, we have all been lulled into a false sense of security about the safety of our capital by a sometimes-corrupt banking system.
As a result of all this, some expats with savings in Cypriot banks will have paid a very heavy price indeed.
There are financial lessons that all expats much now learn from what has happened in Cyprus…
The main lesson is that some economies around the world remain vulnerable, and as a result, anyone with any money saved or invested in such nations is running a real risk of losing capital if they are not careful.
Here’s how to avoid the worst fallout from banking crises and unstable economies: -
1) Reassess your financial position on a regular basis. Make sure you look at how and where your money is saved and invested on at least a 6 monthly basis, if not a quarterly basis as we continue to navigate these unprecedented and unchartered fiscal waters.
2) You need to look and make sure your money is still growing as you expect it to of course, but you are also looking to make sure your money is as safe as it can be…
3) Consider where your money is invested – i.e., in which nation and in which institution.
4) From the basis of which nation it is invested in, you need to keep an eye on a given country’s economy and what the government is doing regarding taxation for example.
5) Consider also the stability or otherwise of the currency of that country.
6) From the point of view of the institution you’re banking or investing with, you need to know which is its parent company, is it sufficiently funded and stable, and what are its policies on guaranteeing a depositor’s wealth?
7) You need to consider depositor or investor guarantees and understand whether your savings, investments or bank deposits are actually covered by any guarantees.
8) Don’t assume that up to 100,000 euro (or 85,000 pounds) of your savings anywhere in the EU are safe. Different countries still have different rules despite what has been casually written in many articles about the Cyprus financial bailout.
9) What’s more, you need to know that any compensation schemes in existence usually differentiate in terms of the amount protected between bank deposits, money placed in an insurance-backed policy, savings and investments.
10) Do your own comprehensive due diligence for the sake of your wealth’s protection. Don’t just leave it up to your financial adviser to tell you if they think you need to change how or where your wealth is invested.
Stay on top of your money’s management, and be an active participant in the decision making process about how your finances are invested and protected on an ongoing basis to ensure you do as much as you possibly can to prevent your capital being raided. Rhiannon Davies writes for Shelter Offshore, the leading online expatriate resource with living abroad, offshore investment and property abroad information channels.
