Watching where your money goes is a necessity, especially if payday seems like an eternity away. A quick glance at your latest bank statement will show you where everything goes, regardless of where you buy it from. However, if you’re buying something from abroad using a different currency, does it have any impact on your bank balance?
More or less for your money
The simple answer to this question is “yes”, but there are many ways in which currency values can change your personal finance. One of the most obvious is when you buy a product or service from abroad. If, say, you subscribe to a video streaming service for $9.99 a month, it might be worth £7.99 one day and, if the Dollar goes up in value against Sterling, it could be worth £8.05 the next.
To be clued up on how much you spend in another currency, check with your bank if they charge a Non-Sterling transaction fee. These can be small, but could account for up to 3% of the value of each purchase – HSBC charge 2.75%, as do Barclays.
Impact on savings
Currency value changes can also impact on your savings accounts too – banks with international presence can alter their savings interest rates depending on what happens in another country. An example of this is if the currency in your country falls (or rises) against the one used in that bank’s biggest market.
Should any change be pretty major, it may see you earn more or less in interest. All you need to do is visit a search engine and type in terms such as “usd to gbp” or “eur to usd” and you’ll see how often and how wildly currencies fluctuate in value.
Learning exchange rates
To fully immerse yourself in how currencies’ values change, it may be worth learning about foreign exchange (forex) trading. When you learn forex, you will soon know about what each currency is worth, how to get the best value for money and when the best time to spend in Dollars, Euros and other currencies is.
Timing is a big part of trading. You need to keep a firm eye on when peaks and troughs occur, as otherwise, you may end up paying more than expected. With forex knowledge, you will be able to learn about historical trends in how much currencies are worth.
You can then transfer that knowledge to managing your personal finances, thinking twice before deciding to buy from abroad, whether at home, on holiday or at work.